Renting before Buying

[vacationer1954]

I've seen a lot of discussion forum threads, FB groups, and YouTube channels popping up recently focused on "Moving to the Magic". It's gotten us thinking about it very seriously. We are no more than five years from retirement, and probably could make the jump even earlier than that - and may do so if something pushes us to do so.

That brings us back to the age-old question about how important it is to move and rent for a while before buying. The only one of the four places in which we lived more than five years (so far) was the place we lived right before this, and we moved into that place from another suburb of the same city, so the standard "rent before buying" advice wouldn't apply.

And there are things we regretted about all four places, even the place we lived in for twenty years - no place is perfect - right? And the reasons for our moves from the two places we lived short-term (and from where we are now, still short-term, and planning to move again soon) weren't (wouldn't be) related to the regrets:

• The first place wasn't great, but it was quite nice for what we were able to afford at the time. We moved out after just a few years because my spouse got a great job in another city.
• The second place was a fantastic place to live, but my spouse's commute was a killer due to traffic. And in that case we actually did rent before buying: My spouse's employer put us up in rental housing for six weeks while we sought a new home. The commute just didn't bubble up as a big problem until a couple of years later.
• Where we are now - well - we're just not happy here anymore. Our family members that lived nearby have passed away in the last year, and the community we have been enthusiastic members of for over four years has turned sour. My spouse is retiring next year and my job is horrendous (so yes I suppose you could say I'm secretly hoping to have a good excuse to quit.)

Regardless, the point I'm making is that the reasons why we didn't (and wouldn't) live in any of these places for a long time wasn't anything that "renting before buying" would have addressed. For example, in the case of where we live now, if we rented before buying we would have lived in a place where there were rentals (not around here), and probably would not have joined this community that turned sour until we moved into our home. So we couldn't have even seen any signs that it would eventually turn sour (and that's assuming that there were such signs to see - I don't believe there were).

So I'm again questioning the "renting before buying" advice. What do we really get out of it, other than basically flushing the difference between the cash that we spend on rent and how much we would pay in property taxes down the drain? It seems to me that unless it is a "rent with option to buy" situation, it is unreasonable to expect much from "renting before buying".

 

[disney junky]

I've never done it, but I would. Six months minimum.

First, you get the feel of the area.
Second, if you can buy a home without having to sell another home, you are in a much better negotiating position.

When our daughter moved to Orlando for school and to work for WDW, we bought a condo, thinking it would be a good investment, and also because she insisted she was never moving home. She moved home, we held on to it for a couple years, this was in 2007-2011, we tried renting it but eventually sold, losing a pretty penny in the real estate downturn. Had we rented a place for her as she finished up her school and work, we wouldn't have been out nearly the amount of money we lost at the time. Perhaps that was the exception. We looked at a few similar condos, but we really didn't know the area and had to trust our agent. You must understand that realtors are limited by law in what they can and can't say about a particular area.

I'd be willing to pay six months to a year's rent for the peace of mind of knowing I was getting exactly what I wanted where I wanted.

 

[sjrec]

Moving to a completely new area is a big step. Online searches and a few days house hunting wouldn’t be enough for me. You have so many options-building something new, resales. You have the luxury of not having to settle kids in school or looking for something near a job. Taking 6 months to really get a feel for the area and getting what you want doesn’t seem like a bad idea.

 

[neverlandsky]

We’re renting right now in new area for almost a year now. We just decided to continue renting for a second year. We truly want to make sure we want to settle here before purchasing.

What we’re looking at is: What amenities we prefer. What neighborhoods are hoa and not. Crime trends. Potential growth. What streets are busy and not. The best location that fits our lifestyle. Most importantly gauging the current local real estate market as-in how many days a house is on the market, how many days to close, watching homes fall out of escrow, & homes without hoas are more expensive price wise. Fixer homes, etc. Things like that.

 

[tvguy]

Moving to a completely new area is a big step. Online searches and a few days house hunting wouldn’t be enough for me. You have so many options-building something new, resales. You have the luxury of not having to settle kids in school or looking for something near a job. Taking 6 months to really get a feel for the area and getting what you want doesn’t seem like a bad idea.

I think my concern would be renting and not liking the new city, and having sold my old home, not being able to go back. Just know too many people that run into that issue.

 

[_19disnA]

Moving to a completely new area is a big step.

