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Renting vs Buying

April 11th, 2011 at 09:44 am

We have no idea where we are moving to, yet. However, my brain is considering the scenarios and possibilities. So here's what I'm thinking about. Feel free to chime in with your thoughts.

We currently have a 30 year fixed mortgage on our home and will have lived here just over 5 years by the time we move. The house does not appear to have appreciated much at all in that time frame. Maybe $3000. We have paid down quite a bit of principal in that time because we paid off our home equity loan. So we will walk away with more equity then we started with. Possibly around $35K.

We have been quite lucky to have lived in one place for 5 years. Many military families move every two to three years, which makes me think buying a house is just not a good idea, since we might move in three years the next time.

The idea of renting feels very odd after owning two homes for a total of 14 years. I can see the positives: we won't pay for home repairs, we won't do home upgrades or landscaping, we can move just about at anytime with out much cost, and no debt! The negative: possibly higher house payments, unable to paint or customize the house. Okay that is all I can think of at the moment.

Should we consider an ARM and still buy a house? Payments might be less than renting, but we would have the ability customize our living space. We might not increase our equity, but we don't get that with a rental either. Or maybe a 15 year loan, so that more money goes to principal.

I figure if we can keep our house payments as low as possible, we might be able to put away even more cash. Can you see I'm running in circles with my thinking? I'm guessing we will be able to make a decision once we know more about the area we are moving to and what types of housing are available in the areas we want to live.

Any thoughts? What else should I be thinking about or considering while making this decision.

17 Responses to “Renting vs Buying”

  1. jewels3 Says:

    We've only ever rented. I don't foresee us ever buying a house. We love the flexibility that renting gives us, as you said, no home repairs, and you're not tied down to the area. It's incredible peace of mind knowing that if something breaks (like plumbing, furnace, etc) someone else is responsible for fixing it.

    Right now we're in the process of moving out of state, and I can't imagine trying to sell a house in addition to everything else I'm doing right now! I know many people do it, but yikes. All we have to do is make sure the house is clean after the movers leave, meet our landlord, get our deposit back and we're on our way.

  2. ceejay74 Says:

    That's a tough one. I don't like renting now that I've owned, but I wouldn't fancy going through the whole closing and mortgage-broker process if I knew I'd have to do it all again in a couple years.

    I wish I had something insightful or helpful to say. I'm interested to see what others think.

  3. MonkeyMama Says:

    Personally, I'd rent.

    I HATE renting, but the only think I REALLY hate about it is the constant moving and instability. You've already got that, so I can't imagine adding home ownership on top of that (gives you little flexibility for the long haul).

    It also depends on the market. In California, owning (an apartment) is generally far cheaper than renting. But the added bonus is that homes sell pretty quickly. I always considered my home to be a pretty liquid asset. Which may sound crazy to the average person, but homes will easily sell in one day here. That's mostly how it has been the last 30 years or so. Even in this economy, and the foreclosure crisis in our neighborhood, a house just sold down the street from us - took one day to sell. If the price is reasonable - things move fast. That said, I'd still hesitate to take on the commitment and risk of home ownership if I knew I'd probably move out of state in a few years. But, I could see it making more sense in certain areas.

    Just don't forget all of the other costs that come with home ownership. Believe me, I understand home ownership being cheaper. It certainly is for us. BUT, buying and selling homes adds a lot of cost to that (closing costs, realtor fees?). Being stuck with a home because you can't sell the minute you want to is costly. etc., etc.

  4. PNW Mom Says:

    I think I would lean towards renting if you are unsure about how long you will be staying in your next location. I am not sure I could handle having to go through all of what entails in buying a house(and then having to sell it) and only be there for a few years. If it were a longer assignment, then I would probably consider buying. I am sure whatever the case you will make the best decision for you and your family. Good luck! Smile

  5. MonkeyMama Says:

    P.S. I wouldn't assume you can't customize your home as a renter. I know I live in a weird market, but most the people I know who have rented have actually painted and replaced floors. I can't say I would replace my landlord's floors for free. But considering the rental market, they wanted to fix up their space and it was probably cheaper to do that then get gouged for rent elsewhere. One friend got the okay to paint the walls dark maroon. Most my renting friends have painted their walls - landlords didn't seem to mind.

  6. FrugalTexan75 Says:

    What about tax consequences? Isn't there something where if you sell your house and then don't use it towards the purchase of another house, that you have to pay extra taxes on it? Something like gains (can't remember.)

    But otherwise, with as often as a military family moves ... I think I'd go for the renting option.

