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The key is to not overpay for your home. In our area, thanks to low inventory, the agents are convincing sellers that their properties will be worth $100K more next year. They are telling the sellers that they should capture some of the upside now in the form of higher asking prices or by being intransigent in negotiations. Smart buyers aren't falling for this.
There are several problems with renting, at least where I live. First, you can end up paying double per year what you would pay in expenses if you owned the property. (However, you can offset some of this through wise investing of the proceeds of your previous home, although you will also not benefit from any tax advantages related to home ownership.) Second, the average rental is often not in great condition and the highest prices obviously go to those places with new kitchens and baths, etc. Third, at the same time you are paying higher rent each year, you are not sharing in any of the upside that may come with owning a home.
I would gladly rent if I could find a suitable place that was modestly priced and that I could really treat as my own for the next few years. I know. Dream on . . .
Yes and No...as always the answer depends on location.
In some places rents are sky high compared what it costs to own. Rents are high in the zipcode where I live compared to cost of owning.
$3000 a month for 3000 square foot house. Vs. paying about $350-400K for a 3000 square foot house in the same desirable location.
You can probably put 10% or less down and still end up paying less in mortgage (this includes real estate taxes, insurance, hoa etc) than paying for rents for 5 years. Probably looking at mortgage/interests/taxes less than $2400. Factor in tax savings from interest/property taxes. That real number becomes closer to $2000 a month.
The "break even" point is probably closer to 3 years than 5 years.
Of course people will say you are "tying down or putting dead weight money with a downpayment" while you can invest it. I won't get into that argument. I see both sides.
It's very hard to rent a nice single family house for 5 years with kids and pets. Too much instability cause you never know if landlord will raise rents or not renew your lease.
The key is to not overpay for your home. In our area, thanks to low inventory, the agents are convincing sellers that their properties will be worth $100K more next year. They are telling the sellers that they should capture some of the upside now in the form of higher asking prices or by being intransigent in negotiations. Smart buyers aren't falling for this.
There are several problems with renting, at least where I live. First, you can end up paying double per year what you would pay in expenses if you owned the property. (However, you can offset some of this through wise investing of the proceeds of your previous home, although you will also not benefit from any tax advantages related to home ownership.) Second, the average rental is often not in great condition and the highest prices obviously go to those places with new kitchens and baths, etc. Third, at the same time you are paying higher rent each year, you are not sharing in any of the upside that may come with owning a home.
I would gladly rent if I could find a suitable place that was modestly priced and that I could really treat as my own for the next few years. I know. Dream on . . .
They're probably out there but rent super fast. I live in a college town with a law school and medical school. I signed a tenant for 3 years (they wanted 5 years) last week. Nice family home is a big change from the usual rentals in town and we had insane interest. We had 10-12 appointments over 2 mornings after ad was up, and 3 qualified tenants to pick from that were all starting medical fellowships or residencies. Ad was up for less then 24 hours.
They're probably out there but rent super fast. I live in a college town with a law school and medical school. I signed a tenant for 3 years (they wanted 5 years) last week. Nice family home is a big change from the usual rentals in town and we had insane interest. We had 10-12 appointments over 2 mornings after ad was up, and 3 qualified tenants to pick from that were all starting medical fellowships or residencies. Ad was up for less then 24 hours.
Nice.
BTW, do you own these rentals? If you do, do you manage the renting process yourself or do you have professionals do that for you? (Also, if you don't mind, it will be nice to know the town or state or region where the rentals are. I will understand if you don't want to share specifics.)
They're probably out there but rent super fast. I live in a college town with a law school and medical school. I signed a tenant for 3 years (they wanted 5 years) last week. Nice family home is a big change from the usual rentals in town and we had insane interest. We had 10-12 appointments over 2 mornings after ad was up, and 3 qualified tenants to pick from that were all starting medical fellowships or residencies. Ad was up for less then 24 hours.
In our market, they are out there, but at $5K-$7K per month or more. It very much depends on your mortgage. For someone like me -- probably paying all cash for my next home -- the economics simply don't work. I can buy and end up with carrying costs that are half the above amount or less. Plus, I have the upside of any appreciation.
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