Buying vs Renting 5 year home

[budgetnoob]

I've read a bit on this but looking to see what other people think on the subject. My fiance (24) and I(27) are prepping to get all of our things in order and live together, you know, for the rest of our lives. We were originally planning on just renting for awhile after we get married in November because neither of us sees us living much past 5 years where we are at now. But the thought of making payments on something with no return just seems like a waste to us. Plus we like working on projects together, so fixing up a home sounds like something fun to do (she's completely uninterested in watching me work on cars).

For us and our finances, I think a 30 year fixed with early payments is going to work better (just in case one of us loses their jobs, have extra to work on repairs, etc). Anyway, that might not be super relevant, but what I am concerned about is buying a house if we don't plan on being in the state in 5 years. The advice is to buy a place that you want to live in, because who knows where things will be in a few years, but I'm not convinced that renting is a good alternative to this if it's even the case. Or is it?

BTW she has minimal student loan debt and I've got none, so we have a fairly good base to begin with.

[bjl584]

Nothing wrong with renting especially if you don't plan on living in your current area longer than 5 years.

Do you have 20% down? If not, then renting for the next few years will give you time to save up for a down payment. When you do move and finally do decide to buy you will be sitting pretty.

[disneysteve]

I wouldn't buy with a short time line. There are costs involved in buying and selling that you won't recoup. There's also certainly no guarantee that you won't lose money on the transaction over a short period of time.

We bought our house when we were as sure as we could be that we'd be staying put for the long term. That was 20 years ago last month so I guess we made the right decision.

[97guns]

also consider that it is very difficult to manage property out of state, difficult to manage an out of state property manager as well

[ua_guy]

Rent! It's not money wasted. You are getting a place to stay in return. Get into the groove of married life and enjoy that for a while until the both of you land on a place you really want to be. Save up in the meantime, then, look at buying.

[budgetnoob]

I'm still learning about the loan process as I go, but realizing there is more to it than monthly payments vs rent. Honestly, one of the biggest deterrents to renting is that we want to work on house type projects together. We keep looking at "fixer-uppers" to make our own... just to sell in a few years (ha!). It just seems like something fun to do before we settle with little gremlins running around, but may not be wise if we don't plan on it being our "home" down the road.

Thanks for the responses- half of this is just talking things through.

[snafu]

First, have you saved up 20% downpayment? Without that base you'll be tagged with very expensive mortgage insurance on top of all the other expenses. How will you fund the additional sums needed for updates, upgrades, equipment, materials and supplies? Do you and fiancee have the skill sets needed to undertake such a massive project? Do you have reliable, cost effective trades [plumbing, electrical,gas fitter etc].

I hope you'll carefully study mortgage amotorization tables so that you understand that in five years nearly all the money you pay in monthly payments will go to interest, mortgage insurance, property tax, regular insurance and day-to-day operations like electric, heat, water, sewerage, trash etc. When you add the stress of a major renovation to adjusting to living together you've potential for too many problems.

[Mdarius]

I always thought home ownership equalled success and the American dream. I've owned two homes now and walked away from the sales with little cash. The cost of home ownership can be high. I don't know of any that don't require repair in addition to remodeling. There is always something. Add the cost of time. My hobbies became sprinkler repair, finish work, mold removal ($20,000+ later! Ouch!) framing, tile, plumbing...you get the idea. It's not really qaulity time with the family even if "little buddy" is handing you the wrench.

I currently rent. I pay the same rent payment as I did for my mortgage payment, but I save a ton of money by not having to do the home repairs and maintenance. My landlords mow the lawn, weed the flower beds, and do all house repairs. I walk out the door to go camping with the kids while my own personal yard care crew takes care of the hard stuff. My family time has never been more free. Not all landlords are like mine, I realize that, but it's the right place for me right now. This really is the American dream!

Consider the hidden costs. Ask a friend or neighbor who lives in a home similar in age to the one you are considering what their annual cost of ownership is over a year, excluding mortgage costs. I bet you will both be shocked by the results when they come out on paper.

