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Old 03-24-2006   #1
Krynn's Avatar
Pueblo, Colorado
Paddling Since: 1991
Join Date: Jan 2004
Posts: 46
Home Buying Advice. Buy vs Rent

We are moving to albuquerque. Does anyone have any advice on Renting vs. Buying.

We will be there for 5 years. And the housing market is supposed to do well. (predicted 6% per year growth)

But I am concerned about trying to sell when we want to leave. You might loose money trying to sell quicker. There are a lot of costs of selling, the 7% to the real estate agent.

Some economist predict a housing bubble. But I believe the economy of Albuquerque is healthy.

It would be nice to rent for a while and learn where the nice neighborhoods are, but moving twice would be a pain.

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Old 03-24-2006   #2
Join Date: Jul 2005
Posts: 18
So you're going to be there for 5 years. If you rent at 1K per month that's 60K you've put in someone elses pocket at the end of 5 years. With the equity you put into a house including down payment, principal payments, improvements and annual growth you could walk away with 60K or more to put towards you're new pad. What sounds better to you?

Moving twice would be a pain. If you can take a weekend to learn about the city and it's neighborhoods before you move that would be the best bet. Talk to a realtor about what your hobbies are and what you'll be doing in town while you're there and they can give you some areas to check out. If this is your first house don't think you need the 20% to put down there are many ways to finance a house these days.

Sure there is some risk, you could lose...probably not though. But if you don't ever take a risk you'll be in the same place you are now or worse in five years. I say go for it, but I'm a biased homeowner.


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Old 03-24-2006   #3
pnw, Washington
Join Date: Oct 2003
Posts: 3,404
7% to real estate agent? I dont think so. You can negotiate that rate same as many items. I have a buddy that will list your home for 4% and you can get that rate from many places. It saves 3% for the showing agent which is your major hurdle when trying to cheap out. Basically agents wont show your home if they arent getting their 3%. If you have already sold a home then you dont need someone telling you to clean your house, take the junk to the dump, empty the closets, bake cookies, etc and making a mint off of one meeting.
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Old 03-28-2006   #4
Denver, Colorado
Paddling Since: 2004
Join Date: Apr 2004
Posts: 3,097
5 years or more, it is usually financially better to buy a house than to rent. Search around for some calculators and you can plug in expected rent vs. mortgage and see what the calculators say. It does seem like a pain in the butt to sell a house, but if you look at it as spending some time and effort to make 10's of thousands of dollars possibly, it seems like a worthy cause.

The only other thing I can think about is lifestyle and convenience. If you can find a nice place to rent that is way cheaper than what you would spend to buy, it might be a good deal. I did this when I wanted to play every weekend vs. mow the grass and spend my weekends at home depot. I ended up paying a bit more in the end, but had lots and lots of playtime vs. the fixer upper that I would have ended up buying.
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Old 03-28-2006   #5
jonny water's Avatar
Geologist, Colorado
Paddling Since: 1991
Join Date: Oct 2003
Posts: 583
We bought our 1st house 1.5 yrs ago. We went thru the same issues. Buy vs. rent, but went ahead and bought the house. We did the typical "buy the smallest (or crapiest) house in the best neighborhood." We then put some money into fixing it up (not too much) and the house is now worth ~85K more than we paid for it. Now we are waiting for the 2 year mark (minimum time to own without paying capital gains) then we are going to sell and buy another house. Best decision we could have ever made. Not to mention tax breaks and paying off the mortgage.

Basically....if you are actually making payments toward the principle and you make some (even minor) improvements on the house, you can't lose. Definitely do least you are getting in to the market.....think about how much more houses will cost in 5 years!
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Old 03-28-2006   #6
Repa's Avatar
Denver, Colorado
Join Date: Oct 2003
Posts: 75
I hate to admit it but I lived in Abq, during school. If you want some beta on the area where to live vs. where to buy etc I'll share what I know. PM me.
Stay Wet
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Old 03-28-2006   #7
Durango, CO
Paddling Since: 1990
Join Date: Apr 2005
Posts: 211
Do a little research. Get online and check out active real estate listings see what houses are listing for. Check the County website for Assessor sales information and see what houses are selling for in whatever neighborhood you might be interested in. Call the Chamber of Commerce for demographic info i.e. median sales price, median income, economic forecast / real estate forecast to get a feel for the market. Most of this is published public information. Call a real estate agent or appraiser.They may charge you a little bit for market analysis but it could help you make the right decision in the long run.
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Old 03-28-2006   #8
KSC's Avatar
Boulder, Colorado
Paddling Since: 2003
Join Date: Oct 2003
Posts: 2,032
Nobody can totally predict the housing market. It's easy for people that have seen their home values double and then some in the last decade to be bullish, but real estate does go up and down (and it's been doing the up thing for a long time).

I say this like an expert, but I've only owned a home a couple years now. From what I researched though, 5 years is generally considered a long enough time to buy (I've read at least 3 yrs as a very general guideline). But I think you should really make the decision based on lifestyle. Do you enjoy doing home projects that come with ownership or do you want other people to fix things for you. Is owning the property you live on meanful to you? What are your space requirements, etc.

For the first several years most of your loan payments go to interest anyway. There's inevitable maintence costs. What's the total monthly cost of renting vs. buying. If renting is cheaper, what could you earn w/ the difference through other investment vehicles? Owning may or may not be best economic move. Of course there's always the saying 'buy land, they're not making any more of it". That adage seems even more true with global warming.

Also what about buying without using an agent? Then you only have to pay half the fee to the seller's agent. Kind of depends how much time you can devote to looking around.

My 2 bits.
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Old 03-28-2006   #9
Join Date: Apr 2005
Posts: 82
KSC brought up an important point. In the first several years of your mortgage, little goes towards principal. For example, on a 200K loan for 30 years at 6.5%, your payment would be $1,264.14 not including insurance and taxes. So, that's $75,848.16 out of pocket for 5 years. But, you've only paid $12,529.37 in principal. So you gave $63,000 away. That's an average of $1050 per month. Just something to think about.

It's border line. If you can rent for say, 70% of the cost of owning, it might be worth just renting, taking the 30% difference and putting it into the bank. When you are ready to settle down, you can put that 30% that you saved each month towards your down payment and reduce your future interest expense.

Personally, I bought a duplex. Between my tenant and my roommate, I pay $88/month for my mortgage. Something else to think about.

I'd say it's a close call. Find someone who can work some numbers in Excel and crunch the numbers yourself. There's no good blanket answer.
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Old 03-28-2006   #10
pnw, Washington
Join Date: Oct 2003
Posts: 3,404
When you say threw 63k away, remember some of that is a tax benefit.

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