Rent or buy?

Tacoma747

Well-Known Member
Joined
Mar 20, 2005
Location
Winston-Salem
Well, I am now engaged (end of June). Planning on getting married in May. So we have been looking for a house (or place to live).

Personally, I think it makes more sense to buy something, in a good part of town (near where I live now), even if it is small. I figure we can buy something, have a monthly payment of ~$700-$800/month, and then 5-10 years down the road sell and get something bigger.

Se wants to rent something for a few years, then buy something. This makes no sense to me, seems like it is throwing money down the drain... Buy something, propery normally appreciates in value, so when it comes time to sell it should be worth more???

Renting for me would have to be a HOUSE, she thought of a townhouse or something, but I and not a "subdivision" type of person, don't want to deal with any HOA crap or fees, and want a garage to park my truck in.

I found a nice house VERY closeby for $124K, with a 3 car garage, and a little over an acre of land... It was built in 1952, has a new roof (04'), and new heat pump. The only thing she doesn't like is the bedroom is small (SMALL, probably 11x13?). It has two bedrooms (small ones), and a huge bedroom upstairs (full length of house, basically a finished attic), only problem is you gotta walk in the center of the room (at least I do :D ) Has a nice deck, flat property, and a nice detached garage. Oil heat, and the upstairs would need a window unit for extra A/C, comes with a 1 year warranty.

Just doesn't make sense to me to spend $700 or whatever/month to rent something, when you can spend the same amount and own it, then sell it to get something back out of it when the time comes, AND not have to worry about HOA fees, where to put my truck :) , and crap like that.

Opinions appreciated. Thanks
 
I'd say you are better off to buy, and I know a great realtor that I highly recomend. At keast when you buy a house, you can right off the intrest-which will be a good portion of your payment the first few years.

First off you need to talk to a lender before you waste your time looking at houses. My house was $85K including closing costs, and my payments were $710 with mortgage insurance and taxes figured in, so theres a good chance you would be over 1000 a month, if they approve you that high.
 
buy buy buy!

almost always a great investment... not to mention a tax write-off and after 2 years of ownership/residence you can sell and pay no taxes on profits over 500k (or they may have upped that to 1M, i forget)
 
Just to Echo, BUY! Renting is simply giving money away, whereas buying puts your money towards something of value.
 
definitely buy. it's one of the best things i've ever done. if you know you're going to be staying in the same area for a while after you get married, it makes no sense to rent.

also, like rockmafia said definitely get pre approved by a lender before you really start looking. you might not be approved for what you think you can afford, or you might be surprised and be approved for more than you think.
 
Not to be contrary.......But......

We are in a rising interest rate envoirment.

The result of higher interest rates are lower home prices, a 2% rise in interst rates will result in a +25% reduction in values, hold out until just before the elections, if a moderate looks likely to win, buy then before prices go up again. If an extremest (in either direction) is looking likely to win, hold longer, prices will continue to fall.

I am not really speaking out of my butt on this one, I was a professional bond trader and ran a trading department for a major brokerage firm for 9 years before I started Ruffstuff, I no longer trade hundreds of times a day but I do read the Economist religiously and follow world trends minutely.

Interest rates are dependant on the world view of US policies (+75% of US bonds are bought by non US citizens), simply put, if the world sees' the US going in what they perceive as the wrong direction they won't buy bonds unless the rate is high.

Also, with todays reported failures of 3 substantial lending institutions and last weeks stumble by Bear Stearns (owner of 4Wheel Parts, BTW), money is going to be getting alot tighter and approval will be limited to the highest quality borrowers.
 
I, like Dan, will be in the minority here.
I would not buy for a few reasons.
The first as mentioned is inetrest rates.

The second is while a house seems like a no brainer, and a blessing, if not in the right financial sitiuation a house can be a curse. With a rental place if a pipe burst and damages 2500 worth of flooring you make 1 phone call and move on. If you own the home better have 3k sitting around or you may soon have major issues. Or you borrow money to repair your home and it adds to your monthly debt load and then if problem number 2 creeps up, well same choice again.

The thrid is your time horizon. A house is a GREAT long term investment. But it is an up and down proposition in short term. With closing, lona origination and realtor fees usually in the 4-7% range total (on both ends: buy and sell transactions) you are actually in a losing financial proposition until your house grows 8+% + inflation.

