Home buying...sort of...

[UTfball68]

Let me start by saying, home buying is way harder than I believed it was going to be. I honestly thought I was going to be a new house a year ago...and I'm still looking. The little lady and I started with a $225-250k budget and would put 10% down. I had my priorities list, she had hers. Mine was geared more toward property, garages/storage and sq/ft. Hers was geared more toward updates, curb appeal and things of that nature. I told her, her items can be bought and that I would buy them to keep her happy. Well we look and look and look...couldn't really find anything either of us loved (didn't really find anything with the potential for us to love), and we figured for that kind of scratch...we better love it. Turns out, I have a bit of a soft spot for curb appeal as well, and splitting the work commute between the two of us is more difficult than expected. Not to mention, for that price range and what I wanted the house is significantly older, and more work than I wanted to fit the little lady's priorities.

Anyway, fast forward a few months, I get a new job, as does she. My job fast tracked my career about 15-20 years, I was told I had the opportunity to sink or swim, if I could swim...they'd move me on to bigger and better in 2-3 years. The OL is in a position such that she can move where ever I do because her company is all over the country.

So I say all that to say, the next plan for us was not to drop the amount of coin we originally thought, because we didn't want to move in 2-3 years and be seriously upsidedown on a house. So we started looking in the 150-175 range. Well if we couldn't settle on anything in our original budget, I don't see it in that range either.

Now to the bulk of my question...seeing as my time at new house is up in the air, I got to thinking about rent-to-owns. The idea of renting pisses me off, so I figured a good compromise would be applying that rent to the principal if I don't get out of dodge...and if I do, I won't be upside down on a house. So ultimately, I know rent-to-owns have a stigma of being a faux pas...but are they all that bad??? What kind of wording would I need to get in to a contract? What would I need to look out for? Do real estate agents cover these as well? How do I go about finding 'nice' rent-to-owns???

 

[Ron]

What you are really looking for are "lease option to buy" not rent to own.
I have lease optioned 2 homes from the seller stand point. The only way ever to LO is if you cant qualify for a traditional mortgage. (For example I require 5% down 10% interest and $500 month rent with the rest being applied to principal...IE very fawking little)

Im going to tell you what an old fart told me when I bought my first house...and then again when I bought my first investment property.

"None of them are perfect..find on that is better than OK and jump in. Besides what you think you want now wont mean shit in 3 years and that wont mean shit in 5."

Now all that said....renting isnt necessarily a bad thing.
Yeah everyone says "you are throwing money away" BUT:
What about Property Taxes? you dont pay those now, but you will
What about Insurance? You will
What about if the HVAC pump takes a dump?

You can make or lose large sums easier in real estate than in about anything in the world.

Lets say you move in 3 years. And buy a 200k house in the interim.
The sellers agent gets 6% (3% each if they split with a bueyrs)
but there is $12,000 between 2 deals (the buy and the sell)
You'll pay 3 years of property taxes at $1k/yr
You can pretty much guarantee that again in maintenance and upkeep.
I have just found $18,000 that has to be covered. Sure you can push the commission off on the seller now..but then you will eat it all on the next one etc.

And this is IF the housing market doesnt correct again in the next 3...houses have been on a pretty good run the last 40 months...

Real Estate is a buy and hold proposition. You are in finance...let me ask you this. Are index matching mutual funds a good bet for short term capital growth if you have to pay a 3% acquisition and sell fee? If not..that is best case on a house.

I love real estate....but dont be fooled by the myth that you have to own.

IF I were in your shoes and KNEW I was moving in three years...Id lease a nice high end apt/condo and live like a pimp with no grass to cut etc for a while.

 

[UTfball68]

^^^Fawk...that's pretty much exactly the answer I was looking for. Thanks...now I'll have to go tell my woman she wasn't wrong. She's been telling me to rent/lease for a while now. I think I knew in my heart of hearts, but I was just convinced owning was the answer. I think I was holding out hope that in 2-3 years when Corporate came a calling and told me I was moving, I'd say thanks, but no thanks and my experience transition to a similar industry in Charlotte...so I wouldn't have to move.

