Profile picture for user6737762

Is it smart to sell, rent for a year or two, then buy again?

My husband and I currently own a condo (purchased about 5 years ago), but we're planning an out-of-state move in about two years.  We would really like to live in a different neighborhood in our current city for our last couple of years here.  We cannot afford to purchase anything in this neighborhood, though.  Is it ever smart to sell, rent for a couple of years, then buy again?  We will definitely be purchasing our home when we move out of state.
  • April 28 2013 - Boston
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (7)

Profile picture for wordsmth
Yes. Definitely.

Your options would seem to be:
--Stay where you are.
--Buy somewhere else locally and then sell when you're ready to move.
--Sell, then rent [your idea]

Let's consider each:

Stay where you are: That would make sense if you liked where you currently are. But you want a different neighborhood. You don't say whether it's that the other neighborhood has more attraction, or whether you don't like where you're at  now. But that really doesn't matter much. You've made the decision that you want to live in a different neighborhood. So that means moving, not staying.

Buy somewhere else locally, and then sell when you're ready to move. With all the transaction costs involved in buying and selling, that probably wouldn't make financial sense. Figure, very roughly, that the entire process takes about 10% of the value of a property. (Real estate commissions, closing costs, other fees and expenses.) That's fine if you're planning on living somewhere for 8-10 years. It's not so good for the short term.

Sell, then rent. That locks in whatever equity you currently have in your present condo. The risk is that values might rise substantially in the next couple of years, in which case you'd miss out on some appreciation. But you're also protected if values fall. And while people think that renting is "throwing money away," if you take a look at the first two years of an amortization table, you'll see that very little of what you'd be paying in a mortgage goes to paying down the principle.

Work the numbers to make sure it makes sense. But, from what you've said, it seems to be the best solution for you.

Hope that helps.
  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would make a decision based on location and condition of the condo right now!

Is your condo is in a neighborhood which gets easily affected by the ups and downs of the economy?
Is your condo association purely managed or plans to have some capital improvement projects which may require special assessments?
Is your condo in the basement or particularly noisy location?
Does the condo require updates to the point that people may be reluctant to move forward with offers?

If the answer is yes to any of the above I would sell it now and rent another place for 2 years, otherwise I would stay put and let the values go up until you are ready to move out of state.

  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for SoCal Engr
"With the recovering Real Estate market and the prices of homes still down, may be best to sell and buy rather than rent."

And, how much does the consumer have to make on both ends of each transaction to overcome the commissions, especially since they've already stated that they cannot afford to buy where they would like to live?

Assuming that the OP sells, and then re-buys a similarly valued property, it would have to realize a significant increase in value (over the original property) to overcome the commission hit the OP takes on the first sale. The only real benefit to your scenario is that there are three commissions vice one.

Your advice seems a bit self-serving to me, as well as not in touch with the OP's stated scenario.
  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

With the recovering Real Estate market and the prices of homes still down, may be best to sell and buy rather than rent. In 2 years the prices will be up. Besides the interest rates are at record lows, they may also be up in a year or 2.
  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for SoCal Engr
I would say it makes near-term sense (in other words, you may be able to live in a community you currently cannot afford to buy in).

However, I'd also caution you to consider the longer-term aspects - given that you want to buy in 2+ years in a different state/locale.

First, are your local market values increasing or decreasing. Decreasing? Selling now may net you more $$$ towards any future purchase. Increasing? Selling now may cost you $$$.

Second, what is the financial pro/con of stay-v-rent? You currently own, so there are tax benefits related to interest on the mortgage payments. While it is not dollar-for-dollar, it is a potential savings. You will not realize similar savings as a renter. What is the projected $$$ cost over the two years?

If you're okay with any potential down-the-road impact, then go for it.

However, if your local market values are rising, maybe you want to consider renting out your condo while you rent in another community. It's not a guarantee (and, what in life is?), but it could let you try to get "the best of both".

BTW - Here is a link to the IRS ownership/use tests. As long as you sell within 5 years, you should still be able to exclude any capital gains. But, verify with your CPA. I am neither a CPA, nor did I spend last night in a Holiday Inn.

Add Note: Irrespective of any $$$ considerations, "selling now" has the benefit of removing "need to sell" from the "to do" list when the time comes to move. This may be worth a few $$$ to you, from a less-hassle perspective.
  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Hello,
that is certainly an option that you have if you must move to a different neighborhood.  I would analyze your budget to make sure that it also makes sense financially.  You now, for example, get your interest tax deduction on your mortgage (if you have one).  I'd also look at the actual difference between the amount you pay now vs the rent.  You may also look at what your current condo is worth now vs the possible appreciation in the next couple of years. There are a few variables here that stem from your budget besides moving to a different neighborhood, not to mention the $$ needed to buy another property in the new state that you will be moving to. I hope this helps and do not hesitate to contact us if we can be of assistance. Best of luck
  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for wetdawgs
Renting offers a lot of flexibility, so if you wish to live in a different neighborhood for the last couple of years in the current city your proposal makes a lot of sense.

  • April 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.