Home Buying in 20121>Question Details

mmjavier25, Renter in Waldorf, MD

Is it a bad idea to purchase if we will be living in the area for 3-5 years?

Asked by mmjavier25, Waldorf, MD Wed Jun 20, 2012

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17
MM,


It depends on what is the plan after you move. In 5 years will you want to sell it or rent it out? Historically homes have appreciated at 4% average a year. That does not mean in 5 years your home has appreciated 20%!

Purchasing a home can lead to opportunity to build wealth and your investment portfolio. Choose wisely!
0 votes Thank Flag Link Fri Sep 20, 2013
You have to be careful buying and planning to sell in a short time frame. If we continue to see appreciation you will be fine. But you have to realize you will have:

1. Closing costs when you buy
2. Possible fix up and remodel costs while you are living there
3. Closing costs when you sell
4. As much as 6% Realtor commission costs when you sell

So the property will have to go up by say 10% at least *just to break even* with what you have into the property. If the market is flat or declines, then you are going to have a big loss when you sell. If the market appreciates sharply then you will do well.
0 votes Thank Flag Link Wed Sep 18, 2013
Renting vs. buying differs from each person to another. How much do you want a house to feel like a home? Would you like the tax benefits? Would you like the security of knowing you can stay in the same place for that amount of time and not having to possibly move multiple times? Would you like the potential of making money when you sell? On the flip side, can you find a nice enough rental home for less per month than buying? Are you willing to potentially lose some money if you sell in 3-5 years and the market hasn't gone up enough?

Lots to think about, and it all depends on the area and your personal preferences/situation. Best of luck to you - I know you'll find the perfect home whether you decide to rent or buy!
0 votes Thank Flag Link Wed Sep 18, 2013
It all depends on how much you pay for the homer, what it needs, and what the trends are in the area.

Chris
0 votes Thank Flag Link Tue Sep 10, 2013
One option that has not been mentioned to you is the renovation option. I help home buying clients put investor strategies to work and many of my clients can buy a home with a renovation loan and move in with substantial equity in 30-60 days. With this strategy, you worry much less about what the market will be like in 3-5 years because you have the option to sell and potentially make money the day after the renovations are complete, just like an investor, instead of waiting for 3-5 years. You can learn more at http://www.makeoveragent.com. Be sure to watch the video, that will really give you the best idea of what I can help you do to a house.
0 votes Thank Flag Link Tue Sep 10, 2013
Good Evening MmJavier25.

We are just following up to see if you bought or rented.
With the market as it is today, if you bought now, you would have a great investment for the future when you need to rent it.

We'd love to see where you're at. Feel free to get in touch.

Best,

Chris & Shris Dudley
Long & Foster, Realtors
Licensed in DC, MD & VA
Office #: (703) 556-8600
Office Address: 8227 Old Courthouse Road, Tysons Corner, VA 22182
---
Chris Cell: (202) 297-3047
Email: chrisdudley@longandfoster.com
Shris Cell: (301) 655-1521
Email: shristhi.dudley@longandfoster.com
--
http://www.dudleyrealtor.com
0 votes Thank Flag Link Tue May 7, 2013
Hello mmjavier:

Rentals market is absolutely hot these days and paying Rent Vs. Mortgage is the question which you need to understand and make decision on. Owning a home for 3 to 5 years can be a short period of time for some families and may not be for others. Given the fact that home prices and interest rates are still low - paying a mortgage Vs. paying a rent would be a better option. Again as my fellow agents have said: all it comes down to is what your comfort level is and in which directions you'd like to go. Paying rent is like paying someone else's mortgage so calculating cost on Rent Vs. Buy would help you. It would be a good idea to sit with a trustworthy and knowledgeable Realtor who help clients with both rental and sales needs and evaluate your options.
We have helped many relocating families with both rental and sales in this area due to Quantico and Fort Belvoir and would be happy to assist you as well.

