Home Buying in Johnstown>Question Details

Barb, Both Buyer and Seller in Davidsville, PA

Is it better to buy a home if you only plan to live in it for two yrs, or is renting the best option.?

Asked by Barb, Davidsville, PA Sun Apr 12, 2009

It purchased, home wld be under 100,000 I would pay cash and then hope to resell in 2 yrs and get at least the money I paid for it back out of it. What do you think?

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I used to be a renter-for-lifer, before I began to invest in RE. I can picture scenarios where either option could work effectively; however, you need to plan your exit strategy, before you can accurately determine which option will work best for you.

Would you buy and hold a property for longer than 2 years provided the collected rent covers your mortgage and yields you a modest income? If so, then you might want to consider buying a multi-family property (like a 4-plex). Even if you aren't interested in holding the property for longer than 2 years, then you could flip that 4-plex to another investor. Keep in mind most knowledgable investors value properties using the income method, so as long as you can justify its sales price with its income then most serious investors will consider buying it--regardless of the market conditions.

Do you simply want to walk away from the property with no strings (or other things) attached after 2 years? if so, then renting might be for you. Yet, there is a way to structure a purchase with similar characteristics using a more sophisticated transaction (that's almost unheard of in residential real-estate): a purchase with a buy-back option. Most sellers probably won't go for this, but some investors might. Another option that "lets you have your cake and eat it too" is to purchase a property using a lease-option. You could work with someone to structure a 2-year lease, and an option to purchase that property. if at the end of that 2 years you decide you'd like to not exercise the option, then you don't have to. Yet, you could exercise that option or you could sell that option to someone else, before it expires.

And that's only the tip of the iceberg. . . .
0 votes Thank Flag Link Wed Apr 15, 2009
I bought a home in Jacksonville for $45,000 and 9 months later sold it for $90,000.
I bought another in Maysville for $41,000 and 5 months later sold it for $109,900.
Homes under $100,000 sell fast in Jacksonville, NC because there are 3 Marines Bases
and this price is easy for young Marines to afford on their BAH. I can email you homes for
sale under $100,000 that are good investments. Regards, Denise, Century 21 American Prop.
Jacksonville, NC 860-917-0778 cell
0 votes Thank Flag Link Mon Jul 11, 2011
Two years is not a long time. You need to re-coup your closing costs, and hopefully the market will go up--your home would be worth more when you go to sell. In this environment, two years is probably not enough time to do that. I would rent
0 votes Thank Flag Link Mon Apr 13, 2009
I would rent in your situation. You plan on moving within two years and generally like mentioned below, you should stay in a home for 5+ years.

Sean Dawes
Long and Foster Real Estate Inc.
Web Reference: http://www.SeanDawes.com
0 votes Thank Flag Link Mon Apr 13, 2009
Hi Barb,
As a local REALTOR in your area I would not recommend you buy a home & sell it in 2 years. Renting would be a better option. If you would decide to buy there is no guarantee that you would get the money back that you had paid for it. Especially when you factor in the closing costs to buy & the closing costs to sell the property.
I have some sellers currently selling there homes with a profit, some are breaking even & some are in the hole.
But if you planned to own the property longer, real estate is a fantastic investment.
0 votes Thank Flag Link Sun Apr 12, 2009
I'd rent. When you're thinking about buying, remember that the loan is for 30 years - that should give you some idea that homeownership is not for short term.
0 votes Thank Flag Link Sun Apr 12, 2009
Hi Barb,

Sorry - 2 years is no where near long enough. 5+ is the right timeframe - better yet 7-10.

Your timeframe is much too short to have any hope of selling at breakeven or anywhere close to it in only 2 years. BUT you might consider buying a multifamily, living in one unit, renting out the others and then it will become the first part of an income generating part of your investment portfolio.

Real Estate is worth considering now for sure, if you find the right property at a great price - and the market is in your favor. But this is a Long Term investment.

Good news is that when you do sell that there will not be any taxes to pay - you get free profit on $250K as an individual and $500K as a couple. Provided that it is your primary residence.
0 votes Thank Flag Link Sun Apr 12, 2009
Colin is right. Rent unless you plan on keeping it as an investment for many years down the line.
0 votes Thank Flag Link Sun Apr 12, 2009
Barb: I would encourage you to rent if you know you are only going to be there for two years. Unless you are interested in holding the property as an investor after the two year period. In more stable times my advice might be different, but there are still many question marks economically right now. It is a great time to buy with lower prices, and low interest rates, but only if you are buying for the long term. There are still a couple of shoes to drop in housing, and two years may not be enough for those ramifications to clear for you.

I am doing my best to make sure all of my current buyers are thinking they will stay in their properties for at least 5 years. Depending on how much further prices go down (and they will), even after 5 years there is a chance they will only break even after you factor in the costs to sell. If they are thinking less than that I am trying to make sure they are willing to hold the home for a while as an investment.

Also, I am not an accountant, but it is very unlikely that it is a good idea to pay all cash for a home right now as far as your overall financial picture goes. With mortgage rates this low, once the financial market stabilizes you will make more on that money if you invest it elsewhere than you would by avoiding interest on your home. Again, I am not an accountant, but have heard them give that advice many times.
0 votes Thank Flag Link Sun Apr 12, 2009
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