Profile picture for abajorek

My wife and I may be in a new location for 3 years, maybe more (depends on residency). Rent or buy?

My wife is a doctor pursuing residency, and we aren't sure whether we should rent or buy. We may be in Jacksonville for 3 years, but if she is awarded a fellowship, it may be longer. Should we rent or buy?
  • October 11 2010 - Jacksonville
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Answers (16)

Profile picture for PaulKaplanGroup
I would talk to your accountant or financial advisor.  But typically we advise our clients to plan on buying for the long term commitment.  Prices appear to be at the bottom in our market, and are slowly inching up.  However, the projections are that prices will remain stable for the next few years.  That being said, chances are, if you sell in three years, your selling costs will probably exceed any gains you might have experienced.  But its very market specific.

Your accountant will factor in any tax advantages you may have by buying right now as well.  And there is an emotional advantage to for many who prefer living in a home they own as opposed to renting.

Best of luck on your decision.

Paul
  • October 13 2010
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Profile picture for broker_GRI
Abajorek,
Rent.
It will cost you anywhere from 4-10% of the price of the house just to sell it when the time comes.
Best of Luck,
Tanya
  • October 11 2010
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Hi,

As you can see from the many answers this is not an easy question.  My experience in the Jacksonville area due to size is that the market is zip code specific with further sensitivity from each neighborhood.  As an example I just sold a home, 3/2 with 1600SF, to a newly married couple from Penn.  They paid $127,000 financing using FHA with 3.5% down or $122,555 @ 5% interest for 30 years.  Their monthly payment of principal and interest is $658 plus taxes and insurance of $272 for a total of $930.  They received 6% of the purchase price towards closing costs, now 3% allowable giving them little cost to close.  This is their home and can do as they please.  Whereas you will be hardpressed to find something comparable as a rental in this price range and size.  Contact me if you have questions.
Charlie
  • October 11 2010
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Profile picture for wetdawgs
RENT!!!

Even in normal times anything less than five years is gambling, these days even five years is gambling
  • October 11 2010
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Sometimes, renting is better than buying, since an owner has more responsabilities, if you want to live there, and if you are happy with the area, and most important, if the value is right!, then buy, only with that premise, and do not get overloaded with debt!, remember that buying with a loan means that you are NOT THE OWNER, you are a forever tenant that will have to pay taxes, insurance, and if the values go down, you go down!, the only way you will be good is if you buy a good opportunity priced below the market value, then you will owe less than what will be the value, only then is ok to be the owner instead of the tenant.
  • October 11 2010
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Matt: contact info is considered SPAM, so don't do it. It will be removed with embarrassing [content removed for being self promotional] link.

RENT!!! 3 years is far too short, particularly in today's uncertain market. Both buying and selling are much more time consuming then renting, and under time pressure you could do badly on both ends.
  • October 11 2010
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Rent vs. Buy for the short term is always a tough question. Usually, it takes a few years to recoup your cost of purchase and re-sale.  The Florida market has certainly seen a large decrease in home values, so you might be able to capitalize on that by buying a foreclosure, short sale, or distressed property.  If you feel you can buy a property, improve its value, or realize some market appreciation, then it may be a good time to invest.  Or, if you are able to get a great loan, and would intend to otherwise keep the home as a second home or investment property, you may also wish to buy the property as a good deal now.  Forecasting appreciation is a risky situation, so be careful to do your own analysis and forecast of the market. If you buy, be sure to buy a great location as location is always a hard amenity to replace, and great location tends to keep its value and prosper when house markets rebound.  Be sure to consult with a local real estate professional in your market, as my focus is Northwest Indiana and Northern Colorado.  There is a great book called The Millionaire Real Estate Investor that you may wish to read.  Best wishes!  .
  • October 11 2010
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Profile picture for John Squier
I don't know your market, but there are a number of things to consider. Real estate market conditions, market projections (understandably difficult to project 3 yrs), current rent rates vs mortgage payment, potential tax implications or benefits, actual out-of-pocket analysis, etc.  
  • October 11 2010
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If your wife is not awarded her fellowship and you move, will far outweigh the joy of home ownership.

With your purchase, Settlement Costs are ranging around 3% to 5%. When you sell, you'll have about 6.5% in fees. Property is not appreciating at 20%+ per year. In fact, property values may continue to fall. Until you are certain of her position, I suggest renting.

