Plug your numbers into that calculator. I'm getting that you should probably be renting if you can for less than $2000 if you're on a 3 year scale. So if you can rent a house for less than $2000 that is similar to what you'd buy, rent. And that means you don't have to worry nearly as much about location.
On a 5 year scale, that rental break even is down to $1650.
szeis4cookie wrote: ... or the Fed raises rates, or, or, or...
We know that wont ever happen.
Our taxes are super cheap, mind you.
We're talking under $1200 for a $260,000 house.
And our rent increase is around 5% or higher per year.
pheller wrote:codrus wrote:Whenever I do this, especially houses within the 10x-15x annual rent range (171 to 261) I always come out on top buying, especially with 20% down, even with a shorter time period (3 years). The cheaper the house, the more depreciation I can handle. I think last time I ran it at 260k and no appreciation, if I sold in 3 years I'd lose $300, but I'd also have a yard. Bump up the prices towards 290-310, then it doesn't make as much sense, especially with no appreciation.pheller wrote: I fully understand the reason why owning a home isn't worth it. The fact of the matter is, WE CANNOT FIND A RENTAL HOUSE. OK, we can, but we've gotta pay $2000/month.So make a spreadsheet, on one side put in the rental cost for 3-5 years (don't forget rent increases), and on the other side, put in the purchase costs (commissions, taxes, interest, expected repairs, PMI if necessary, etc). Compare the two, and it should tell you if one option is significantly less expensive than the other or not.
Out of curiosity, how does your spreadsheet account for future value of the home? Do you just guess what you might be able to sell it for in 3-5 years, put a number that you really want to get out of it, or is there a standard rate of increase that can be used to estimate?
Seems to me that so much of this situation relies on the future value of the house you'd buy, and therefore what your selling price would be. Without knowing that, how can you accurately guess realtor fees, or your overall profit/loss?
If you are willing to throw money at improvements/repairs, you can add value to the house that way to make it more desirable.
We were at our first house 5 years. We walked away with a good pile of cash to roll forward to the new house, but honestly close to half of that was spent over the years on improvements (windows, doors, heatpump, water softener, renovations, granite, tile) and the other half was equity we had paid down on the loan. So yea the house sold for more than what we paid for it but we spent a lot of money on it too.
STM317 wrote: Out of curiosity, how does your spreadsheet account for future value of the home? Do you just guess what you might be able to sell it for in 3-5 years, put a number that you really want to get out of it, or is there a standard rate of increase that can be used to estimate? Seems to me that so much of this situation relies on the future value of the house you'd buy, and therefore what your selling price would be. Without knowing that, how can you accurately guess realtor fees, or your overall profit/loss?
On a short 3-5 year basis, you could use zero change as a reasonable basis.
Fancier would be to look at trends in the area and extrapolate. But, as always past performance doesn't guarantee future results.
In reply to foxtrapper:
I see the logic there, I'm just not sure I'd be comfortable assuming the value wouldn't drop given how high the market seems to be right now.
But like I said already, I'm a "worst case" guy when it comes to major financial decisions.
STM317 wrote: Out of curiosity, how does your spreadsheet account for future value of the home? Do you just guess what you might be able to sell it for in 3-5 years, put a number that you really want to get out of it, or is there a standard rate of increase that can be used to estimate? Seems to me that so much of this situation relies on the future value of the house you'd buy, and therefore what your selling price would be. Without knowing that, how can you accurately guess realtor fees, or your overall profit/loss?
Obviously you can't know for sure, but you can make reasonable predictions based upon historical data. You build the spreadsheet with default assumptions that the economy isn't going to melt down and see what it says. If you're interested in what happens during a crash or a housing bubble then you can make some different assumptions and run those scenarios too.
This is intended to be a rough guide to give you some insight into how the various factors relate to each other. It should tell you if one option is hugely different from the other, or if they're roughly the same. If they wind up being roughly the same, then you can safely disregard the financial question and make the decision based upon other preferences.
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