I agree. Someplace you happen to like on vacation, isn't necessarily the same place you would want to live full-time. If you live someplace that has LOTS of vacation rental properties, neighbors will always be changing and some people on vacation don't care how they act or how much noise they make since they are just on vacation. If you currently live in a cooler climate, you may find Florida to be oppressively hot in the summer. You wouldn't notice that if you have only vacationed there in the Spring or Fall/Winter. So really there are lots of good reasons to rent before moving to a totally new location.

Proximity to places like doctor's offices/hospitals which you probably didn't consider on vacation, becomes a bigger deal as you age and live there full-time.

 

[kaytieeldr]

I think my concern would be renting and not liking the new city, and having sold my old home, not being able to go back. Just know too many people that run into that issue.

you could go back, just not to the house you sold. Or move somewhere entirely different.

 

[Disney Doll]

DH is a realtor and he always advises people to rent prior to purchasing a home when they are moving to a completely new area.

Get the feel of your new area. Learn what towns or sections of towns have higher or lower crime rates. School system is not a priority for you on a personal level but school system does drive property value to a certain degree. Proximity to health care. Traffic. Shopping.

As much as I love WDW, moving to central FL would not be a choice I would make. It’s one thing to be a tourist. It’s another thing to have to deal with tourists in my day to day life. And yes, FL is a “tourist heavy” state, but there are areas that are less tourist laden than the greater Orlando area.

 

[jerseygal]

I think my concern would be renting and not liking the new city, and having sold my old home, not being able to go back. Just know too many people that run into that issue.

We were relocated and rented in that location for a year and purchased 1 yr from the rental. Really gave us the opportunity to get to know the community better. I learned something by that move. Even if I wanted to, imo, you can't go back. You can go back IF you wanted to the same town, but most don't. Once you have sold and "moved on" that part of your life is a good memory hopefully, but it is over. You can always go back to that community if you wanted to, buy a new house and build new memories. No downsides to renting. In fact, with the new Tax Reform Act, there are not real tax advantages anymore of ownership, other than hopefully purchasing a home in a community where you will see appreciation. The days of the decision to buy a home for tax advantages are over with the limitation of SALT, State and Local Tax, $10,000 cap for real estate and income tax. Residents of high income and real estate tax are getting killed, tri state NJ, NY, CT will be feeling a bit hit with their returns are done this yr unfortunately!

 

[jerseygal]

DH is a realtor and he always advises people to rent prior to purchasing a home when they are moving to a completely new area.

Get the feel of your new area. Learn what towns or sections of towns have higher or lower crime rates. School system is not a priority for you on a personal level but school system does drive property value to a certain degree. Proximity to health care. Traffic. Shopping.

As much as I love WDW, moving to central FL would not be a choice I would make. It’s one thing to be a tourist. It’s another thing to have to deal with tourists in my day to day life. And yes, FL is a “tourist heavy” state, but there are areas that are less tourist laden than the greater Orlando area.

Totally agree with your DH advice of renting. Disagree with moving to Central Florida. Orlando is rated very well for cities with positive growth predictions. There are some good school systems in suburbs of Orlando, you just have to do your research. I totally agree that good school systems drive appreciation even if you are downsizing and you won't be using schools anymore. We have seen appreciation of all of our homes due to purchasing in communities with excellent schools. Going forward, when we downsize, we will purchase in a community with good schools to help protect our investment.

 

[FairestOfThemAll37]

DH is a realtor and he always advises people to rent prior to purchasing a home when they are moving to a completely new area.

Get the feel of your new area. Learn what towns or sections of towns have higher or lower crime rates. School system is not a priority for you on a personal level but school system does drive property value to a certain degree. Proximity to health care. Traffic. Shopping.

As much as I love WDW, moving to central FL would not be a choice I would make. It’s one thing to be a tourist. It’s another thing to have to deal with tourists in my day to day life. And yes, FL is a “tourist heavy” state, but there are areas that are less tourist laden than the greater Orlando area.

Whether or not you have to deal with tourists in your day to day life very much depends on where you live. Orange County does not allow short term rentals and the downtown/college park/winter park side of town basically has zero tourists. Unless you go to the mall or to the tourist spots, you won’t even really know you’re in a tourist heavy area. The publix/target/cvs/Walmarts etc aren’t filled with Disney or Florida merchandise or things geared towards visitors. There’s is a night and day difference between areas of Orlando with regard to tourists. Granted, if you want to live within 10 minutes of the parks then, yes, you’re going to be living and interacting with tourists daily.

