Profile picture for mollykgillespie

Rent versus buy in small town?

I live in a small town (population of 6,000), and currently rent a home (625 a month). My landlord may be increasing this to 675 this coming year (my lease ends in May).

Essentially, I could buy a home in town for $50-75,000. My mortgage would be WAY lower than I currently pay in rent, and property taxes run about $100 a month from the zillow listings. According to Zillow, home prices are expected to increase in this area.

I am willing to do some cosmetic fixing up of the home to increase its value, but I may need to sell in 2 years (my boyfriend and I are currently working 5 hours apart from one another, and it is unlikely that he will be able to find work around here). Now, I would consider using this home as a rental property if I could find someone to manage it for me (perhaps one of the real estate agents in town?) but I don't know how that would effect us if we wanted to buy wherever we move after this.

So, I guess my question is whether it is a good idea to buy a home when the costs are so much less than renting (I currently pay all utilities anyways), or does it make more sense to keep renting since a small town may be hard to sell a home in since the market is so limited?

Thanks!
  • January 31 2014 - Independence
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Answers (3)

Taking the projections out of the equation, which is pure speculation, investing in real estate usually works out, because you have tenants paying off your mortgage for you.

HOWEVER. You are correct that having one mortgage may impact your ability to qualify for a purchase loan down the road. A call to your loan rep will clear that up for you.

All the best,
  • January 31 2014
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Profile picture for MountJuliet
Molly,

I'm happy that you've asked this question.  Many people will differ with my opinion but knowing you may need to sell in two years is a critical fact in the decision.

Considering your acquisition cost as well as your disposition cost not to mention maintenance, and you'll find that even paying more money in rent might be a better financial move.  I recommend you listen to KhanAcademy's  Rent vs Buy for housing before you make your final decision.

Best,

Bob Sorey
  • January 31 2014
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Profile picture for sunnyview
It can be a good idea to buy as long as you don't plan to sell in 2 years and choose a property that will rent for enough to cover your monthly mortgage, taxes and insurance.

When you have a short time table, you have to choose a house based on it's future rental appeal instead of what you may want longer term personally. Focus on finding an agent that understands how to pencil rental property and can give you accurate numbers before you buy. Some agents focus more on personal property sales, but in your time frame it is really important to focus on long term cash flow instead.

Rates are low and if you choose the right house, it could be a good long term investment if your area is stable and tracking up.
  • January 31 2014
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