The final piece of my thought is the relationship aspect. Me and ,my wife are financial counselors with our church and I have seen the number 1 thing that stresses marriages is money issues. Marriage is hard enough in year 1 it certainly doesnt need stress added. The first year I would rent, live together get to know each others likes dislikes etc. Its very easy to end a lease and go somewhere else its much more difficult to sell a home and buy a a new one. If you decide you/her doesn't like x,y, or z.

My personal opinion I would rent somehing as cheap as possible for a year or two and pile up cash so that when you do decide to buy you have a nice down payment, etc.
 
I'm going to go with SKYHIK5 and Dan on this one. But we really would need more info like what you have to put down, do you already have the washer, dryer, stove, cooler, beds, TV and all the other living stuff you will need or do you need to get all that stuff new?
I have seen people get married and then get a house only the break up in the first year and then need to sell the house and loose a lot of money. If you have the money to pay your closing and a down payment then your are better off or if you can get money from a lender that does not charge that stuff, a true no cost with a fix rate you would be better off, but if you lump that into the loan then you are still paying your closing for the first year or so. If you get a older house like you talk of, you may need to put a lot of money in to it and the warranty may not cover it all or they fix what is needed to get past the one year.
A few things about getting a loan, If you rent and save your money, say you don't have a good down payment now..... You save up for a good down payment like 20k or more in 2 years.
Over the two years you would have paid about $1800 for PMI - 15,900 interest- $2,500 in taxes
Take the 20K you saved up and add it to the down payment and then get the house two years later and your payments would drop and save you a lot in the long run. Your 124k loan over 30 years $158,155 in Interest / payment $783
but if you dump $20K into it then it cost $132,646 Interest / payment $657....
You really save going to a 15 year and $20K - $59,000 Interest / payment $900......

BTW We got a house and talked the same way about only a few years then moving up but after a few years we did a new loan for 15 years and are only a few years off of having it paid off. Don't be so sure of the house jumping, if the area housing changes or the market changes then you may be there for some time. Ours is on the up and the prices keep going up so I'm in it till I need to move.
 
Ill ask a few questions more in line with the last two opposing 'don't buy just yet' opinions.

As skyhik5 asked pointed out.. Houses are long term deals..

How long would you stay the house you bought now? <5 years strongly consider renting.

There are tons of good web sites with free calculators etc.. Tons of good incentives for 1st time buyers (aka don't waste that)..

Do you think your income will increase in the next few years? (aka how much house can you afford). IMHO realitors tend to oversell you on a house. Do you need s 2000ft house ? Im happy in my 1350 house with 2car garage..

Do you like the area ? schools ? anything that might prompt you to sell in a few years...

Make sure you buy new enough and/or have a good cash reserve to help you bridge the first few years (debt load as skyhi5 said) sometime sellers will do a 1year insurance/repair deal on the house. Or see paperwork on any major items, HVAC, roof etc.. those things can kill any amount of savings if not planned for..

Reguradless, renting or buying, DON'T SKIMP on INSURANCE. A small renters policy can save your ass, as well as a good agent for your house..
 
I would have to say.. you need to factor in what everyone has said above to make the best decision..

but I rented a house for 3 years before my wife and i bought... what a mistake that was.. I threw away 3 years of my money to someone elses mortgage.. now that I own I am alot happier my payment is about the same as the rent was.. and I can do whatever I want to the house..

yes I have to pay to fix things and I agree make sure you have good insurance, etc..

and do keep extra money around for when your washer/dryer/frig, ect die..

but I also did nto buy the 1st house I found.. It took me 1 year to find the house we have.. and I bought this house with intentions to stay in it for atleast 30 years or more..

this is not a starter house for me this is the house..
I looked at schools, area, traffic, convience, etc..

so yes I would say I liek the idea of a house better then renting but I would also say do not jump into a house.. make sure it is 100% right for both of you..

oh and get one with NO HOA :)
 
Not to be blunt Michael, but knowing a little bit about your situation why the hell would YOU pay someone else's mortgage? You know I just bought my first home and its here in Winston right off HWY 158, I worked with Bank of America by far the most competitive lender I found; 5.75% 30yr. fixed. If you are considering an older home there are plenty of reasonable home warranty programs available to take the "what if's" out of your mind. I worked with a local realtor, who happens to go to church with my parents here in K-ville, I'll get you his info Matt is currently working with him within the same price range you have mentioned. FYI $124K mortgage will run you closer to $1K a month than $700.
 
