My aunt, who’s a mortgage broker, was trying to help us find housing, and she suggested that we buy a condo or a small house, but I was very opposed to the idea. Much like Tim said, I had no idea if the places she had found were going to be good neighborhoods for us. It was hard enough having other people check out apartment buildings for us.

I’m really glad we decided to rent, not only because we didn’t really have the down payment for a house together before we moved (what with all the other costs of moving), but also because I found the PERFECT neighborhood about 15 miles south of where we are renting now, and I never would have known that it was there when we were still in Michigan.

Great advice, thanks. ^_^

I’m not sure what type of apartments are in your area, but where we rent our apartment, you would never have those types of people. We have garages, private stairs, curb side trash pick-up daily, etc… Most in our apartments are professionals and families.

You just have to be careful where you move as far as apartments go. It’s not hard where I live to find fantastic apartments.

I have a friend who is moving to a new city for a new job with their spouse and child. I’ve recommended renting, but it’s difficult to make the case for one reason. The rental situation is crazy. Decent places go for $900-1100/month, while for equivalent houses the mortgage payment would come out to about $550/month or so. Even if you throw in all the usual extra expenses, it seems like it makes sense to buy even if they plan on moving away in a years time. What do you think?

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

Yes, but if your credit is adequate and you are making a reasonable down payment on a house you can truly afford you can do a real estate deal quickly. We closed in 10 days after first seeing the house and started moving in at the end of the three week period between leaving an old job and starting a new job. This was in June 2008, so not todays loan environment, but not the old easy days either.

(See my post above, however, for some of the reasons why this was not at all a good idea. Just because you can do something doesn’t make it a good idea! )

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!

Fannie Mae, the Federal National Mortgage Association was just starting to topple over that summer and if our home hadn’t been move-in-ready and if the sale had seen any delay, the sale might have toppled with it and cost us thousands of dollars in holding costs before we could have gotten rid of it.

Our current house is fine, luckily. We even like the neighborhood, mostly. Except for the overly noisy neighbor next door who had a car repossessed Sunday morning. If we were renting this house, we’d be able to escape them if needed. As it is, in a worst case we might have to wait for their house to be foreclosed, sold, and repurchased. Once again, as the owner we would then take the hit to our houses value where as a renter it wouldn’t sting as much.

It is still definitely a good idea to keep all the possible problems/disasters possible in a home purchase in mind, financial and otherwise… not just the benefits.

(Did I mention that 2 months after we moved in, we had to evacuate for hurricane Ike? If the worst case storm surge had occurred, the house located 3 miles from the water would have had water up to the first floor ceiling, and likely washed away.)

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.”

DH and I need to move because we both work way too far away. DH has been laid off and found another job in the summer of 2010 which happens to be just a mile from my part-time job. We have consider both buying and renting and I am really not sure of the best approach for this specific situation. It a smaller town than I have ever lived in. But I have worked there ten years and know most of my neighbors in nearly all the places we have considered.

RE: “Ben” @ 40 –

As I mentioned in an email to “Ben,” the reason I stripped out all the personal details and changed the name is that the point wasn’t “this guy made a stupid decision” but rather “here’s an example of why you should be cautious.”

No personal disparagement was intended, and no judgment was being passed. Hindsight is always 20/20.

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?

A couple of years after DH and I moved into our midcentury apartment, an old lady upstairs died. She had lived in the same apartment for 50 years. Her kids grew up there, her husband built his business from there, it was their HOME. And they treated it accordingly.

Our apartment is our HOME. We have furnished and maintained it as such. People shouldn’t go into any living situation assuming it’s for the short-term, so it doesn’t matter if it’s crappy; they should always care. It makes for a much more pleasant life.

If you rent before buying, and treat your rental as your HOME, you will have a much better chance of making a rational decision about a home purchase, vs being desperate.

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.

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.

There’s no rush to make that commitment. You can have just as much of a “home” in a rented space as well.

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.

We flew in and looked at properties for 5 days, then on the day before we left, bought one. It was just so perfect – we had a checklist and it had everything we wanted on the list, so we felt secure buying it after only looking for a week. It has turned out to be everything we expected. We got lucky.

That’s different for people in some big cities or on the coast, but even there I bet it hits a minority – people who bought in the ’70s and sold in the recent bubble in a large city probably hit that $250K gain, but people who sell within a decade or so of buying probably won’t.

The previous owner of our house made a huge capital gain – sold the house for three times what they paid for it. And yet they still came under the $250K exemption.

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.