Best Regards,
Faiza Alvi - Realtor®
Prince William Realty, Inc.
703-389-7973 (Direct)
703-580-9995 (Fax)
http://www.house2homeva.com
MILLION DOLLAR CLUB - 2011

I believe:
Real Estate is about building relationships
& serving clients with honesty, integrity & passion.
0 votes Thank Flag Link Wed Jun 20, 2012
I agree with you that the rental market is overheated.

It truly comes down to your personal comfort level.
3-5 years is a rather short time to own a house, especially considering the cost to sell, maintain the house, etc.
However, 3-5 years is a VERY LONG time in a life of a Family and if the rental HOUSE does not feel like a HOME it is worth to own :-)

I cannot advise you that way or another - only YOU can make that decision.
I think a big deciding factor could be the good old fashioned sweat equity. Are you good with home improvements, landscaping?
IF you can purchase a property BELOW your monthly rental payment and have the time and expertise to build up the "sweat equity," owning a home could be a very good idea, especially considering the historically low interest rates.

However, only YOU can make that decision.
Since you plan to stay only 3-5 years in the house, treat the purchase like you would treat purchasing a stock: invest only the amount that you would be willing to lose and not suffer a financial harm.
If you decide to purchase, remember the real estate mantra: location, location, location :-)

Good Luck
0 votes Thank Flag Link Wed Jun 20, 2012
You have gotten some excellent examples from my colleagues below. Interesting enough, a sale I just made was to a client from California...he plans to stay 3-5..and he bought VA.

This gentleman is very astute and purchased a home for 635k in a nice neighborhood in Centreville (Virginia Run). If you would like to discuss with him or myself..please contact me.

I own rental property and can discuss the pros and cons and also discuss and show you stats from different areas.

If this is of interest to you I am happy to put my 25 years of experience to work for you!

PS: THANKS FOR SERVING OUR COUNTRY!!!

Kind Regards,

Erik J. Weisskopf,ABR,CDPE,CRS,GRI
Re/Max Distinctive Real Estate,Inc.
Erik@AskMeAboutHomes.com
703.216.1222
0 votes Thank Flag Link Wed Jun 20, 2012
Where will you be going in 3 to 5 years? Do you know for sure? If so, buying there and renting out with the aid of a property manager could well be a good idea, since, as others have pointed out, interest rates are so low and renting is costly. You could potentially save a lot of money that way. This is a high-cost area, even for secondary locations, such as Waldorf. If you know that you'll be moving, I would not buy property in a secondary location. What's a secondary location? Anywhere where people live because they can't find what they want and can afford in a sought-after location, such as Bethesda or Arlington, just to name two examples.
0 votes Thank Flag Link Wed Jun 20, 2012
Again, your question requires more than a simple answer of yes or no. I know this can be frustrating but buying real estate is not like buying a car or a dress or a hammer. Using the VA loan guarantee can be helpful if you don't have money for a downpayment. While there are other potential mortgage products out there with similar benefits the VA is probably the best. ( In Virginia we also have the VHDA for qualified buyers.) With a VA loan the return on your investment is highest because you are not using any of your own money to purchase. Therefore, any increase in value is equity (ROI).
0 votes Thank Flag Link Wed Jun 20, 2012
THAT actually depends on the property you buy. I don't think its as simple as a yes or no answer, and heres why; if you move in 4 years it will cost you money to sell your home, or you must be able to rent it out and cover your mortgage. If for example we take a 300k house, to buy and sell the house, you will incur $30k in costs. So, the combination of tax breaks, principle paid down(and prices rising), and equity in the house must come out to $30k. With some properties, it does easily make that(you may buy a foreclosure at a deal and gain $20k in equity). With some properties, you will only break even, or you wont make that back. Buy the right property and that answer is a no. Buy the wrong property and thats a yes.

I know a lot of people will always give the rosiest opinion of the market(and even did during the boom), but you need to know the realities you face, and do your homework beforehand. Make sure you buy right, and with someone who understands the position you are in. It makes for smart decisions on something so important!

Jacob Taylor
Samson Properties
540-303-3616
http://www.TheRealTaylor.com
0 votes Thank Flag Link Wed Jun 20, 2012
We were initially looking at rentals and rent just seems so high for what you get. We started discussing looking into short sales because it seemed like we could get a place that was just as nice with a much lower mortgage payment.

