Moving? Rent First, Ask Questions Later

When we last did a major move 4000 miles away, we rented as well. I also thought about buying as the housing was so cheap there at the time but were lucky that we didn’t because we decided to move home after just another year. I could do that with a month’s notice, but if I’d owned a house it would have been different. Had I bought close to work, it wouldn’t have turned out well anyway since the company moved their offices just six months after I joined them.

I have a friend whose family has been transferred quite a bit and they always insist upon owning and not renting. I think they’ve lost upwards of $250k in doing that over the years and having to get out in bad markets – to buy the next house.

I have actually thought about this quite a bit and while I completely agree with renting first I have had one hang up with this. That is, what do you do if you have kids? I know it is possible to still rent with kids but the idea of moving and putting them in a new school where you are renting and then probably putting them in a new school a year later when you decide where you really want to be is the only hang up I have. I know, I know…kids are resilient and all that but that is the one issue that I feel might make me consider trying to buy right away.

Janette – I totally agree that if you are in a career where you are moving a lot that renting makes complete sense and buying would be crazy. In my situation, we have lived in our house for 13 years. We could potentially be moving to another city about 2 1/2 hours away which is where the corporate headquarters for my husbands company is. I know that no job is completely secure and you never know what is going to happen at any given time. However, it is unlikely that if we moved to this other city that we would be moving for that job again any time soon. What I am saying is that we are already “staying put” more than likely. I agree that you can rent in very good school districts and that is an excellent option. I am just pointing out that in my particular situation that the kids/school thing is the one argument that might sway me to buy early on…

Oh…and I know there is the argument on the other side that if I plan to buy a house and stay in it for a long time (as we have here) that I really NEED to rent first and make sure it is where I want to stay long term. Again…the “moving kids that have just started establishing new friends again” argument can be persuasive for parents.

I make major moves so often (it seems like every 3-4 years I’m moving to another state), which is something I really enjoy doing; it never makes sense to me to buy. I was almost lured into it a couple times, or at least seriously entertained the thought, but since the housing crash there is no way I would buy. I don’t really own any stuff, I don’t want kids, jobs are just jobs to me, and I value mobility. The only house I could see buying would be some secluded cabin out in the woods somewhere by Lake Michigan. When I see all the stuff my landlord has to do to keep my rented house nice, I’ve got no interest in being a homeowner.

Agh, wish I had read this 4 years ago. We bought right away (had been renting an apartment and were so tired of that – but there is a decent number of home rentals available here we could have tried). We now realize our house is too big, our yard is not used as much as we thought (and thus too big), our neighborhood is full of family-size houses but occupied by people whose children are now in college so not many kids our son’s age, I don’t want to stay in the job we moved for, and making a change is difficult because they are the big employer in town and our house has eaten up our down payment as well as tens of thousands more in lower value.

In sum, heed this advice, especially if you have never owned a home before (and thus are not only unsure about neighborhood, but also home features you will like/dislike) or you are moving to a job you may not love as much once in it.

I agree whole-heartedly with this concept, but I also feel it can be further utilized to figure out a great, suitable place to rent.

I’ve heard a fair amount of “horror stories” about those who did not perform their due-diligence in regards to thoroughly examining the area/ building/ location/ neighborhood of their future rental abode, and were quite dismayed once they they were settled. (Infact, several friends went to the length of subsequently breaking their leases early and took sizeable losses in order to relocate to a more suitable area to preserve their lifestyle and peace-of-mind.)

I feel that when it comes to any type of move (if possible) try and do your best to investigate and learn all you can about your future potential residence & neighborhood BEFORE making any sort of decision; after all, regardless if you rent or buy, you will have to call this place: HOME.

If you ran this post in early 2007 when Ben first moved, people would have thought you were crazy. You’d have seen responses like “but they can move again in a year and bank the appreciation” or “renting is like throwing money down the toilet”

It’s easy to use hindsight to point out what a blunder Ben made, but if he had bailed from his current home just before the bubble burst, we’d all think he was super savvy.

The only thing he can do now is to make his decisions based on today’s situation.

@Dan53 – I completely agree. My brother and sister are two prime examples of people who did the opposite thing.

My brother got married and moved to Seattle for a job. They bought a house right away. He unfortunately got divorced soon after, and ended up buying out her portion of the house because the house had depreciated so much that selling it would have put him into debt. With his high mortgage, he is really tied to this house and is always looking for roommates.

