Owning a house for two years ...

[BarbWire]

I'm solo. I have been house-less for 4.5 years. The several $100K from the sale of my previous house in 2016 has been sitting in cash as I didn't have a clear timeline on what I was going to do but wanted to preserve capital.

I now have an interesting and unexpected chance to buy a friend's family FSBO house in a place on my "strong maybe" list where rentals are scarce. Running the numbers, paying cash, there are no financial obstacles to buying and even to selling in two years without appreciation.

So ... if financials were not an issue, would you buy a house to own for perhaps two years to test an area where rentals are very very scarce?

 

[tulak]

If financials are not a concern, then why not?

What are the downsides? You mention that this place is on your strong maybe list. If so, I’d be inclined to go for it.

I would make sure that the home is in good condition, etc, before buying. Will you have any problems selling in two years if you decide you don’t like it?

Otherwise, it sounds better than renting and if you decide you like the home/neighborhood, then you can stay indefinitely.

 

[BarbWire]

I shouldn't have any problem selling it unless there is a massive recession.

I *think* my hesitation stems from the old mantra "you need to own a home for at least 3....4..5... years or don't buy" addage, but of course that was meant to cover the case of recouping mortgage origination fees, PMI and eventual selling fees assuming a 3% appreciation per year.

But old ear-worms are hard to dislodge ....

 

[Bigdawg]

In two years if you didn't want to stay could you keep it and rent it? You mentioned there are not many rentals there so maybe your house would be in high demand.

 

[tulak]

I shouldn't have any problem selling it unless there is a massive recession.

I *think* my hesitation stems from the old mantra "you need to own a home for at least 3....4..5... years or don't buy" addage, but of course that was meant to cover the case of recouping mortgage origination fees, PMI and eventual selling fees assuming a 3% appreciation per year.

But old ear-worms are hard to dislodge ....

This is because of fees mostly. You should take into consideration selling fees, but as an exercise, calculate how much owning for two years and selling vs renting would cost. Make sure to account for extras with the home, such as maintenance and improvements that you’d make.

I’d also put a lot of thought if you really want this house/neighborhood. I’m not sure where two years comes from. Why not longer? What if you don’t like it after six months?

 

[RetiredAt55.5]

I'm solo. I have been house-less for 4.5 years. The several $100K from the sale of my previous house in 2016 has been sitting in cash as I didn't have a clear timeline on what I was going to do but wanted to preserve capital.

I now have an interesting and unexpected chance to buy a friend's family FSBO house in a place on my "strong maybe" list where rentals are scarce. Running the numbers, paying cash, there are no financial obstacles to buying and even to selling in two years without appreciation.

So ... if financials were not an issue, would you buy a house to own for perhaps two years to test an area where rentals are very very scarce?

It could be a fly in the ointment if real estate values took a correction in the next two years.

This might be in a very strong area, but never say never. At some point, as we come out of the dark side of covid, all the bills are going to be coming due (all the stimulus debt, state and local and school deficits, etc.). Some people's jobs aren't coming back, commercial real estate will take a hit as some company's decide work from home is the new normal, etc., etc. I'm not predicting gloom and doom, but it probably won't be all sunshine and rainbows either.

 

[BarbWire]

Two years comes from two places:

(1) I think travel will be a mess for 2021 and 2022 with pent up demand, so having a place to squat may be a good thing, and

(2) a colleague once said that it takes two years to get the pulse of a place -- one year for simply dealing with logistics of relocation and figuring out where to buy fish and have your shoes resoled, and the second to truly evaluate "living" the place. In the past I've found that to be true (though I was working at the time; things mit move faster in retirement).

Again, the financials seem to pencil out, including maintenance . I wouldn't do any upgrades until I was sure I was staying ....

 

[BarbWire]

It could be a fly in the ointment if real estate values took a correction in the next two years.

This might be in a very strong area, but never say never. At some point, as we come out of the dark side of covid, all the bills are going to be coming due (all the stimulus debt, state and local and school deficits, etc.). Some people's jobs aren't coming back, commercial real estate will take a hit as some company's decide work from home is the new normal, etc., etc. I'm not predicting gloom and doom, but it probably won't be all sunshine and rainbows either.