    You don't have any pets do you? That could be another factor to consider.

  7. Apprentice Bliss Hunter Says:

    My gut feeling is to say rent.

    Much more flexibility which is very handy given the nature of a military career.

    Also the fundamental principle of avoiding debt at all costs. For me if I ever buy a house, it will be the house I intend to die in. (I know a lot may change unexpectedly in the meantime, but that would be the intention). Given the high likelihood of your husband being moved in 2/3 years I don't think buying would be profitable due to buying/selling costs and the very real possibility of you having to sell the house for less than you bought it for.

    Why not just rent and coast for a while ? Might be more relaxing for your family. And of course, you can be saving away for your deposit on your next home when hubbie gets some stability location-wise.

    Just my unknowing 2 cents !

    p.s. I look at houses as places to live and not as investments.

  8. creditcardfree Says:

    @apprenticeblisshunter: I really like the idea of not having any debt. Very freeing.

    Keep the opinions coming. It is really helping to know what others might do in this situation.

  9. MonkeyMama Says:

    The only tax consideration is that tax laws can make owning preferable. As you long as live in a home 2 years there is no tax on any profit. Keeping multiple homes does bring up some tax considerations though, now that I think about it. But, if you have a gain, paying tax is not the end of the world either. You'd still be left with a GAIN. Not sure I would base my decision on taxes. The tax rate is not high on home sales, at the moment.

    No, I would not KEEP a mortgage for the tax write-off. But, when you are just starting out, the tax write-off will often make home ownership much more affordable compared to renting.

  10. My English Castle Says:

    I agree--the idea of being tied to a home seems unappealing in this market. And it does look like it might be a long stretch until things improve.
    I think if it's reasonable enough, I'd certainly think about renting--not something I could've imagined saying even a few years ago.

  11. baselle Says:

    Rent probably. I rent, but it really depends on how it works out on paper. I'd pick the choice which gives you a cheaper monthly payment. I don't see housing prices suddenly shooting up either. Also, the "threat" of rents rising is a toothless one. I've had only two rent increases in eleven years. Reasonable landlords want dependable tenants. Final classic piece of advice is to rent and figure out what neighborhood you want to live in. This is based on conditions in Seattle - you might see something different.

  12. patientsaver Says:

    Yeah, I'd have to say that given your situation, renting would seem to make more sense. I wouldn't do an ARM if I were to buy, just becus of the built-in uncertainty of it.

    I think a lot depends on where you end up moving to. Housing markets are so different, and if you go to an area at either extreme of the housing market, say California vs. Podunk, Kansas, that could give you your answer about buying vs. renting. (There are many counties in Kansas, by the way, where they want to entice people to repopulate dying towns, and so they're offering 5 years of income tax-free status to out of staters to move in, plus possible help with higher education. I wrote about it for a new story recently.

  13. patientsaver Says:

    It's possible it was just 2 to 3 years of no income taxes. I can't remember exactly.

  14. Looking Forward Says:

    I'd see what area you are going to be moving to. It may be better (cheaper) to rent. It may be better (cheaper) to buy. All depends on where you end up. Smile

  15. LittleMsMom Says:

    I would suggest renting, because that way you have time to really research where you want to live. Also once you are living there you will be able to really focus on finding the best house for you.

    I think sometimes people get into a hurry to find someplace and then they settle. If you plan to rent you might settle for less than you want in an apartment but that is better than settling for less than you want in a home.

    With an rental apartment or house if you find out you don't like the area you are living in atleast it is less costly to move then to find out after you bought a house and don't likethe area and feel the need to sell.

  16. snafu Says:

    I've owned and rented in the last 4 yrs. I had a house sitter in my home while renting overseas. The financial gurus will tell you it's impractical to buy if you believe you will move in under 5 years. The current economic climate also makes buying a poor choice. Depending on the community, you can usually negotiate either price or update/upgrade.

    Wish you well, moving is so disrupting, I think # 4 in life's challenges

  17. Broken Arrow Says:

    Most have already said what I was thinking.

    The only thing I would add is that Bernanke had to play "The Boring Professor" during the quarterly meeting yesterday to keep the market from over-reacting to news of possible easing of quantitative easing (hehe) as well as the re-introduction interest rates to stop the weakening of the Dollar, especially after Moody threatened to possibly lower the US credit rating to AA.

    Long story short, an ARM would not be a good idea into the foreseeable future, but if you need something locked into a fixed rate, we could be seeing the last trains departing the station!

    But yeah, I would rent if I was in your situation....

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