Buy vs. Rent to Save Money

[skives]

So here is my question. Currently we rent for $650 a month plus utilities. I was looking at houses around our area and found one that is listed for $39,900. it is a bit small at 720 square feet but has an enclosed porch that adds 114 square feet. Currently we are renting a townhouse that is 992 square feet. We have calculated that the house should save us $300 a month.

Our plan would be to live in the house till we pay it off which we could do in 4-5 years unless there is a major repair. Then rent it out for extra income.

This is just a thought for us. We were wondering every one on here thoughts about it?

Thanks.

[97guns]

i like it, first house should be small and manageable, you grow from there. that is one way to acquire property, buy and hold, live in and move on.

your payment on a 40K house will be much less than what your paying for rent, doesn't that in itself make it a no brainer?

[Frügal]

your payment on a 40K house will be much less than what your paying for rent, doesn't that in itself make it a no brainer?

Not really. If the house is in terrible shape, or even on-par shape, it could end up much more expensive to own. Also, there is water/sewer/garbage if they do not already pay for it, possible HOA fees, etc.

Also, if they plan on moving within the next few years, it may be difficult to carry the extra expense of the home if they cannot sell or rent it out.

[disneysteve]

your payment on a 40K house will be much less than what your paying for rent, doesn't that in itself make it a no brainer?

Not at all. There is a lot more that should go into the buy vs. rent decision than cost. In fact, I'd say cost is quite a ways down the list when making that decision.

[Frügal]

Not at all. There is a lot more that should go into the buy vs. rent decision than cost. In fact, I'd say cost is quite a ways down the list when making that decision.

I have to agree. My wife and I have contemplated it, but we have decided that we have too much on our plate already to even consider taken on the responsibility of maintaining a home, even though I can do most of any repair or improvement that may come up.

[97guns]

he's paying $650/month + utilities, with 20% down on a 40K house the monthly payment will be less than $200, insurance will be no more than $55/mo., property tax should be no more than $70/mo.......thats a $325 savings per month and my numbers are generous, half of what he's renting for, he builds equity and he actually would own something..


so he needs a new water heater, is he gonna need one every month? imo renting is absolutely throwing money away, if all yal feel like your getting ahead doing so have at it.

[disneysteve]

imo renting is absolutely throwing money away, if all yal feel like your getting ahead doing so have at it.

I didn't say renting was "getting ahead". I was just pointing out that there is a whole lot more to consider before buying than just how much it will cost you or what you will save. You need to be ready to buy on various levels. The finances are only one aspect.

[Jerry91]

Well, you can take help of the buy vs. rent calculators to compare the options. Check out one calculator here: "http://www.mortgagefit.com/calculators/buy-rent.html".

[snafu]

There are several aspects to buying like district, access to services, school district's ranking which may not affect poster but could be important to future renters, taxes and fees, condition of house infrastructure, roof, furnace, plumbing system, sewerage and electrical. Does he have the skill sets needed for day-to-day repairs? As mentioned, investment in a house is pretty illiquid should it become necessary to move. Finally, realtors often list a place very low in the expectation of creating a bidding war as prospective buyers easily become emotionally attached to a particular place and pay way more than asking. We certainly saw that in the housing bubble.

[skives]

The house we are looking for is in a small town of about 10k-12k people and there is only one school district. The house looks like it is in good shape from the pictures but I know you can never say for sure till you see it in person. Just wondering if real estate is a good investment and if this would be a good idea to save money and invest for the future?

[rennigade]

The house we are looking for is in a small town of about 10k-12k people and there is only one school district. The house looks like it is in good shape from the pictures but I know you can never say for sure till you see it in person. Just wondering if real estate is a good investment and if this would be a good idea to save money and invest for the future?

Are you looking to rent it out?