My sister, husband and child live in the SF area and never bought. They’ve lived in the same rental for years – an old Victorian where the landlord pretty much lets them do whatever they want to the house. Before the housing market crashed, people used to chastise them for not having equity. Now they seem like geniuses with a great home in one of the best school districts and no debt.

Its interesting to note how people who are buying a house to live in spend an exorbitant amount for their home, in comparison to an investor who plans to rent out the home they purchase.

If more people looked at a home purchase as the major financial decision it is, they would look at many more properties and employ more flexibility in other options provided they get their home at the right price. That is a price that allows the house to be rented later and cover the bills.

Just something to consider.

This is kind of a “duh”. Why WOULDN’T you rent first? How can you know the area well enough to buy??? You need to live in the new place a while, learn its neighborhoods and features, before making such a commitment. DON’T WORRY ABOUT YOUR KIDS. If you like the neighborhood where you’re renting, if they like the school and friends, you can buy there. IF NOT you’re not stuck. Moving is a pain, but so is living in an area that doesn’t work for you.

Of course that’s not what my parents did, most of the time. They must have been lucky, because they only got burned on a house once.

For me this isn’t about the current market – my parents moved a lot, always bought, and at one point were caught out in a recession owning three homes in two states. People’s jobs tend to get volatile at the same time the housing market gets bad for sellers, because the two are linked in obvious ways.

I rented 2 different places in this same neighborhood when I first moved here; the house we have owned for nearly a decade is two blocks from the place we rented and moved out of. When we sell, we’ll rent – there’s a small chance of making a market mistake, selling and banking the money for a year before buying in a much higher market – but it’s not as bad to me as the risk of something going wrong with the closing dates and being temporarily homeless, or stuck with two mortgages.

We wouldn’t move to a whole new city until my son is transitioning from elementary to high school (he’s at a K-8 school) but we could move to a different house or a different neighborhood in the same school zone – in fact, we really want to.

Renting is definitely not “throwing money away.” Your reward might not be very great, and it’s a terrible investment. However, renting has a lot less risk to it. If you move into an apartment and it starts to fall apart, it’s not your problem. If you move into a new house and the foundation caves in on you, you have yourself a mess.

Rent first… research the area for the best deal… then make an informed decision. Paying a little rent in order to make an informed decision is definitely not throwing money way.

Your arguments make sense, but we’re very happy that we bought. When we reached this city we did have about a month living with my family which let us understand which neighborhoods were more or less crime prone, but even if we had rented, 1 month would have been sufficient.

One reason? We wanted to put down roots of both metaphorical and apple-tree varieties. There’s not much point planting trees that takes 3 years to really start producing if you’re renting, even if your landlord is OK with having fruit trees in his yard.

In our renting experience, renters are viewed as transient by neighbors (unless they are also renters!) and it’s much harder to integrate into a neighborhood.

I couldn’t agree more with this post. My wife and I have thought about moving out of state within the next few years. We agreed that if we do, we will be renting for at least the first year so we can get to know the area.

One thing I would suggest about renting is to work with a private individual and not get an apartment in a complex. I always had to deal with noisy neighbors leaving trash outside their doors, bad policies and mismanagement, etc. It’s a bad way to measure the merits of the overall neighborhood.

If Ben had already been a homeowner in his old area, one would have thought he would have already done the emotional toil of determining what kind of neighborhood he wanted to live in, regardless of city.

Because I know myself well enough, I know I would never want to live in a city, but on the outskirts of a small town/suburb (until I finally get my farm, then I’m going country!). I grew up in an area where everything more basic than a grocery store was a 30+ minute drive away (and the nearby one was expensive, so we went to one that was 30 minutes away); I don’t really need things to be closer than that.

This is good advice, but I would add one thought–at least for those who are selling one home to move to a new location.

Don’t you have to pay capital gains taxes on the “proceeds” from the sale of your original home if you don’t re-invest it in a new home within a certain amount of time? (I think it’s one year, isn’t it?)

So renting in the new location is certainly a good idea… but so is looking for a shorter lease if possible, so you can make a decision before those capital gains taxes take a big ol’ bite out of any nest egg you have from selling a prior home.

This is excellent advice.

There are far more risks in buying than renting, and it allows for flexibility and reflection later on.

A few years ago we chose to move to a new home, but stayed in our area. Though we debated whether to buy or rent, in the end we decided to rent because we weren’t certain about committing, and we didn’t want to deal with the hassle or selling down the road. It was the best decision for us at that time.