IMHO realitors tend to oversell you on a house. Do you need s 2000ft house ? Im happy in my 1350 house with 2car garage..


Don't forget Lenders Oversell you too! When buying my house and getting an approval for a loan, I was Flat dumbfounded with the money they offered to loan me. It's no wonder we're hearing about lenders going bankrupt. Just because a lender says hey, I can approve you for a $200K loan, sure as shit doesn't mean you can afford it. YOU Figure out what YOU can comfortably afford.
 
I rented for a short period between the sale of my condo and the purchase of my house. I hated renting...money going to somebody elses mortgage and i couldn't do anything to the house. We were going to build but ended up finding a house that was well built, but needed a lot of cosmetic help...perfect...we got an older home, the way the wife wanted with a nice garage, spent about 5k to remodel and now if feels new inside.

Right now is a buyers market and one of the best times to buy a house, but make sure you buy something you like, because like these guys said, it costs money between closing costs, etc. to buy and sell a house + a 6% or so commision to an agent to sell and if you're not in a quick rising market then it'll take a little while to make that up. Remember, the first couple of years you're only paying interest so you aren't building any equity in the house with your house payments.

Major tip: if your lender says you have no closing costs or offers a very low interest rate then be aware that they are being included elsewhere. The interest rate drop is based on paying down the rate with points or origination fees you will see in the closing costs, OR they will show a higher amount borrowed when you go to sign the papers then you thought you were borrowing. Stick with a bank unless you find a broker you can really trust. Banks are federally insured and follow different guidelines. Oh and with the market being stagnent the brokers are NOT getting more picky, but the people they sell the loans to are. So they do alot of "creative things" and sometimes its flat our fraugilent.

I would never rent again because I am always looking at future investments, even if it starts out as a strain. I've got a 15 year mortgage thats 3 years paid down.....once its paid off, I'll go look for the next investment.
 
It's pretty simple. Interest rates have effected the price of houses. When they are low sellers tend to get asking price or a premium for the house, when they are high the housing prices will come down as a whole. We are entering a new stage of the game in the last few months, lenders have gotten tight with their cash because of the rising number of defaults on loans that were given when rates were super low and the qualifications for borrowers were loose. This in turn has really made some of the houses for sale now cheaper than they were a few years ago. If you plan on buying and staying in the house more than 5 years, I'd buy one. You can always refinance down the road if the rates drop. If you aren't going to be there 5 years or so, I'd look at renting and waiting.
 
FYI $124K mortgage will run you closer to $1K a month than $700. [/I][/I]

Yep
The base would be around $750 or so then add $75 to $100 for PMI and add for your Ins $75 - $100 add for taxes $150 puts you at $1000-$1100 then you got your gas, oil, power, and all the other bills.
Just need to look at the big picture, don't let someone talk you in to a payment based on the base payment talk final payment......and go Fixed rate.
That is what got so many people in trouble was the adj rate that they could not handle and could not get out from under.
Low payment to start, they could make but after a few years the payment went up a few hundred and they could not make it got behind on a payment or two then no one would help them on redo a loan.
 
I would rent until you have a comfortable 3-6 month emergency cash fund built up.
 
the opposers make some good points about when to buy a house, but that in no way translates to renting being a better option. it never is if you can afford to buy and you know you'll be in the area for a few years at least.
 
Here's my opinion, take it or leave it.
First off, some great and interesting points on waiting for the market to change, esp from Gravel Maker on plitical influence. However one thing he may have overlooked is that the market behavior in the outskirts of Winston is very different from CA - not nearly as volatile. Pretty mild and flat, actually.