Yep.That's one of the things I think about . So maybe the question is: if I lost EVERYTHING I have in this housing experiment, would I be OK?

 

[BarbWire]

In two years if you didn't want to stay could you keep it and rent it? You mentioned there are not many rentals there so maybe your house would be in high demand.

I have mulled that. I am sure I could easily rent it but I don't fancy being a landlord from a distance, which would be the case if I decided not to stay.

I *think* what I want from this forum is a "no, it is not necessarily stupid to own a house for two years if the worst case scenario numbers pencil out" reassurance.

Or not.

 

[Lakedog]

Since I sold my long time lake house in 2013, I've bought and sold four properties (homes and condos) as well as two RVs that I lived in for a few months. I found that buying/selling even for a year or so worked well for me since I had a large dog which made it tougher to find decent rentals. The key was to buy in nice areas where selling would not be a problem.

I owned one FL condo for only 8 months and another for 18 months, and homes for 18 months (in TN) and 12 months (in AL). I just bought another home on 6 acres that I moved into last week with plans to keep longer term.

If you consider what you would have paid in rent, you will likely still come out close to even or sometimes ahead financially by buying/selling. I may have been lucky, but I sold each property for more than the purchase price, and with one made a nice profit. Since I really dislike living in rentals, buying/selling was an easy decision for me.

 

[RobbieB]

Do what you want to do. Why seek approval?

 

[DrRoy]

I *think* what I want from this forum is a "no, it is not necessarily stupid to own a house for two years if the worst case scenario numbers pencil out" reassurance.

Or not.

If you are generally sure that you would like to live in this house, and in this place, and the financials are OK, then you are 'approved'.

 

[finnski1]

I'm solo. I have been house-less for 4.5 years. The several $100K from the sale of my previous house in 2016 has been sitting in cash as I didn't have a clear timeline on what I was going to do but wanted to preserve capital.

I now have an interesting and unexpected chance to buy a friend's family FSBO house in a place on my "strong maybe" list where rentals are scarce. Running the numbers, paying cash, there are no financial obstacles to buying and even to selling in two years without appreciation.

So ... if financials were not an issue, would you buy a house to own for perhaps two years to test an area where rentals are very very scarce?

You say the house is located in a "strong maybe" area but what of the house itself? Do you like it? Is it in need of many repairs etc. Are you being sucked in a little because it is a friend?
Not suggesting any of these things are true but maybe make sure none of them are biasing you at the moment.
Personally I hate renting and enjoy owning and it sounds like you may be the same.
I was going to say that if you paid cash you would have to weigh that against the opportunity cost of investing that money but you have already done that for the last 5 years so maybe that's a moot point as well.
The other thing to consider is the hassle of moving period. If you moved and 6 months later you didn't like it and had to move again it would start being a burden instead of a new exciting adventure IMHO.
Having said all that I would do whatever you like and ignore all us random people on the internet.

 

[Markola]

^^^^^+1. I’d pay for a professional inspection as the first step. Since it’s a friend, frame it as, “Hey, you can learn some things about your house off my nickel.” If they resist, well, this is the good reason why FSBOs are dicey and why it can be risky doing major financial deals with friends. Good luck.

 

[BarbWire]

Thanks all.

Not seeking "approval" -- that never even occurred to me -- but either confirmation that this would not be a bone-head move(for reason xxxx), or being alerted to red flags or considerations that I hadn't thought of.

Good food for thought here. Thanks. I have what I need.

 

[Aerides]

How is the market in that zip code? Look at zillow, look at the prices in the neighborhood how they've changed - it's obvious in mine that sales have gone from 400 to 500 to now 600+ in a span of 18 months.

I wouldn't want to be the buyer of the house that just sold for 705, but the smaller one for 495 might be a steal, if doesn't need too much work. So if the potential FSBO is a good deal in the local market, and move in ready (so you don't have to spend 2 years fixing it up before you sell it again), and you really like it - like you'd want it even if it wasn't a friend's, then I would be game regardless of the short horizon.

 

[BarbWire]

How is the market in that zip code? Look at zillow, look at the prices in the neighborhood how they've changed - it's obvious in mine that sales have gone from 400 to 500 to now 600+ in a span of 18 months.

