 Rent-or-buy
issue turns on time and risk factors
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 Dear
Real Estate Adviser,
I'm planning on moving to an area for four years and then relocating
somewhere else after that. Is it better to buy a house if I have
the means and then sell it after four years, or should I just rent
for the four years and save my money for a house in the future?
-- Mo
 Dear
Mo,
A short-term stay in a new area often favors
renting because of the closing costs, down payment and other upfront expenses
and complexities associated with a home purchase. But a four-year stay starts
to skew the other way.
To a large degree, it depends where you are heading and how much
risk you can stomach. In large metro areas where real estate is
pricier and has the potential for more volatility, you may not want
to take the chance, especially if you believe the market is at or
past the market peak. Of course, the same risk could lead to a big
reward as we've seen in recent years, with many homeowners in Southern
California and other highly desirable areas of the country making
six-figure profits on their home investments in far shorter stays
than four years. Most experts say the days of such wildfire appreciation
are coming to an end, but they don't know for sure.
Smaller
markets, on the other hand, are usually more stable to buy in, providing they
have economies that are reasonably diverse.
A good place to start is at Bankrate's buy-or-rent
interactive calculator which will help you gauge the numbers.
There are many other similar calculators available free online.
Most, by the way, account for 3 percent to 4 percent annual appreciation,
but the more aggressive you are in finding reasonable financing
terms and a more-for-the-money home, the more the numbers fall in
the favor of "buy."
Four years may be a
little long to plant yourself as a renter without all the custom comforts that
you enjoy with home ownership. If you find the right rental, nesting may be less
of an issue for you, although a good rental will often cost you more than the
house payment/tax/insurance/maintenance monies you'd be spending on a similar
place -- though not always. But if you're looking for a bargain rental, it will
probably take more than just a cursory weekend visit to your destination town
to find one. If you do buy, I suggest you put your house back
on the market as much as a year before you plan to move again, just to give yourself
maximum bargaining flexibility and preparation time. You might not want to be
saddled with selling a house while you're trying to relocate again. If you do
sell it early, you can always take up temporary residence in more humble rental
property or extended-stay hotel and store your excess belongings in the current
or new city. You're on that precarious rent-buy border line.
The safe play, of course, is to rent. The bolder play is to buy prudently and
hope the market sustains itself. Good luck in your decision.
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