Best wishes, Rudi
  • October 11 2010
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My opinion - Rent - 3 years isn't long enough to hope for an appreciation - prices may still decline further, and  the economy is still too scary  and uncertain to buy for the shorter term.

I don't pretend to know your area, but that is just  my general advice.......... 
  • October 11 2010
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Profile picture for dacolan
In today's market, there are strong reasons to buy - not rent.

Are you recommending/suggesting this poster buy in a Jacksonville market that is down 14% y-o-y and more than 4% q-o-q based on your observations of the Denver market?
  • October 11 2010
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In today's market, there are strong reasons to buy - not rent. In the Denver market, vacancies are low and rents are up. This means you will pay too much for rent. On the other hand, there are lots of properties out there on the market, so the resale market for homes has the prices low. Also with interest rates at historically low rates, why not invest in some real estate? Buy something that you can hold onto as a rental in the event you move on after 3 years.
Vicki Porter
  • October 11 2010
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Profile picture for dacolan
Considering the standard deduction for a married couple is $11,400, the tax benefits of buying will likely be insignificant (if any are realized at all).

When analyzing rent-vs-buy be sure to account for maintenance, repairs and transaction costs (if/when you sell in three years) that you would not incur as a renter. Three years seems like an awfully short time horizon given the state of the housing market (Jacksonville's housing market is down 14% y-o-y) and overall economy. Caveat emptor.

The NY Times has an excellent Rent-vs-Buy calculator that can help you start your own analysis.
  • October 11 2010
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One more item: stay away from condos.  Condos will require you to pay HOA fees which you can't take advantage of while you are in the home.  I look at HOA fees as rent money that goes down the drain.  Of course I say this with the caveat that you don't want the condo living lifestyle.  You have to ask yourself whether you would want to have a yard, would take care of it, take care of the exterior of the home, etc.  The HOA dues may be a write off as an expense when you rent the property.  But the amout of HOA fees reduce the rental income; in which case the rent may or may not cover your mortgage. 
  • October 11 2010
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I would suggest first renting. You will get to know better the real estate market there (If it is declining, or stabilizing), you will have more time to search for the location you and your wife will like. You may do a short term lease (like 3-6 months) and if you decide to buy you can begin your search.
Good luck!
  • October 11 2010
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Look at the rental prices vs home prices.  If your mortgage will be comprable to what your rent would be, I'd recommend buying if you plan on being in the home for at least three years.  If the term were shorter or even two years, I'd say rent.  But keep your mortgage amount small.  Don't buy as much house as you can afford.  I will explain in a moment why.  But first, buying a home would allow you to write off your interest payments off your taxes which is a benefit you wouldn't be getting if you were renting.  Don't plan on the house appreciating a great deal in three years time.  Plan on selling for about what you bought it for but calculate the tax write off.  Essencially you would be paying less to own a home than you would be paying for rent (with a possibility of appreciation). As for keeping your mortgage amount low:  Don't put undue stress on yourself to pay high mortgage, look at your home as an investment.  What I mean by this is if you decide to move, if your mortgage is low, you can always turn the property over to a good management company who could rent the house out for (hopefully) more than what your mortgage costs.  If you receive rent that pays your mortgage as well as the cost of its management, you now have a property that is paying for itself.  However, if your property doesn't pay for itself but it's close, the difference can be written off as a loss on your taxes.  I am assuming both you and your wife are in a high tax bracket.  Having said all this I will disclose, I am not an accountant or attorney.  Consult an accountant to make the final decision.  The advice I am offering is the same I offered two of my clients: a husband and wife both pharmacists who make combined over $250K a year.  They will be buying a house whose mortgage will be $1350.  Currently they pay me $1200 in rent.  They plan on moving to Texas in three to four years.  When they get ready to move, I will be managing their property and I know for the house they are buying in our local market, I can get $1500 in rent.  This will cover their mortgage plus the management fees.  We have been selective in finding the right home for them.   We have been looking for the last six months without jumping the gun.  The home they put an offer on is less than 7 years old, in a great location.  The same advice applies to you.  If the numbers work, consider buying a smaller new home in a good location with manageable mortgage that could become an income property for you in the future.  But local markets differ. Consult an accountant as well as a Realtor and a proeprty manager.  Good luck. 
  • October 11 2010
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