 

[LovesTimone]

I say these thing all the time when folks start thinking about moving here to Fl... I am a Florida girl, southern raised girl, and have lived all over Florida all of my life except for 5 years in GA... so when I write these things I have some knowledge of what its like living here on a daily basis...

"Living here is not like vacationing here"
" Florida's main industry is tourism there is no way to get away from it."
" Living here you will have to deal with the tourist and snowbirds where ever you live"
" Are you ready to deal with everything that living here in Florida offers... yes the good and the bad and everything in between..."

I would rent here for sure before you buy...at least a year... it will take you that long to get your legs under you, and be able to drill down on what is the best area for you...

Decide on what type of lifestyle you really want to live, and what you really need to live that lifestyle --- this is were you have to really be honest and open about what retirement means to you and how you both want to make that happen... and how important are these things... remember you will be together all the time and you each need certain things to make retirement great for you both...

Really spend time in the areas you think you want to live in, shop, eat out, drive around at night, go to the movies, what activities are you interested in, and go from there...

 

[tvguy]

We were relocated and rented in that location for a year and purchased 1 yr from the rental. Really gave us the opportunity to get to know the community better. I learned something by that move. Even if I wanted to, imo, you can't go back. You can go back IF you wanted to the same town, but most don't. Once you have sold and "moved on" that part of your life is a good memory hopefully, but it is over. You can always go back to that community if you wanted to, buy a new house and build new memories. No downsides to renting. In fact, with the new Tax Reform Act, there are not real tax advantages anymore of ownership, other than hopefully purchasing a home in a community where you will see appreciation. The days of the decision to buy a home for tax advantages are over with the limitation of SALT, State and Local Tax, $10,000 cap for real estate and income tax. Residents of high income and real estate tax are getting killed, tri state NJ, NY, CT will be feeling a bit hit with their returns are done this yr unfortunately!

I can't even imagine being in a situation where I exceeded the $10,000 cap.

 

[vacationer1954]

I'd be willing to pay six months to a year's rent for the peace of mind of knowing I was getting exactly what I wanted where I wanted.

That is a financial matter, and so is something I feel very comfortable working with.

In the worst-case "buy-upfront" scenario, we buy something we end up hating and have to move again to somewhere else in the area. That scenario includes the costs of moving, buying, selling, and moving and buying again. We need to compare that to the "renting before buying" scenario, which includes the costs of moving, renting, and then moving (again) and buying. By mathematical reduction, we only need to compare the costs of: buying and selling (once); to the cost of renting - the rest of the costs are present in both scenarios.

• The cost of "buying" is how much less you can sell the place as compared to how much you bought for. If you've spent a year doing the kind of research my spouse is doing, that's as likely as not to be a gain rather than a loss. I think it is safe to assume that that's a wash.
• The cost of "selling" is about $20,000. So that means that that absolute maximum amount you'd want to spend on rent in the "renting before buying" scenario is $20,000.

So that needs to be compared to the cost of renting.

• I found a nice rental that fits our needs for $1,650 a month. However, the costs of renting aren't linear. Most leases have provisions when you break your lease before the year is up, so if it only takes six months that doesn't mean it'll cost half as much. Of course you can demand a lease that has a smaller penalty, or a month-by-month lease upfront, but of course that typically increases the rent, itself. Since we're comparing it to the worst-case "buy-upfront" scenario, I figure that we should consider this cost similarly worst-case, so it's a flat $19,800.

So this puts the two scenarios pretty-much within a couple of hundred dollars of each other, which is why I created the thread in the first place. I suppose different people will have different opinions about how likely it is to have to pay for a most of or even a full year of renting. However, by the same token, different people will have different opinions about how likely it is to hate a place you move into upfront. For all we know, we could actually buy a place upfront that we decide to stay in forever.

What we’re looking at is: What amenities we prefer. What neighborhoods are hoa and not. Crime trends. Potential growth. What streets are busy and not. The best location that fits our lifestyle. Most importantly gauging the current local real estate market as-in how many days a house is on the market, how many days to close, watching homes fall out of escrow, & homes without hoas are more expensive price wise. Fixer homes, etc. Things like that.

A lot (though not all) of that can be done remotely. My spouse is tracking the local real estate market very closely, and once my spouse retires, will be doing so even more intently. Matters like crime trends and potential growth are similarly easy to track remotely. Beyond that, some of the concerns you raised are non-issues for us: We are looking to live on a cul-de-sac in a contained community, so streets being busy or not is not as much of a factor.