“Ben” here. (Tim, do I really look like a Ben to you?) Ok, from the way the story’s told, I totally agree with you. I don’t agree with Ben’s decisions, either. However, my name is not Ben, and you don’t have the whole story. You didn’t take into account my individual situation, nor know why I made these decisions.

We actually did rent (on the company’s dime) for 4 months until we found a house we liked. During those 4 months, nearly all I did was neighborhood research. You might think, though, that I did bad research, or didn’t rent long enough, as I’m looking to move after just 3 years.

We chose to live in that “quiet suburban” location because we were forced to do so. Literally, my wife had to agree to live within a certain area or she wouldn’t get the job… which ruled out the city. Also, the city was prohibitively expensive, so we’d be forced to rent there if were to live there anyway.

Renting meant we would have either had to sell a bunch of our belongings or throw everything into a storage unit somewhere – a huge hassle either way. It was a manageable commute, and renting sucks in many ways, so we bought a house. Some might say we should have rented until we were in a better situation, but we can’t see the future. People lives change. If you want to own a home, you have to live with the fact that you might have to sell it. Otherwise you’ll be too scared of commitment to do anything but rent forever.

We really love the house we found. It fits within our budget. We chose a place as close to the city as her boss would allow. We’re twice as close to the city when compared to where we moved from (job limitation again), so it was an improvement. Plus, in 2007 we couldn’t afford ANYTHING in the city anyway!

So “fast forwarding”, right? My wife got an unexpected transfer to the city. We see an opportunity for a quality of life increase. We no longer are bound by that job, and can probably go down to one car and walk/bus to most places if we move into the city. If we sell now, we lose 20%. However, prices are down for all houses, not just mine. Houses in the city are discounted by 20% too! Suddenly, I realized those houses that were too expensive in 2007 are within our price range. I’ve crunched the numbers, and this way, against all logic, we save money versus been buying in the city, pre-crash, 3 years ago. (Sorry for the excessive comma usage.) Yes, we’ll get smacked on the nose by all those closing costs and agent fees when our current place sells, but people like Tim need to eat too, right?

That said, selling the house is going quite slowly. There are certainly lots of homes to compete against, and I think we should probably choose a different realtor in the spring. Thankfully, we’re not upside down and we’re not in a situation where we’re forced to sell. Honestly, we’re still happy where we live, but we see a good opportunity both financially in the long run when the market comes back and short term for a quality of life improvement.

Lots of rambling, but I figured I should speak up. When are you going to finally buy a house, Tim?

This is absolutely the truth. I moved to an entirely new city – with a house I’d bought before I made the actual move waiting for me when I got there. It one of the biggest mistakes I ever made. Despite the fact that my neighbor became my best friend, I disliked the neighborhood overall. Many people were credit and mortgage over-extended and it showed in their unfriendly and pissed off attitudes. The freeway was too close and noisy. The schools were terrible. I would never ever buy a house in a strange city again. Much better to rent and form a strong opinion either way.

Sure, I understand what you were doing. I felt like a bit more perspective was needed given it was so obviously written about me. Things are rarely so black and white when you dig into the details. Despite the best research, you simply cannot plan for everything, and I feel people should understand that. Like I said, given the way you told the story, it strikes the point home. However, that “real world example”, is not my story.

@Leanne #36 – no, there’s no requirement to use the capital gains on a home sale for another home anymore.

A single person can make a $250,000 gain – for married people it’s $500,000 – completely tax exempt, if it is on a home that is their primary residence.

Here it is straight from the IRS.
http://www.irs.gov/publications/p523/ar02.html#en_US_publink1000200709

“You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.

*You meet the ownership test.
*You meet the use test.
*During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons.”

In 2008 I took a job which I ended up hating in a location I didn’t especially like. My coworkers were unhelpful, the work was meaningless to my career, and I was having trouble meeting people in the new city.

Fast forward 2 years to last month when I was offered my dream job less than an hour from where I grew up. I was able to break my lease for less than a months rent and turned in the keys 2 weeks after I accepted the job offer. Had I bought a home it’s likely I could have been stuck in a job I hated just so I could wait out the housing market.

A girl I started with at my old job bought a house and is virtually stuck there until the market recovers. Thank goodness I rented!

Great advice

I love these types of posts that dispel certain myths that we all take for granted.