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Rent or buy

Discussion in 'The Lounge' started by jjlaughner, Feb 9, 2005.

  1. jjlaughner

    jjlaughner 3/4 ton status

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    Thinking of moving, looking at $750-800 a month in rent for a 2bedroom townhouse kind of place probley with no garage... Should I try to find a house if I dont know how long I'll be there? I have a good job that I've had for only about 5-6months, I need to move but hate the thought of dumping $10,000 into a rental when I could have invested that in a house that maybe in a year I could sell and get that same amount back from :confused:

    thoughts?
     
  2. Cricket

    Cricket 3/4 ton status

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    I would vote for the house if you think you'll be around a while.
     
  3. mxfireman

    mxfireman 1/2 ton status

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    Purchase a house you can always turn around and sale it. Look at it as an investment......:grin:
     
  4. Fubeca

    Fubeca 1/2 ton status

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    If you aren't sure you are going to stay there for more that a couple of years it might not make sense to buy. If the price of the condo or house doesn't increase much you might end up worse off if you have to sell. I'll see if I can find you a good calculator to put all of the numbers into to see what the actual cost or benfit might be.
     
  5. cbbr

    cbbr 1 ton status GMOTM Winner

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    If you are not going to be there for at least a few years capital gains taxes will eat up a lot of what you make in appreciation. I have forgotton exactly how long you have to live in a house before you get a break on the taxes, but the short term capital gains taxes are a bitch. You also need to figure in the cost of property taxes, insurance, etc. when making your decision. Most new home buyers are shocked when they find out what the actual cost per month is. Those calculators on the web don't always show that.
     
  6. rerun93

    rerun93 Registered Member

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    i beleve it is 2 years u have to live in the house to not get all those heavy taxes. but after that its all cash. and say after 2 years u want to move u dont have to sell it u can always rent it out. u always look at the big picture. they will pay your house payment so down the road when u retire u have maybe a couple houses to sell and move and retire with a nice lump som
     
  7. Fubeca

    Fubeca 1/2 ton status

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    If you own it for more than one year but less than 2 then you would be subject to long-term capital gain rates (15%) on the gain in the year of sale. If you lived in it 2 of the last 5 years you can exclude up to $250,000 of gain from any tax. If you own it for less than a year the gain would be taxed as if it were ordinary wage income.
     
  8. cbbr

    cbbr 1 ton status GMOTM Winner

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    Glad someone could clear that up. I had a house for about a year that I had not lived in (bought it as a rental) and then moved. I sold it because it was goiung to be a big PITA to keep it up from a distance. I remember the taxes taking out a big bite.
     
  9. jjlaughner

    jjlaughner 3/4 ton status

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    yeah I didn't think about the taxes and insurence.

    Here's the situation. A friend and I are looking to split an apartment for a year maybe longer depending on Jobs and other affairs. The rent for medium size apartments is 700-800 a month and no garage. The garage is not a huge deal but I will be an hour from home-home where all my tools and project vehicles would be. I was searching trying to find rental houses and ran across a company that has NICE new houses in the 100K-125K range and they have the payments marked out at 650ish a month which is well under any two bedroom apartment around the area. The area is growing and there is no addresses listed so I'm wondering if you have to buy the land in addition to the house's 650 a month, but on the other hand it has $1 to move in now deals - which leads me to think the house are already built. I sent emails to the company asking several questions. My hopes are to move to the "big city" and if I dont have hour commute times it would allow me to go to classes for my computer certifications and hopefully get a better job. Having hour commutes plus 12hour days 3-4days a week is keeping me from doing alot of the driving...

    I know this is just a mockup page they have for there houses but I really like the layout of the house and its very similar to the house/floor plans I designed while in architure classes in college.

    [​IMG]
    [​IMG][​IMG]
    Bedrooms: 3
    Baths: 2.5
    Sq Ft.: 2032
    Garage Spots: 2
    Price: $114,000
    Approx Payment*: $655
    Stories: 2
    Style: Single Family
    Area:
    Plan ID: 1065

    if it had a full basement it would be perfect!:cool1:

    similar house/floor plan in a different area
    Bedrooms: 3
    Baths: 2.5
    Sq Ft.: 2162
    Garage Spots: 2
    Price: $125,990
    Approx Payment*: $723
    Stories: 2
    Style: Single Family
    Area: Hamilton County
    Plan ID: 1222
    [​IMG][​IMG]
    Family room - TV and couch area
    Nook area - small kitchen table, couple bar stools at the bar
    Living room - Pool table and poker table
    Game room upstairs would become the Computer room
     
  10. HarryH3

    HarryH3 1 ton status Author

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    You also have to consider the cost of selling. Realtor fees run in the range of 5-7% of the sales price. FSBO is an option, but can take up a lot of your time. If you need to sell quickly to start a new job elsewhere, you're going to cough up some serious cash in realtor fees.

    Also, if you're in a new neighborhood, where the builder will still be building new houses for several years, that can hold your price down. Why would I buy your used house for $135K when I can have a brand new one built for the same price?