I wouldn't want to be the buyer of the house that just sold for 705, but the smaller one for 495 might be a steal, if doesn't need too much work. So if the potential FSBO is a good deal in the local market, and move in ready (so you don't have to spend 2 years fixing it up before you sell it again), and you really like it - like you'd want it even if it wasn't a friend's, then I would be game regardless of the short horizon.

The entire market in the county is sizzlin' hot with price growth such as you have noticed in your area. The FSBO is a very solid deal in the market, and the house has been well maintained though the baths and kitchen are not up to current Architectural Digest / HGTV standards (!). New countertops, new cabinet doors ...

I have an on-again off-again realtor in the area who thinks it would be a sound move and would represent me as buyer's agent. It is in the county rather than in the incorporated city limits, so I am researching what that means.

The recent thread on what to look for in a home purchase is also very helpful.

 

[Surewhitey]

We bought a house in 2015 & sold it 2.5 years later and cleared $100k on a $275 basis. This was after all remodel expenses (not much), property tax & selling fees.

Maybe you will get an "inflation bump" too? I'd do it...

 

[Bigdawg]

I have an on-again off-again realtor in the area who thinks it would be a sound move and would represent me as buyer's agent.

^This made me laugh. Not in a good way. I have zero trust in the recommendation of any real estate agent. They certainly do not have a crystal ball. They make money when a client buys or sells a house regardless of the housing market trajectory. Good luck. Had a sort of close family friend real estate agent who we no longer talk to.

 

[NateW]

.....So ... if financials were not an issue, would you buy a house to own for perhaps two years to test an area where rentals are very very scarce?

Well, that is what DW and I are doing, but not by choice. About a year after I FIREed, DW and I bought a nice house about 80 miles away in the country (after spending 50 years of my life in a big metropolitan area) and discovered we can't stay here through another winter (it's a 24 hours a day/7 days a week wood smoke issue from two nearby run-down properties during heating season), so this summer we plan to buy a new place somewhere else and sell our current home, and try again (we are in the fortunate position to be able to pay cash for our ßnew house and then sell our current one). We are hoping we can sell the current house for enough over what we paid to cover the realtor's commission, and that way, we will just about have lived for free for a year and a half (except for property taxes and the huge hassle it's been).

We debated renting for a year or so first, but detest the thought of moving twice, so we probably won't. I just hope we are better at picking the new place.

 

[doneat54]

I have mulled that. I am sure I could easily rent it but I don't fancy being a landlord from a distance, which would be the case if I decided not to stay.

Maybe dependent on the area, but rental management agencies are nearly everywhere. Last I checked they get around 10%, but you do nothing but watch the deposits come in.

 

[MarieIG]

If financials were not an issue; and buying, selling and moving not a concern, than certainly it is an option.

Since you know that you already like the area - even if it takes a bit of time to sell after two years - it probably wouldn't be the worse thing in the world.

 

[Markola]

Thanks all.

Good food for thought here. Thanks. I have what I need.

Ha. You think you can get rid of us that easily? [emoji13]

 

[Sunset]

....
I have an on-again off-again realtor in the area who thinks it would be a sound move and would represent me as buyer's agent. It is in the county rather than in the incorporated city limits, so I am researching what that means.

.

Since you are buying a friends house, FSBO, (IMHO) you need a house inspection and a lawyer, not a buyer agent realtor who will take 2% -> 3% for doing practically zero work.

As to the original question: rent vs buy.
How much would rent cost in the country (same area) vs buy and lose 5->6% when selling 2 yrs later ?
Usually renting in the county rural area's is a lot cheaper than city, so make the comparison equal.

Could you rent from your friends for 2 yrs ?

Note: if you are buying in a rural area, it could take years to sell as some rural areas move real estate very slowly.

 

[W2R]

I could be wrong, but I just sense that (consciously or subconsciously) you have some reservations about buying this house. I don't know what these would be, but I feel like there might be something like that going on. Otherwise I think you would have bought it and would be posting about your new "forever home" that just fell into your lap.

If it was me - - well, if you don't clearly feel like buying this house is a great opportunity for you at a good price, and something you truly want to do, I'd refrain from buying it.