 

[Ron]

Well you could buy, and hit a homerun in 3 years and make like $50,000 in appreciation...it isnt likely but its possible.
Of course the opposite is also true.

I dont think this is a right or wrong question just a matter of opinion.

 

[drkelly]

I would not buy a house if I thought I might be moving in three years. Unless it was a foreclosure that I got a deal on and I was planning on spending my spare time over the three years fixing it up.

 

[Andy J.]

Ron and drkelly are spot on. I've been on both sides of the fence and currently rent AND own a rental property. Lease to own is for people with credit issues. The idea being that you pay a little extra (maybe $100-$200/month) that goes towards the house once you close the deal. There is usually a time limit and that time is used by the tenant to improve their credit to the point where they can get a loan to actually buy a house. If they cannot, the landlord keeps the extra $$. The landlord also agrees not to try to sell the house during this time period. My understanding is that these deals rarely work out and that echos my one experience with it as a landlord.

If you think there is a decent chance you will move, then don't buy. It's not work the extra cost or risk. The one thing I hate about renting is that you can't (or don't want to) make improvements, but you are also not financially responsible for issues (which sucks about ownership). I would get a rental as cheap as you can stand and stuff that extra money into a mattress for a larger down-payment on your future home.

 

[UTfball68]

Well you could buy, and hit a homerun in 3 years and make like $50,000 in appreciation...it isnt likely but its possible.
Of course the opposite is also true.

I dont think this is a right or wrong question just a matter of opinion.

Ultimately I think I thought I could go all Donald Trump on the real estate market and predict a boom the next couple years that would wipe away any principal issues I had.

Ron and drkelly are spot on. I've been on both sides of the fence and currently rent AND own a rental property. Lease to own is for people with credit issues. The idea being that you pay a little extra (maybe $100-$200/month) that goes towards the house once you close the deal. There is usually a time limit and that time is used by the tenant to improve their credit to the point where they can get a loan to actually buy a house. If they cannot, the landlord keeps the extra $$. The landlord also agrees not to try to sell the house during this time period. My understanding is that these deals rarely work out and that echos my one experience with it as a landlord.

If you think there is a decent chance you will move, then don't buy. It's not work the extra cost or risk. The one thing I hate about renting is that you can't (or don't want to) make improvements, but you are also not financially responsible for issues (which sucks about ownership). I would get a rental as cheap as you can stand and stuff that extra money into a mattress for a larger down-payment on your future home.

Thanks for the info. I never here of them working out either, and those kinds of deals never really seem to be the highest caliber of properties anyway. Credit isn't an issue, and I'm currently socking away about $1500/mo and the girl is doing about $600/mo...and that's really without even trying...just expendable. My one actual requirement is space to park and work on all my vehicles with indoor storage for 3 of them. As far as I'm concerned, if it has that, if there was an upstairs studio apt that's all I'd need.

 

[broncosbybart]

I agree with all the above. Are you married? I think last time you said you weren't. I would never buy a house with someone I wasn't married to. If it doesn't work out you'd really have a mess on your hands. Huge difference between walking away from a rental agreement and a mortgage.

I hate the idea of renting as well, but for 3 years I'd do that on the cheap and stockpile money. If you buy a place you'll end up paying more in interest and taxes than you could rent a place for and you'd need to worry about trying to sell it. No thanks.

 

[UTfball68]

9 years together...my name would be on everything...and I could afford it if worse came to worse. She'd be looked at more as a roommate paying rent in our arrangement.

 

[Ron]

9 years together...my name would be on everything...and I could afford it if worse came to worse. She'd be looked at more as a roommate paying rent in our arrangement.

Exceeept...in NC she would have a claim to the house if something happened between you guys, and sicne your name is on the note, if she got the home and didnt pay you get screwed....

Or you end up like a friend of mine paying for a house to protect his credit (and his $250k/annually banking job by extension) for his 34 year old ex wife and her 19 year old drug dealer boyfriend to party in and destroy while she smokes crack in front of his kids (both under 6)...while the lawyers and judges get continuation after continuation.