I'll own a home again, I'm certain. But my expectations will be different.

[theoracle]

We keep looking at "fixer-uppers" to make our own... just to sell in a few years (ha!). It just seems like something fun to do before we settle with little gremlins running around, but may not be wise if we don't plan on it being our "home" down the road.

Firstly, to echo what many others have said - Rent is not wasted money!! If you can rent in a place where you feel comfortable and secure and are able to save for a deposit/downpayment then that's what you should do for the sort-term... in reality its the same as buying anyway as your mortgage repayments for the first 5yrs will go towards paying the interest on the loan and won't even make a dent on the actual amount borrowed. The only thing you'll miss out on is any capital appreciation, which in this climate is probably minimal anyway!!

Secondly, buying a fixer-upper and taking on a project like that is not fun... infact it is extremely stressful physically, emotionally and financially. Especially if you're having to borrow money and juggle your finances to see it through.

My advice... enjoy this time without putting on any additional stresses. Get married, enjoy that part of your life journey and look to buy once you know where you want to be for the rest of your lives. Good luck!!

[ua_guy]

I'm still learning about the loan process as I go, but realizing there is more to it than monthly payments vs rent. Honestly, one of the biggest deterrents to renting is that we want to work on house type projects together. We keep looking at "fixer-uppers" to make our own... just to sell in a few years (ha!). It just seems like something fun to do before we settle with little gremlins running around, but may not be wise if we don't plan on it being our "home" down the road.

Thanks for the responses- half of this is just talking things through.

A note on the part I put in bold. There's a big difference between buying a home that's in very good shape and changing things to fit your personal taste if the home is older or the finishes aren't to your liking. Examples here are paint colors, carpet, door hardware, light fixtures. Even if it's an older home, it should be in excellent condition, that's the key. Nothing should need replacing, even if you plan to replace some things eventually.

It's an entirely different thing to buy a home that's not in good shape, and thinking you'll just remodel and update as you go along. This has a high probability to destroy relationships and your finances. Considering something like this as a short term purchase would be a grave mistake.

[cypher1]

There's a big difference between buying a home that's in very good shape and changing things to fit your personal taste if the home is older or the finishes aren't to your liking. Examples here are paint colors, carpet, door hardware, light fixtures. Even if it's an older home, it should be in excellent condition, that's the key. Nothing should need replacing, even if you plan to replace some things eventually.

Couldn't agree more. When I bought my home in 2009 I kind of regretted buying a bigger house (no need for repairs) for just myself. I knew others buying fixer uppers much cheaper and spending all their time working on for the next few years. I started to appreciate my home more and realized I had the option for updates or remodel if I wanted to, not because I had to.

[budgetnoob]

Great responses guys; I'm glad to have people with experience openly give advice as it definitely helps the process. We'll hold of on buying a house. The points you brought up make too much sense. Now the question is how to start budgeting and putting our money. Fiance just got a full time job so we should really start planning how we want to live for awhile. I'll probably start a new thread with that though,

[snafu]

Smart to start a new thread for money management. Who's paying for the wedding? If you two are funding your event, get a budget down on paper.

Not to early to explore rental costs within reasonable distance from work either of you. Where is the money going? Are you each financing cars? If you're wanting to save for a DP on a house, have a look at a program like Mint.com

[budgetnoob]

Ha, we've both actually had Mint accounts, but don't use them much so it hasn't done me much good!

My Jeep's paid for... it has 195k miles on it but I only put ~10k a year on it and work on it myself so it should be good for awhile.
She's got $3k left on a student loan (she used it to buy her car), otherwise there are no debts.

Our parents are paying for the big day (mostly hers). While not so much ourselves, our families are both very traditional. Otherwise we'd probably be living together (see above wedding funding why this decision was easy!). It's a small one with around 45 guests and we're keeping it low cost- well, low cost for weddings anyway.