valued and much appreciated advice-rent or buy

[janeeyre]

My husband passed away one year ago this week..horrors. I recently decided to downsize because of many reasons. We own our home and also have a beach house in south jersey which is also paid off. My primary home will go on the market in early March for $460,000. So, I am assuming I should realize approximately $400,000 in cash from the sale. I will keep my beach house.

My question is: I have two opportunities....one is to buy a 2 bedroom 2 bath townhouse with an association to maintain the outside of the building as well as the landscaping, etc. for around $260,000. So, no maintenance and it will have a garage.

The second is to rent a 2 bedroom 2 bath condominium on the 5th floor of a 7 story building for $1280 per month plus electric. No maintenance anywhere. Both properties are in the same quaint walking community that I love.

My retired lifestyle is I am an adjunct professor at a local college and I teach two classes per semester. I love teaching there and it provides me with a free gym membership The remainder of my time is split between yoga, pilates, spinning, book group, mahjongg, church activities, happy hour, dancing, bunco, kayaking and biking (mostly when I am at the beach) and spending time with family and friends. I also travel with a group of friends three times a year.

I am asking for your much valued opinion on renting or buying because I have never rented a property. But, it certainly seems like a stress free way to live. Also, I like to be around people. I also understand the point of view that renting is throwing money away. Thank you all so much for listening to me.

 

[RunningBum]

I don't think renting is throwing money away. If you rent, you can invest that $260K and probably cover most or all of the cost of rent, especially when you consider that you'll have association dues at the townhouse and interior maintenance costs.

The advantages of the townhouse is that it may appreciate, and you've at least locked in the cost other than the dues, whereas rent can go up yearly. You'll probably have more stability with your neighbors too. Renters tend to move more often, though the townhouses could also be rented out.

Assuming that both are well-maintained/managed and safe, either seems viable. If you're unsure, you could rent first and if you find it's a mistake, the townhouse probably won't be that much more in a year or two, whereas selling a townhouse if that's turns out to be the wrong choice is more work. I suspect one or the other will seem more like home to you, and I'd go with that.

 

[Revlefty]

Go for the garage! One major consideration is...how old are you. Owning a place with no mortgage is better if you expect to live a long tome (Lord willing).

 

[Mulligan]

I would never presume to tell which situation is best, but a couple of thoughts to ponder as both seem agreeable with you. The throwing away of rent may not be as bad as you think at first blush. I assume the purchased condo would require monthly home association fees, plus you need to pay annual property taxes and insurance. Weigh that against the fact the money from sale of home could be used to invest to increase money to pay for rent. For example, if the money was in the 3% Pen Fed CD, that would generate significant revenue to offset rental costs. Is the rental property stable in that you would not be required to move from it, or would rental rates of property go up in an unreasonable manner down the road? Best of wishes for you on your continued transition through a tough year.

 

[walkinwood]

Other things to consider -
- property taxes on the town home.
- relative size of the two properties. Smaller would mean less cleaning time/cost. Also a smaller utility bill.
- Will it be easier & safer to lock and leave a condo in a high-rise than a town home?

By far, I think the stability of the rental place is the most important. Moving is inconvenient & costly.
-

 

[Animorph]

The rental place would have someone to take care of stuff when it breaks. That might be nice. On the other hand , you're kind of stuck with the stuff that comes with the rental. You can't just upgrade or modify whenever you want.

The rental cost is about what you'd pay for a 30 year 4.5% loan on $260k. Considering taxes and maintenance, I'm not sure there's a big financial difference between the two.

 

[SVHoper]

Hi,

I certainly don't know enough to say which is better - as others have mentioned renting can be advantageous particularly if you are likely to move < 5 years.

I will add that condo or townhome building/yard maintenance is probably less than for a single family home, but it is not zero cost and I think usually comes in fairly predictable and compulsory monthly fees and may have not so predictable special levies which might be many thousands.

I think the following calculator might have some value... not so much as to provide THE answer but in the inputs and particularly the advanced settings inputs there may be a number of factors that you might not have yet considered:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

I am very sorry for your loss and you obviously have had many changes in your life, but are still young and very active. There is absolutely nothing wrong with renting especially for the short term while you find out more about what you like and don't like. If the neighbor hood you have identified is your ultimate retirement spot, then I think you have many more than these two options e.g. rent a townhome, buy a condo Seeing you might be a bit rushed due to the sale of the house, renting may have the advantage of allowing you to make the purchase/rent decision at your leisure and let you obtain better value if you purchase. The disadvantage of course, is that you may have to move again.

 

[Hermit]

I wasn't ready to make that kind of decision a year after my DW died, but it sounds like you have adapted well. About 2 years later I sold the family home and rented a townhouse for a year and did not like it. In that year I found out that I did not like renting. That was well worth the time and effort to move again. Buying is probably a little harder/more expensive to do over if you don't like it.

 

[Alan]

We downsized to a rental with the idea that if we could always buy a smaller house later if we didn't like renting. It is working out really well for us, 9 years and counting.

Good luck Jane.

 

[haha]

To me, considering your very full schedule and obviously outgoing personality, a strong vote for the rental. Usually if you really need a garage at worst you can rent one cheaply within a block.

Another factor is that the condo is overpriced relative to the rental. A couple of years ago I bought a condo for ~$150K, that was steadily rented for $1600 per month.

Someone mentioned an advantage to owning is that you can alter things. This is also a disadvantage, since altering things takes time and money, and it sounds like you have plenty of very engaging activities to absorb your time, and likely some of your money.

Many of the people on this board are skilled handy-persons, and do most of their own maintenance and whatever remodeling is needed. I assume you are not interested in this, which means that you will be writing a lot of checks anytime something needs to be done.

I'd say, hands down rent. If after a year you would prefer owning, that is plenty enough time to shop for and buy a place. They never go away. Arguments about rent being money thrown away are only made by people who do not understand money.

Ha

 

[janeeyre]

Thank you again for your thoughtful opinions. I signed the lease this past weekend. Although I am emotional about selling my home of 30 years, I am looking forward to meeting with the Vanguard folks to find a suitable investment strategy for the proceeds of the sale.

No more roofs, gutters, yard work, snow removal, etc.... That is a cause for celebration.