We will be using the VA loan to purchase. We have never used the VA loan before. Does this help us out any more than if we were to not use it?
0 votes Thank Flag Link Wed Jun 20, 2012
If you were to use a VA Loan to purchase, the benefit would be NO DOWN payment. You would still pay closing costs (average 3% of the cost of the home) but you would avoid paying a 3.5%, 5%, 10%, 20% down payment necessary for FHA and conventional loans.

Janet Lange, Avery-Hess, Realtors
Military Relocation Specialist
571-722-4348
Flag Wed Jun 20, 2012
No, if you will be living in the home for at least 3 years, purchasing is a much better option in the current market as the mortgage rates are so low and there are not very many available rental properties on the market right now at reasonable prices. The demand for rentals is high now, so the landlords have raised the rent amounts. I have found that most people can buy the same home and pay less per month for the mortgage. Feel free to give me a call to discuss further. I would love to help you.

Tina Beasley
Associate Broker, ASP
Envision Real Estate, LC
804-972-9927 Cell Direct
0 votes Thank Flag Link Wed Jun 20, 2012
IMHO buying real estate is rarely a bad idea. On the other hand, SELLING real estate could be. The decision to buy depends on a huge number of variables. How long you intend to live in the house is only one. Conduct a rent versus own analysis to determine the financial aspects. Conduct a lifestyle analysis to determine whether home ownership if preferable to tenancy. If you are a dog/cat lover then your rental options may be limited. Property values are rising in the Northern Virginia/Washington DC area. Rentals are also going up. If I were you I would have a serious discussion about the various options available to you with a professional Realtor®.
Web Reference: http://danhillrealtor.com
0 votes Thank Flag Link Wed Jun 20, 2012
I think its reasonable. I tell people not to buy if they don't think they will want to own for AT LEAST 3 years, but depending on your specific circumstances, maybe 5. Here's the thought process:
1. If you don't buy what will you do?
2. If you're renting, what will you pay and how will it "feel" to be there? (i.e. a studio might save you some coin but make you miserable)
3. If you don't own, how much additional will you pay in taxes?
4. If you do own, what will it cost you (monthly - and include expected maintenance costs too) and how will it make you feel?

Once you know the monthly cost and the emotional part of it, then you add in upfront costs to purchase and lease. Then add in the cost to sell a home (assume 8% of the sale price - and for purposes of this assume the market is flat). Now you have a reasonable understanding of the cost differences.

Now, best guess, what do you think the market will do? My best guess - depending on what you buy - the prices in Centreville will go up about 10% in that time frame. So if you were planning on spending $400K for a house there, then it will go up about $40K. Now you know what you *should* do. Then play the "whatif" game.

Whatif the market doesn't go up 10%? What if it's flat? What if it declines? Will you be able to stay, to rent it out or will you be financially ruined if things don't go as you expect? If you'll be financially ruined if prices decline 10% from where they are now - and you will NOT be able to make payments if you have to rent it and you will NOT be able to sell without doing a short sale... well then, rent. If you can stomach the risk and the up side is promising, buy.

I am happy to do this with you in person if you like.
0 votes Thank Flag Link Wed Jun 20, 2012
It's the best time to purchase a home now because of the following reasons: (a) interest rates are very low; (b) there are still plenty of foreclosures and short sale homes on the market, making it a buyer's market; and (c) home prices are still very low. If you will be living in the home for 3-5 years only, you would be able to write off your closing costs within that time frame and take advantage of the mortgage interest deductions on your yearly tax returns (Please consult an accountant or a tax advisor on how to do both of these). Because of the combination of these factors, your mortgage payments may (possibly) be lower than rent payments. Hopefully, the market will continue to improve while you are living at the home and you can build enough equity, which will offset your selling costs, at the end of 5 years. I will be more than happy to create a free account for you at my website: http://www.livinginfairfaxcounty.com, so you can browse available homes in VA, or you may simply call me at 703-269-8706 if you have any other questions.
0 votes Thank Flag Link Wed Jun 20, 2012
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