What are your thoughts on homeownership vs renting (short-term)?

Question

I recently spoke with a financial advisor who stated that the times have changed and home equity is not as important as it once was because of the real estate market today. If I'm not in my dream house, is it better to sell or rent my current (overpriced) home and lease something less expensive for 1-2 years while saving for a house I can retire in. Time is not a factor.

Answer 1

If you can afford to stay in your present house, it makes sense to do so. There are significant costs involved in selling a house; I use 10% by the time you allow for brokerage, other transaction costs, moving, and having to take less for the house than you think that it is worth. It is likely that in another year or two the market will have improved (unless you are in someplace like Detroit, where it won't), and you will be better off for having stayed put. If you can not afford to stay put, you could rent something cheaper, but then have the problem of finding a tenant for the house. You can make money being a landlord, but it requires some work.

Answer 2

There are various reasons for being a home owner. The first has become less important over the last few years and that is the tax benefits from the mortgage interest. So If you are already a homeowner and are benefiting from this you may want to consider that factor. Another is just the idea of ownership, and being able to do as you please with decor etc. Even this has been diluted in communities with HOA's (home owner associations) that dictate many of these decisions for you. The third and really the most important is the equity issue. If you are still paying a mortgage and are located in one of the areas being hard hit with falling housing prices this could be a real issue. If, your house is nearly paid for I'd advise riding it out till the market bottoms before selling so you can replace with what you want at an equivalent price. If you sell while owing more than you can get you will shortchange yourself for many years.

Answer 3

Home equity is always important; no matter if it is $100 or $100k. If your overpriced home is too expensive for you to afford, sell it and downsize. If it is not, you can sell and get what equity you have out of it. It all hinges on what YOU want, can afford, and want to do.

If you are saving for your dream home, and can downsize to a lower payment, while meeting your needs and wants, and you can save more doing so.....then sell, take the equity you have and invest (part of) it in a moderatly aggressive portfolio and then save more and more and more.

I wouldn't recommend leasing or renting anything if you can afford to stay in a house, condo, or townhome. Renting is as good as throwing your money away. All you do is get someone to vouch for your ability to pay your debts; no benefit to you.


---I've been through three home purchases and four apartment contracts. I wish I bought earlier and will never rent again if I don't have to. I listen to Clark Howard each day and you should check out his website. He has some great information that could help.

GOOD LUCK!!!!!

Answer 4

I would want to stay where I am and build more equity in my home. Since you are talking short term, you will have moving expenses, plus you will be paying taxes on the income you receive from renting, the renters will have a lease that may complicate the sale of your house.

Staying put where you are will give you time to start getting the place ready to sell. You can start making improvements now, so you can get top dollar when you are ready. Good luck

Answer 5

Regardless, at the end of the 2 years, you'll have been putting money into something you OWN instead of just throwing it out the window in a lease.

Answer 6

I would get out of it all. Buy a house and don't think about renting it out until you come across some major cash. Also, consider the taxes, and tax breaks, also the state in which you live.