Buying a home not forever home

Mrs.JK

Currently we are renting a townhouse. I work full time. I am planning on going back go school next year to get my masters. I will be going to school part time while continuing to work full time. Our rent is insanely high! We could buy a similar place or bigger for 200400 less a month.

My question is would you buy a duplex or small home with the idea of only living there for 5 years? It will be 4 years until I am done with school. With us expanding our family we need a bigger place. It's next to impossible to find a place to rent here that is 3 bedroom, decent neighborhood and schools, etc.

Twinkie0612

We bought a very small house (890 sq ft) right before we got married with the intention of only being in it for 5 years or so.  The house was super affordable and we put a large down payment on the house, so our mortage was very small.  We paid extra principle every month to pay the mortgage down more quickly, we were on track to pay our 30 yr mortage off in 11 years.  The house did need lots of remodeling, but because our mortgage was small we were able to afford to pay for the remodeling as we went and did not need to borrow or dip into savings.  We are also doing all of the remodeling ourselves.

We've been in the house for 3.5 years and now our plans have changed a little.  We are getting ready to start our first IVF cycle next month and we decided to refinance our house and pull out some of the equity to pay for IVF OOP (we don't want to drain our savings).  This will probably mean that we will be in our house a few extra years.  It's not ideal, but we can make it work.

My big advice is to look at what you can afford to pay each month, being sure to include things like taxes, insurance, PMI (if you don't have a large enough down payment), utilities, etc.  All of these affect the amount of "house" you can afford.  I like to be conservative with what we can afford, because sometimes what you can afford on paper may not be what you can afford IRL.

FemShep

If the difference between renting and buying is only $200-$400/month, I would probably continue to rent.  Owning a home is expensive-you need lots of cash up front (downpayment of 20% ideally, although you can get away with as little as 5%), closing costs (another $5-10k, potentially), and moving expenses.  Plus, if something goes wrong, you're on the hook, so you need more in savings.

I'm not sure how much you've priced out to get your comparisons, but keep in mind that your insurance will increase significantly, property taxes can be very high, and utilities are often higher for single family homes too.  On the other hand, you do get a tax deduction for your mortgage interest and property taxes, but the deduction is not enough, on its own, to make purchasing a home worthwhile.

Also keep in mind that when you sell your home, most realtors charge 5-6%.  So in order to make money off the sale of your home, after you factor in commissions, taxes, transfer fees, etc, you need your home to appreciate in value *at least* 10% to just break even.  That's not a given, by any means, especially over just 5 years. 

Kristinmo

My advice is if you buy, make sure it's a house you could be in for longer than you plan to be.  We planned to be in our townhouse for 3-4 years.  Then the market crashed.  7 years later we are paying in a LOT of money to get out of that townhouse and into our forever home because we are out of space.  If I could do it all over again, I would not have bought.

ChristyML

I'm not sure what the laws are in your state regarding home ownership, but in our state, if you live in a house for 3 years or less, it is considered "flipping" a house, and you will have to pay certain taxes or fees. 

If I was in your situation, I probably would buy a home. 

ap142193

I bought my first home in 2008 because my job required me to live in the same town and there were not suitable homes or apartments to rent (its a very rural area).  DH and I bought a home together in 2011 before we were married because we were getting custody of our nephew and we knew that my 1000 sq ft house wouldnt hold the three of us and 2 dogs.  We rented out my first house for a while, but we have been trying to sell it for almost a year now.  We bought the house we are living in now, with the plan of probably only being in it for 5 to 7 years.  

 

I think what you plan to do really depends on the area you are living in and the options that are presented to you for both renting and buying. 

nikkiborge

It depends on your finances really, and how financially strict you can be. My DH and I bought a second floor stacked townhouse. Tons of stairs, 1200 sq. ft. and not baby friendly at all. We actually just bought a fully detached home and are putting the townhouse on the market next week. If we get the price we want for it, then our ROI will be 50K. If you move smart I would always suggest buying. Its a huge step but if you try to find a condo or a townhouse that is not freehold a lot of home ownership costs will be taken care of for you.

55

Though the payment may only be $200-400 more a month, you do need to consider the cost of upkeep. My husband and I stayed pretty close to that number when we realized we could double our space by purchasing a home for only $200 more than we were paying to rent an apartment. However, the air conditioner went out three months after we bought the house. We purchased a new home so everything was covered by a builder warrenty, but had we not purchased new, it would have cost us several thousand dollars we didn't have at the time. After having that experience, we try to keep enough in savings to cover the replacement of any major appliance should it fail on us.