Profile picture for lilly34

How long do you need to keep your newly bought home before selling in order to not lose money?

Hello,

we have no experience in realty but are considering buying our first home since rates and prices are lower than they were a few years ago and that we could now afford it.
However, we do not know for sure how long we will stay in the country.
How many years would it take to break even? Should we continue renting?
 
Thank you so much for your input 
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October 15 2010 - US
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Answers (11)

Hi again Lilly.

It's unfortunate that Pasadenan felt it would be helpful to insult my professionalism as a Realtor.  He/She did highlight my proven record, however, so I won't be flagged for self promoting.

That being said, you should be excited about the notion of buying your first home...not terrified or pressured into continuing to rent.  An experienced Realtor will support my strategy of making your money going in so please consider that when thinking about this huge decision.  I can help you find a like-minded Realtor in your area if you don't know one now.
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October 16 2010
Profile picture for Pasadenan
Well, I haven't seen any "doom" nor any "gloom" posted on this thread, but I have seen outright lies...

In Evergreen, the Median value of an ownership residential unit is presently $360k, and due to the "standard deduction", you have to borrow a minimum of $260k before you even see "ANY" benefit from itemizing your mortgage interest on a Schedule A for your 1040 filing.  And your return from the Federal Government will be dependent on your tax bracket, determined by your income.  10% is typical for many people.  15% is next.  Then 25%, then 28%, then 33%.  35% is maximum, for individuals with adjusted taxable income of $373k or more per year.  Any individual (or family) who hasn't already calculated the comparison of standard deduction to itemizing for the possible scenarios is not ready to buy yet.

Except for the "bubble years" when Chris started his brokerage, it has typically taken 7 years for the "break even" point.  2 years is "rental range".

Sure, some out of the country believe they still want to own and dump money into the U.S. economy, and that is fine if they have the resources and that is what they want to do, but in most areas of the country, even renting out your purchase will not "break even" now.  Landlords that bought in the bubble are subsidizing the living expenses of their tenants presently, not the other way around.  And the bubble hasn't finished deflating in most of the country yet.

Remember, when an REA tells you that he is in the top 10%, and that they are the "most successful", what they mean is they believe they are "pitchmen" like "Billy Mays".  And pitchmen sell product in spite of the lack of value to the purchaser.  That is their job, to move product regardless of how over priced it is.

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October 16 2010
Profile picture for sunnyview
Gloom and doom my shiny hiney. Although I agree that people do make money when they buy, they cannot make that money if the market is down when they need to sell. Since you cannot predict when the market will support a sale, you are smarter to buy a property that will not compel you to sell in a down market. 

Other than deep pockets to support negative monthly flow or an infinite timetable, the only way I can see to do that is keeping your PITI as close to rent as possible.
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October 16 2010
So I'm seeing a lot of advice that squashes your dream of owning a home due to the possibility of moving out of the country.

Here's a few things to consider.  

The tax benefits of owning your home are huge and in some scenarios will put more money in your pocket each year you own your home, thus increasing your overall return.

The motto I tell Buyers every day is "you make your money going in, not coming out."  Find a really good Realtor to help you find a great deal in an area you like.  Since you may be moving, look at this purchase as a business transaction instead of emotionally. This tactic will ensure you buy the home that makes sense for your family, your pocket book, and increases the likelihood of making a profit let alone breaking even.  I helped a client make a 3% profit in only 8 months after aggressively buying a $700,000 home and advising them about key improvements they could make.  With so many Short Sales, Corporate Relocations and Foreclosures in today's market, you should focus on those as they will give you the best opportunity of making your profit going in.  If you need help finding a like-minded Realtor, as I, in the area you're interested in...let me know.

So that my advice doesn't sound too good to be true, please understand there are no guarantees that you will break even.  There are no magic formulas nor crystal balls to use in figuring out what the market will provide in so many years. However, if your Realtor is good and finds that property which is well under valued and in a nice location which you then can aggressively negotiate an even better price, I don't see many reasons why you couldn't achieve a profit fairly quickly.

Lastly, remember that renting is simply paying someone else's mortgage and they get the tax and equity benefit.  There is nothing sweeter than owning your own piece of land or home that you can do what ever you like.

I saw too much doom and gloom in the previous answers so I thought I'd give you some encouragement to buy now since prices are low and loans are cheap.  Again, let me know if you need clarification on my points.
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October 16 2010
Profile picture for sunnyview
Two years is a completely unrealistic time frame to break even for the average owner. When you buy you have loan costs, escrow costs and inspection costs at the minimum. When you sell, you have escrow costs, pest/dryrot costs (or other repair items) and generally a 5-6% commission to your agent.

Most markets will not cover these costs in 2 years. You would need to see an increase of 5% a year or more just to break even without considering any maintenance costs during your occupancy.
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October 16 2010

Real Estate is a long term investment.  Hire a local Realtor and ask them to show you homes that they think are a good value.   Historically RE has gone up over time but there is no guarantee you will make a profit or even break even in todays market.

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October 15 2010
Hi Lilly,

Real estate is a long term investment.  Historically over time RE has gone up in value.  There is no guarantee that you will make a profit on the home you buy or even break even.  Hire a local Realtor to help you find a good
value in an area that you want to live in and ask their advice on your current market.
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October 15 2010
Buy if you want to own a home, enjoy living in it, and not concerned with taking a loss when you need to leave the country.

Keep renting if you may leave on short notice and is concerned with breaking even
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October 15 2010
Profile picture for the_country_hick
Look below.

This link shows how to use your numbers to find that out. Look at the amortization table inside. It appears with realtor costs and closing fees with amortization added in it will be around 7 years to break even assuming no major repairs come due.
"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

Some things to consider that suggest falling house prices are still ahead of us. If true this could add a lot of years to the time frame to break even buying a house now.
"10 valid reasons to wait to buy a house."

Finally, why renting could be the better choice even if buying does seem to be cheaper. This gives a very different perspective then most realtors will show you.
"Why rent if you could buy for less money? Valid reasons inside."
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October 15 2010
Profile picture for wetdawgs
Chances are good five to ten years to break even, perhaps a little less, perhaps more.  (Two years is a ridiculously short and unrealistic timeframe!!)  There are a number of costs associated with selling such as agents' commission, transfer taxes etc that mean you have to sell for higher than the purchase price or you will not break even.

There are also a lot of costs associated with home ownership, such as repairing the roof, the water heater, buying a lawnmower etc that are not associated with renting.

Even in the best of markets five years is a common benchmark.

I'd recommend renting
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October 15 2010
I believe now is a great time to buy but you have to look hard at your situation. If you think you will have to leave the country within 2 years, rent. Longer that 2 years you can probably buy now and MAYBE break even after the two  year mark. If I had a crystal ball, I would be a gazillionaire.
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October 15 2010
 
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