Should I rent a home?
This article is part of the Ask the M-Network series. Sheila asks:
We’re selling our house and moving to a new city. With the real estate market in such a downturn, would it be wiser to rent for awhile until either the market gets better or we can decided upon a house we know we’ll want to stay in for awhile? I’ve always been told that renting is throwing away money, but if I can’t sell my house…would renting make more sense?
Mrs Micah says:
If renting is less expensive at this point than buying (including all the up-front costs and whatever money you’d spend on repairs in the time you’d otherwise be renting), then it’s not throwing away money. Paying less right now for a place to live means that you have more for the mortgage you’re already paying without things becoming very tight financially.
It also gives you flexibility, as you say, to get used to the area and find a place you’d like to live. That flexibility is quite valuable. Buying a home once you know the area increases your chances of making a good decision. And renting until you buy means that you’re not pressured to find a house immediately, you have time to find one you really like.
As for buying in a down market, a down market isn’t a bad thing for buyers. Waiting until it recoups means that you’ll have to pay more for the house. But if the down market means your house isn’t selling, then I think it’s ok to wait.
It certainly is a trade off. You are getting less for your house, because you are selling it in a down real estate market — so there is a benefit to buying another house immediately to lock in the lower price — none of us really know if the real estate market will go up or down in the near future, but at least you are trading apple for apple, so to speak.
On the other hand, I agree with Mrs. Micah. Unless you know the new city really well, it’s hard to make a good decision on where to buy. So there is a strong benefit to renting for a short while to learn more about the neighborhood. This way you get to know the area better and can make a better buying decision. This will also take some pressure off your family, since moving can be quite stressful.
In the end, I think renting for a short time make sense, but I would not wait too long before buying another house.
I think you should definitely rent at first, and this is from someone who just moved to a whole new city as well! Since we didn’t know the area that well, we wanted to really take our time and find the house and area we wanted – and we couldn’t have done that without living here for a while first. We still are not buying yet, as where we live has not hit bottom yet, but we are starting to look after living here for 7 months. Friends of ours just relocated to Denver, and they are renting at first as well even though financially they could buy whatever they wanted. No sense in rushing as the market will not be recovering any time soon. Take your time and find what you want. Good luck!
I’m going to jump on the bandwagon because I think it’s going the right way. Renting whilst you sell your current house and figure out where you’re going to live is going to be a good thing. Added to which if it becomes very difficult to sell your house and you need to cut costs, it’ll be easier to move somewhere with cheaper rent than to try and sell two houses in different locations. Renting buys you shelter (which is never throwing money away) and flexibility. In your position, flexibility has got to be a good thing.
Glblguy (me) says:
As a person who has recently been paying two mortgages payments for the past 4 months or so I think renting is very smart. Not being able to sell your house for a while is a very likely scenario in today’s market as well. We recently rented ours out because we weren’t able to sell it. It was on the market for 6-months and not a single offer. Renting will not only give you time to decide where you want to live, but will also keep you from the financial burden of having two mortgage payments.
The disadvantage is that right now is a really great time to buy. We just recently bought a home and purchased it significantly below market value. By waiting, you could be giving up a chance to get a great deal. The answer really boils down to how confident are you that you will sell your home and how much risk are you willing to take.
Renting in your situation isn’t a bad thing, as my fellow M-Network friends have pointed out, so don’t let that worry you. Go with the decision you are most comfortable with you. Thanks for the question Sheila and best wishes on your move!
Please remember that our answers are opinions and should not be considered professional advice and we assume no responsibility of any kind. Please consult a certified financial expert as needed.
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