3 ms·

I said this when such a thread came up the last time: If you can (easily) switch jobs without moving it might make sense to buy. If you can't, however, renting

by jleyank 12y ago

I said this when such a thread came up the last time: If you can (easily) switch jobs without moving it might make sense to buy. If you can't, however, renting is the safer option as you can move if/when there is a problem with the job. Domiciles can be rather illiquid at times, which sucks when you need to move for work. It's a separate question if it's worthwhile to buy at all, as that's dependent on geography, present and future market trends, lifestyle choices, ...

hkmurakami 12y ago
Some people say "oh you can always rent the house out!" but they often forget that once they move away and have to hire a property management firm, the fees that they'll have to pay will erode the rent revenue below breakeven with the mortgage payments (without such a manager, you can frequently break even or better vs mortgage)
- vonmoltke 12y ago
  First, it depends on the rental market. Unless the local housing market deflates, after several years you should be able to get more than your expenses in rent, even after giving the management company their 10% (or whatever it is in your area). Second, the break-even point is based on the principal to interest split in your payment. That is a function of your loan term and how deep into the term you are.
- sliverstorm 12y ago
  I don't think people necessarily see that as a perfect solution in which they make a profit. If you can come close to breaking even by renting it out, that gives you more runway with which to sell the place. Reduces the time pressure, so to speak.
- gnoway 12y ago
  In at least one US State, your property taxes are different if you're living in the home vs. renting it out. In my case, losing the homeowner's exemption would almost double my property taxes. I'm not sure if you get to deduct property taxes for non-homestead property on your federal return either. In my case, losing this deduction would force me to use the standard deduction instead of itemizing. So, a possible double-whammy. edit: note this is for the US.
  - quesera 12y ago
    > I'm not sure if you get to deduct property taxes for non-homestead property on your federal return You can. Property tax goes on Schedule E as a business expense, just like insurance, utilities, repairs, etc. You can also deduct mortgage interest for rental properties.
jaredmcateer 12y ago
Indeed, my wife and I both are pretty much equals when it comes to our careers, we both find them fulfilling and enjoyable, but they are completely different focuses. If one of us were to get a job offer that required us to move, we would have to be certain the other could get a job of equal value there as well or the job offered would have to be about twice as good as the current. So it made the decision to buy much easier and it hardens us against jumping from job to job simply because the grass may look greener.
analog31 12y ago
In general, the model doesn't include risk.
mattm 12y ago
To add to this, people don't usually lose their jobs in a bubble. If you are losing your job, chances are a lot of other people in your area are also losing their jobs which makes it even harder to sell.

by jleyank 12y ago

hkmurakami 12y ago

Some people say "oh you can always rent the house out!" but they often forget that once they move away and have to hire a property management firm, the fees that they'll have to pay will erode the rent revenue below breakeven with the mortgage payments (without such a manager, you can frequently break even or better vs mortgage)

vonmoltke 12y ago
First, it depends on the rental market. Unless the local housing market deflates, after several years you should be able to get more than your expenses in rent, even after giving the management company their 10% (or whatever it is in your area). Second, the break-even point is based on the principal to interest split in your payment. That is a function of your loan term and how deep into the term you are.
sliverstorm 12y ago
I don't think people necessarily see that as a perfect solution in which they make a profit. If you can come close to breaking even by renting it out, that gives you more runway with which to sell the place. Reduces the time pressure, so to speak.
gnoway 12y ago
In at least one US State, your property taxes are different if you're living in the home vs. renting it out. In my case, losing the homeowner's exemption would almost double my property taxes. I'm not sure if you get to deduct property taxes for non-homestead property on your federal return either. In my case, losing this deduction would force me to use the standard deduction instead of itemizing. So, a possible double-whammy. edit: note this is for the US.
- quesera 12y ago
  > I'm not sure if you get to deduct property taxes for non-homestead property on your federal return You can. Property tax goes on Schedule E as a business expense, just like insurance, utilities, repairs, etc. You can also deduct mortgage interest for rental properties.

jaredmcateer 12y ago

Indeed, my wife and I both are pretty much equals when it comes to our careers, we both find them fulfilling and enjoyable, but they are completely different focuses. If one of us were to get a job offer that required us to move, we would have to be certain the other could get a job of equal value there as well or the job offered would have to be about twice as good as the current. So it made the decision to buy much easier and it hardens us against jumping from job to job simply because the grass may look greener.

analog31 12y ago

In general, the model doesn't include risk.

mattm 12y ago

To add to this, people don't usually lose their jobs in a bubble. If you are losing your job, chances are a lot of other people in your area are also losing their jobs which makes it even harder to sell.