The advantage of renting-before-buying for me boils down to having the chance to develop our subjective determination of, as you put it, "The best location that fits our lifestyle." That's important, but what I don't understand is the probability that renting-before-buying will really help address that concern, and whether it is financially worth whatever value it offers.

I think my concern would be renting and not liking the new city, and having sold my old home, not being able to go back. Just know too many people that run into that issue.

That's an important consideration, but it doesn't really lead to a different conclusion: It just increases the cost of moving the second time, in both scenarios.

I'm curious: How much of the "rent-before-buying" approach stems from fear of going through two extra real estate transactions?

 

[vacationer1954]

I can't even imagine being in a situation where I exceeded the $10,000 cap.

We were at $15,760 in 2013 (before we moved to Georgia).

 

[barkley]

School system is not a priority for you on a personal level but school system does drive property value to a certain degree

and drives property taxes. we have 3 nearby adjacent school districts that are pretty apples to apples quality wise but one district is hell bent on doing some large scale expensive enhancements/improvements that have resulted in bonds being passed that drastically impact property taxes. same goes w/living in city limits vs. just outside w/in the same county. city near us has neglected infrastructure for decades, allowing more and more homes/apartments to be built such that now several utilities are failing and the cost is going to be passed along to the property owners.

knowing an area and understanding the difference in on going costs buying a place on one side of the street vs. across from it (yup, it's that close with property lines here) can mean thousands in annual savings for decades to come.

It’s one thing to be a tourist. It’s another thing to have to deal with tourists in my day to day life.

and dealing w/the costs that whatever draws those tourists to your area entails to residents. i grew up in a tourist area and dealt w/the higher cost of services/products (that tourists were fine w/since they could forgive it/deal with it just being on vacation short term) by having to shop outside the area i lived. i grew tired however of constant cash grabs on the local government's part to improve/repair areas that were primarily tourist utilized. one would think that tourist dollars would ideally at minimum offset the tourist's impact on local roads, services...but in my experience it was the year round residents who paid the cost (and in the off seasons when we finally didn't have to deal with congested roads and parking it was the time of the year when all the road and parking lot repairs were being done b/c 'good lord we don't want to inconvenience the tourists').

 

[tvguy]

We were at $15,760 in 2013 (before we moved to Georgia).

That's horrifying. But I'm in California where in 1978 voters said no to out of control property taxes. My entire house payment per year and property taxes were less than that, not just the interest on the loan.

 

[tvguy]

That's an important consideration, but it doesn't really lead to a different conclusion: It just increases the cost of moving the second time, in both scenarios.

And if their old home is in a hot real estate market, a year's increase in value could make their old home unaffordable.

 

[QueenIsabella]

OP--you're clearly biased against renting before buying. That's fine. This is America, you don't have to. I can see the value in doing either. The last time we moved, we just bought our new house outright (and carried two mortgages for a while). It made sense to us--DH was moving down in May, the rest of us following in July. We had 2 kids in public schools, we wanted to be in the "right" school district. We did extensive research online, DH had been down here on his job interview and looked around, and we brought the kids with us on our house-hunting trip in April. We love the house we landed in--no regrets at all.

That said, you can (and we did!) miss a few details along the way. One of the things that was very important to us was a school district with an orchestra at at least the middle school level (elementary would have been preferred, but no luck there). We found that. We also wanted a specific HS district, which we got. But we found out once we moved here that there is county-wide school choice--our kids could have gone to the "good" HS, or any other HS if they wanted. In fact, my youngest may go to a different one than his older sister--she chose the HS with the IB program, he may choose that, or the STEM HS, or one of the Early College HS's. Obviously, school district isn't such an issue for you, but it's an example of something that was hugely important to us, and we still missed some details in our long-distance home search. And knowing what we know now, we still would have picked the same house, so there's that.

 

[vacationer1954]

OP--you're clearly biased against renting before buying.

Not so much biased against it as much as working hard to uncover whether it is worth it in our situation. From my post above, it seems like there isn't much difference between two worst-case scenarios, renting for a year before buying, on the one hand, and buying a home for a year and then selling it and buying another, on the other hand. Did I miss something?

One of the things that was very important to us was a school district with an orchestra at at least the middle school level (elementary would have been preferred, but no luck there).

Though that's a very different situation: You had children to consider. That has to make a difference. We intend specifically to purchase a retirement home in a 55+ community. That takes a lot of variables out of the equation, doesn't it?