    Home prices don't always move up either. Just like stocks, supply and demand come into play and have an effect on home prices. Higher interest rates will also force home prices down. So don't think of a home purchase as a "guaranteed-not-to-lose" investment.
     
  11. kennyw

    kennyw N9PHW Premium Member

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    Have you looked at used houses? Finding an older home that may cost half of what you are looking at for a new one could be a little cheaper. Heck even finding a 5-10 year old manufactured home on land would be a decent way to go. Just a little harder to get one with a garage already set up.

    I bet that new home price excludes the property taxes and who knows what else...
     
  12. jjlaughner

    jjlaughner 3/4 ton status

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    The floor plans above are from a cookie cutter neighborhood so the houses are already built (5-6 year old areas, the other surrounding area are still building I didn't really want those areas anyway becase it would be a very high tax area). The neighborhoods I am mainly interested in are at the edge of town between the area thats 10-15years old and the area thats building. The couple neighborhoods they have the above floor plans avaliable are finished neighboor hoods, unfortunatly they have neighborhood associations, fees and restrictions also. For right now I think we are going to look at renting a townhouse or condo because of the close time frame we are looking at moving.
     
  13. newyorkin

    newyorkin 1 ton status

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    A couple things to keep in mind as a homeowner:

    -YOU have to pay for the leaky roof...
    -YOU have to pay for the leaky pipes
    -YOU have to pay for the heat system upgrade
    -YOU have to pay for the heating fuel and system maintenance
    -YOU have to landscape (or just mow the grass regularly)
    -YOU have to remodel the bathroom, replace the cielings, all the wiring, shore and maybe repour the foundation, pump out the basement on occasion, shovel the snow, replace all the windows, spend every non-business working moment thinking of how you're going to pay for it and what needs to be done next...Oh sorry, lapsed into my own homeownership experience for a second there...


    Realistically, to buy a house, you'll most likely need a significant amount for a downpayment to avoid insane monthly payments, and once you own the house, all it's quirks and problems are yours exclusively, noone else is going to pay for them... Non-issue in a fairly new house, though, especially if it's still under warranty.

    All that said, I would MUCH rather own than rent. It's worth it to be able to do it if I decide I want to build a gun safe into the closet wall, or I want a hot-tub in the bathroom, or I want to finish a crawl space for storage, whatever. Plus, if I totally break something, I don't have to call the landlord and pay crazy fees and wait around for him to fix it.


    If he's moving and purchasing another home with cash from this home sale, can't he roll it into the new home purchase to avoid the taxes? 1031 exchange or something?




    All in all, I would opt to buy I think. Rental money is garaunteed never to come back to you.
    Check out foreclosure's and tax sales in your area. They come with some risk, but if you can weasel it right, do a lot of homework, have a lot of patience, you may end up with a sweet deal on land or even a house. You'll probably have to put a lot into it if you get a house in a tax deal, though... Still, an avenue to consider.
     
  14. BrianDamage

    BrianDamage 1/2 ton status

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    like Dave Ramsey says, "rent money is patience"... he doesn't suggest renting as a way of life, but in cases such as yours, it may be the best option.

    He just had a "real estate them hour" yesterday...should be able to listen to it on his website (www.daveramsey.com)
     
  15. js4x4

    js4x4 1/2 ton status

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    where in Indiana are you? My mom has a house for 'sale' but she does have a semi long term renter in place. I don't know if your looking for 'new' or an older home.....but i'd guess if you were to look in an established area close to schools and shopping, you can't really go wrong purchasing a house- you will get your money back +. The tax benefits outweigh the bad, so do not let that scare you. If i bought a house 10 yrs ago when I was financially stable, I would have easily doubled or tripled my investment today if I sold (son of a....). Property is almost NEVER a bad investment. (when you buy a house, your more buying the property than a house...) My suggestion, is talk to a real estate agent...your not paying them. Keep in mind, they want to make the sale....and if your income can support it-you own them.
     
  16. jjlaughner

    jjlaughner 3/4 ton status

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    I'm looking for a house in the Fishers/Castleton area of Indiana (north east Indianapolis). I was approved yesterday for 117K 100%financing zero$down but the houses I want (floor plans above) in that area run 125K and they want a 7K down payment. Morgage insurence, house insurence and house payment are rolled into one and escrowed out from the one payment. The company has buying power with new home builders (thus the listing of floor plans and not actual houses) but I am looking for pre-build or existing homes in developed neighborhoods. I'm hoping to move in first of march, either into a house or renting a house/apartment/townhouse. I have inspector friends in the area that I can get to inspect the house in addition to the sales places inspectors. So the leaky pipes and bad heat and bathroom remodels hopefully wont be an issue in a 2-6year old house. I'm pretty well set on the area, its growning and in a "good" area so I would expect with the high $ sales of including a downpayment in the offering price the values will go up slowly in these areas. I still have alot of researching and questions for places in the next couple weeks but I need to find something fairly quick the future roomie gets booted from their apartment the 14th of march :p:
     

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