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s/o renting vs. owning
I was really glad to read the post below called "Can you get a loan for a down payment?" because my DH and I are in a similar situation. We are trying to decide if we should rent or buy. The single family homes and townhomes we are looking at are renting for around $900/month, but I had a real estate agent tell me that we could buy a townhouse for $69k (its a short sale) and the mortgage payment would be around $500 a month. Its definitely tempting because I know each month we wouldn't just be throwing our money away to a landlord, but I really want some sound advice. Another thing is that we will probably need to move out of state in 2 years, so at that point we would be faced with renting out the townhome and potentially making a profit (they rent in that area for $900/month and our mortgage would be $500/month)--please don't flame me if this is a completely idiotic question and I'm missing something obvious. I don't know anything about the housing market.
Advice?
Re: s/o renting vs. owning
Since you're only looking at living there for 2 years, just rent. It will be so much easier on you in the future.
Its harder to get a mortgage when you already own a property, regardless of if you're renting it or not. Banks see having rental properties as risks sometimes, especially if you don't have any prior experience as a landlord, and you wont have a solid rental history on the townhome.
Don't forget that your $500 mortgage may not and probably doesn't include taxes, insurance, HOA fees and other maintenance. I would assume since its a townhome you will have HOA fees and they could range upwards of $100 or more per month.
I understand wanting to own as well. DH and I were in the same situation about a year ago because we were unsure if we would say here or move. We made the decision to set down roots for a minimum of the next 10 years so buying was the best route for us.
Also, don't forget that being a landlord isn't all smiles and rent checks. Would you really want to take on the responsibility of being a landlord from a different city or state? You could turn a profit but you could also lose money if the renter doesn't pay each month, causes major damages, etc.
Best of luck!
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There are a few landlords on here who can chime in about that side of it, but it sounds like you're better off renting. Insurance and taxes, plus the HOA fee would probably up the monthly payments and upkeep would be more than you'd think. Also, a short sale is never a sure thing and it could be a very rocky road. Don't take the REA's word as completely true - they get a bigger commission off of a sale than a rental so they can be biased.
I would rent the cheapest thing you could find and save up as much as possible in the next two years. Don't take on any new credit, don't close any accounts and work on paying down any debt. That will put you in a much stronger position to buy.
Renting isn't throwing your money away. It's giving you a place to live! No, it's not an investment, but neither is owning a car, or really - pretty much anything else we own. Everything that goes INTO my house is "throwing money away" - but I like having a bed to sleep in, a couch to sit on, a TV to watch, plates to eat food off of, food, clothes to wear out of the house. Etc.
A rented home is the same thing- it's giving you a roof , warmth, comfort, etc. It's not throwing money away.
~Benjamin Franklin
DS dx with celiac disease 5/28/10
Thanks eastcoast, I think I needed to hear that
You ladies are very very wise!
Another vote for renting, in your situation. Only two years is not enough time to recoup your costs on buying and if you think you might move, I don't think it's worth the headache of trying to sell / trying to find renters. I think our REA said 5-7 years minimum in the house makes buying make sense.
If the mortgage is $500, don't forget the homeowner's insurance, taxes, PMI (if you put less than 20% down on a FHA loan) and possibly HOA dues. I think our mortgage payment is around $600, but when you add up all the above, we pay double that each month. It's not at all the same as paying $500 rent and that's it.
Utilities are likely higher in a house than in an apartment. Heck, we were renting a house across town and still our electricity and water bill is way higher in our new house. This house is only a little bigger, too, so I'm not sure exactly why. Luckily, I kind of planned for that.
Home maintenance costs -- these are the kind of costs nobody tells you about! I expected to buy furniture when I moved in. I even budgeted for a new washer/dryer and fridge (houses here don't come with them) and even some upgrades (replacing carpet with tile in the bathroom, yay!). But we just paid $200 to have the gutters cleaned, $100 to have our sprinkler system maintained, and $150 to have our fence re-adjusted. Our HVAC system could go at any time -- that's about 4k, minimum. One fence is leaning already and could fall over at any time -- that's probably 1k for just one section. Those aren't improvements necessarily -- not in the sense of a shiny new floor or freshly painted wall -- and we definitely won't get that money back when we sell. It's just stuff you have to do when you own if you want to keep the house up. And that's for a house that is structurally sound! We saw quite a few houses with foundation problems, mold problems, etc -- I cannot imagine the cost to remediate those things.
Closing costs -- we paid about 3.5% of our purchase price in closing costs when we bought. It's double or triple that when you go to sell. So there's more than just the down payment to consider. I honestly didn't know buyers had to pay that money, when we went into all this.