My husband has just gotten an apprenticeship oppurtunity in Iowa. We are from the West coast, but this is a great opportunity and he is taking the job. We will be here for about three years. The housing seems much more affordable and stable than we are used to. Should we buy a cheap home to live in and fix up (we could get something for $50k-100k), even though we will be moving after the apprenticeship is up? OR would it be smarter to rent (for about $700-$950/ month)?
Rent of course.
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Friday, February 19th, 2010 at 7:25 pm
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September 11th, 2008 at 9:56 am
Rent of course.
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September 11th, 2008 at 9:58 am
I AM THINKING SINCE it is a good time to buy, buy and keep or sell or rent after the 3 years after all, who knows maybe after 3w years you will stay.
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mind
September 11th, 2008 at 10:03 am
Just the other day I read a news bulletin about how real estate in Iowa is more reasonable than any other area in the country…you lucky girl!
That being said, if you CAN afford to buy a house right now DO. Here’s why:
It is a buyer’s market. In three years the economy will have almost certainly improved thus bringing up the value of the property you purchased. When you sell your house and move, you’ll have a nice little profit to show for it and a beautiful paid off mortgage tradeline on your credit report–these are things renting can’t give you.
My advice to you would be to ask your real estate agent to show you foreclosure properties. These properties are sometimes extremely nice and at very reasonable prices. Turning around and selling a foreclosure property that you have painted, worked in the yard, and given a bit of love to can net you more money in the long run that paying current fair market value for a home.
Plus, with the current cost of real estate in your state being so very low, it will probably end up costing you more every month to rent than to make mortgage payments. I just don’t see a good argument for not buying.
Make sure that when you get your financing you NEVER go with an adjustable rate. Even if the fixed rate is a bit higher, trust me its worth it in the long run. The housing crisis has not righted itself yet, and you don’t want to be one of the thousands caught in that sinkhole.
Best of luck and have fun house shopping!
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September 11th, 2008 at 10:06 am
Hard to say.
Housing market is poor nationwide now. Who knows what it will be in 3 years. IF you can’t sell it, can you rent it to cover the mortgage? IF you can’t sell it, can you afford to leave it unsold, maybe rented, maybe not?
So you buy a cheap house, fix it up and hope to sell at profit in time.
OR you rent cheap house, SAVE lots of money so that you have a 20% down payment (avoiding PMI) when you relocate.
I’m risk averse so I’d take second choice. But it’s your life, your money, do you like to gamble?
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real estate attorney
September 11th, 2008 at 10:12 am
If you can get something for $100,000 and rent is truly $700 - $950 per month, you are probably better off buying, fixing and reselling.
First, housing experts expect that prices will bottom out in the next 12-18 months. Whether they rebound and how much is anyone’s guess, so you may lose some equity. However, at 7% interest, a 30 mortgage payment for P&I is $665 - even at your low end rent, it is cheaper. However, you will have to factor taxes and probably PMI into that, so let’s say $800 which is right in the middle of the rent range you gave, so the payment itself is really a wash.
Having said that, having the mortgage will probably give you the opportunity to itemize your taxes and take the mortgage interest (and tax) deduction. Interest per month is about $550 or about $6500 a year, plus let’s say the $1500 in taxes. This is a tax deduction of $8,000, which, at 15% tax bracket saves you $1200 in taxes every year (that is money in your pocket), so over three years, that is $3600 you won’t get renting.
To finish off the scenario, let’s say you spend $800 for rent and $800 for mortgage. Over three years, either way, you will spend $28,800 total. Since you will get back in taxes about $3600 over those three years, your comparative, upfront costs are $28,800 for renting and $25,200 for owning. If you can turn around and sell yourself for $100,000, you will pocket whatever equity you have built up inthe house when you sell. According to an amortization schedule I have, you will have paid $3,300 of your mortgage payments into equity, bringing your cost for owning down to $21,900 (obviously, this will be more is housing prices go up and less if they come down).
If you get a fixer-upper, it is possible that you could actually increase the selling price of the house if you do the work and it shows well, thus lowering your overall cost for buying even more (you’d have more equity).
One last thing you need to take into account - costs of owning versus renting. If you own, all repairs are on you (you have to pay for the supplies and do it yourself or hire someone). When you rent, repairs are on the owner of the property. If you can do repairs yourself, that will lower your ownership costs. Also, if you own, you can get the repairs done when needed as opposed to waiting for someone else to schedule everything.
Also, utilities have to be accounted for - if they are included in rent, that narrows the advantage of owning versus renting.
These are just some of the things to think about. BTW, if you can afford to pay more, you could look into a 20 or 15 year mortgage which will build up equity quite a bit faster and lessen the interest paid on the mortgage.
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September 11th, 2008 at 10:25 am
When you go to leave are you going to be able to stay for as long as it takes to sell or are you going to leave as soon as the apprenticeship is over and have to possibly deal with a new mortgage/rent and the house in Iowa until it sells?
If you may have to carry both of those around for a while, I’d only buy if you will be able to afford that possibility. Otherwise, I’d rent.
Good luck and congrats to your husband and you. It is always fun when a great opportunity pops up.
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