Anyhow, the straight up facts are that, from a pure financial standpoint, buying will save you more money than renting, assuming a 4 year stay etc. There's not much arguing that fact.
However, at the risk of sounding like my father, there's really a lot more to this issue than money, as some of the "opposers" have pointed out, and I'm tending to side with. My suggestion is to find a cheap-ass place to rent for, say, 1 year, and here is why.
Primarily, this is the beginning of your life as a married man. For the first while (year +) you'll just be learning how to live together, how to get along in closed quarters etc. That, in itself, is an ordeal. No married man here will disagree iwth this fact. During that time, you will get a better handle of how you guys *actually* work together on things, what kind of space you need, what you don't etc etc. You may find during this time, 1000 sq ft is plenty.... or that you'd better have extra buffer space for yourself to get away from her, lol. You'll learn how much space she and her crap actually takes up, and same about yourself. On that note - you still live with your folks, right? Do you even have a sense of how much space you really need by yourself?
You have a good point on needing a house w/ garage etc. Common problem around here. However... as long as you stay nearby, I'd bet you coudl still use that big place at your folsk for wrenching and getting away... they'll be happy enough just to have you away... so you're probably not necessarily losing "all" the house benefits.
Meanwhile, after being married a year, who knows what might come up - maybe one of you will get a great job offer, etc... or now that you're more independent, get an itch to move farther away... then THAT's a great time to start lookin gfor a home.
Basically, what it coems down to, is that the first year of marriage as a young guy (enough so to still have plenty of Stoopid left, I know I still do) is enough w/o having to worry about a house, especially an old one. Just give it 1 year. The financial difference in loss between 1 year of rent and the 1st year of mortgage is very small. In that time, build up the 6 months emergency cash/down payment, and jump in.
 
Owning a house is a lot more work and time than some people think especialy if is is a older house 5 years +. I am a firm believer that if you can get a good deal on a house to buy, you will be ahead in the long run. house prices will go up and down, but over all they will go up over time. If I was going to rent them I would rent until I found a good deal on a house to buy. Look real carefull and plan for the future. Like Jon Said ..you might think you are going to trade up, but things change
(like kids) and you do not want to be in a crappy area or house and stuck there. If you are into or able to do renovations then maybe look at a repo. There are alot of these around currently.

Of course you could allways buy some land and park a RV on it and call it home. :bounce2::bounce:
 
However, at the risk of sounding like my father, there's really a lot more to this issue than money, as some of the "opposers" have pointed out, and I'm tending to side with. My suggestion is to find a cheap-ass place to rent for, say, 1 year, and here is why.
Primarily, this is the beginning of your life as a married man. For the first while (year +) you'll just be learning how to live together, how to get along in closed quarters etc. That, in itself, is an ordeal. No married man here will disagree iwth this fact. During that time, you will get a better handle of how you guys *actually* work together on things, what kind of space you need, what you don't etc etc. You may find during this time, 1000 sq ft is plenty.... or that you'd better have extra buffer space for yourself to get away from her, lol. You'll learn how much space she and her crap actually takes up, and same about yourself. On that note - you still live with your folks, right? Do you even have a sense of how much space you really need by yourself?
You have a good point on needing a house w/ garage etc. Common problem around here. However... as long as you stay nearby, I'd bet you coudl still use that big place at your folsk for wrenching and getting away... they'll be happy enough just to have you away... so you're probably not necessarily losing "all" the house benefits.
Meanwhile, after being married a year, who knows what might come up - maybe one of you will get a great job offer, etc... or now that you're more independent, get an itch to move farther away... then THAT's a great time to start lookin gfor a home.
Basically, what it coems down to, is that the first year of marriage as a young guy (enough so to still have plenty of Stoopid left, I know I still do) is enough w/o having to worry about a house, especially an old one. Just give it 1 year. The financial difference in loss between 1 year of rent and the 1st year of mortgage is very small. In that time, build up the 6 months emergency cash/down payment, and jump in.

Good advice.
 
And now the reasons to buy......

First off I agree completely about the differences in market between Cal and the Carolinas, a 20-25% drop in market here (-$1-150K to your equity) can saddle you with a lifelong debt. Your market is very different.......

Also, the tax advantages in your area are much greater than in Cal, the mortgauge tax writeoff should easily make up for any market downturn but many other good points have been brought up for consideration. The living together aspect in particular may be the best in my eyes. Finding out what each of you really needs for space can be a real headache, just think of a womans closet requirements!

In the end I see waiting as the best possible choice until you have both figured a little more about each other. If rates continue to rise as I think they will you will pay less for the house but with a higher interest rate that you can refinance when rates fall (rates are cyclical). You would still get the house you want and down the road you would get a better payment than if you bought today.
 
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