<p>My nephew will be starting a new job in San Antonio in January. He has a three-year contract, and makes somewhere in the neighborhood of $90,000 (according to my sister, his mother). His wife is a teacher and will be looking for a new job there, but nothing as of this moment.</p>
<p>My nephew wants to buy a house, because he sees rent as “throwing away money.” On the other hand, property taxes in Texas are high (I guess to compensate for a lack of state income tax). And he thinks he should buy at least a three-bedroom house and maybe even four-bedroom, not because they need any more than two bedrooms but because they are not sure they will be there longer than three years and are thinking about issues if/when they sell. So they could rent a two-bedroom apartment, but would buy a three- or four-bedroom house. </p>
<p>Also, with no kids (yet?), they have no tax deductions, so a house would be beneficial in terns of the mortgage interest deduction. On the other hand, renting means someone else fixes anything that breaks or falls apart. </p>
<p>My thinking is that given the uncertainty about how long they will be in this location, plus the high property taxes and the feasibility of renting just a two-bedroom apartment, it might make sense to rent.</p>
<p>Not that he has asked for my advice (and not that I would offer it without being asked), but I am curious what you all wise real estate investment people think about this situation. When H and I bought our house, it was all about the school district for the kids, so a different set of issues here.</p>
<p>I would say no because he should consider closing costs for both buying and selling. What happens if he couldn’t sell the house when he needs to move? Would he be able to rent it out? Would he need the equity from the house to buy his next house. I tell my kids to rent for a while to get to know the neighborhood first and make sure she’ll stay there for 5+ years. Real estate is not always the best investment, especially over short term. He should consider what he kind of return he could get on his down payment if didn’t use it to buy a house.</p>
<p>Also, I would suggest renting for at least six months. This will give the couple time to learn about the different neighborhoods, make friends, and really KNOW where they want to buy…or if they really need or want to. If there is a true chance they will only be there for three years, I would NOT suggest buying. Tell them to put money in the bank for a down payment for when they are better established…</p>
<p>And tell them to out the maximum amounts in retirement accounts…pretax first (which will help them) and also a Roth. The money they put in those retirement accounts NOW will have years to grow. In my opinion, this would be better right now than jumping into the housing market.</p>
<p>We just bought our first house a year ago. I do wish your nephew would rent until he knows for sure he is ready to put down roots… buying a house was so hard the first time that right now I can’t even comprehend the thought of doing it all over again and adding the stress of having to sell this house on top of it. It is also so important to learn the area and figure out where to buy. I’ve lived in the vicinity of my new house all my life and we still spent six months driving through subdivision after subdivision, town after town, checking out grocery stores and malls, all sorts of exploring. We landed in exactly the right spot, and while we may move houses 10 years from now (we plan to stay in this one at least that long) we know we are staying in this area for good, god willing. To me, that is the point of buying a house. The fact that our mortgage is less than half what our rent was and our utilities are less and we aren’t “throwing money” away is sure nice but that wouldn’t be enough to get me to buy a house before it was time. And I think we are making up for much of the savings in maintaining the house. Just found out my driveway needs $3,000 and our water heater and furnace are 18 years old and need to be replaced <em>eventually,</em> and there are about ten other projects I can think of offhand. There’s always something.</p>
<p>A consideration that I would have in your nephew’s place is that it would take me a lot longer than 3 years to build up another down payment to buy another house. I doubt I would have enough equity in this house after that short a period of time to really help me, but I am not an expert… we are still just learning how these things work. I looked at a mortgage statement the other day and was pretty appalled by how little we’ve really put into it so far this past year. I guess if I did an FHA type situation with a low down payment I might be able to pull it off, but if we’d done that once you tack on the PMI to the monthly payment we actually could afford substantially less house than we were able to get with a conventional mortgage and a more typical down payment. Plus, the market here is red hot (or was last year) and a lot of the best listings would only consider cash or conventional.</p>
<p>oldfort and thumper, my inclination is to agree with you. But I think my nephew is a little stuck on the idea of paying rent for three years rather than investing in an asset. They are budgeting $1000 a month for renting a two-bedroom apartment, and to him that is $36,000 that he is just “throwing away.”</p>
<p>The other thing is I think his company is maybe pressuring them a little to buy. The company is paying for them to go down and look for housing, and has offered to set them up with a real estate agent.</p>
<p>If he needs to sell it 3 years later, real estate commission is 6%, not to mention legal fees, inspection, recording fee, tax…is he confident enough that the house would appreciate enough to pay for all of those fees.</p>
<p>He will need homeowners insurance, PMI if he doesn’t have a 20% down payment, money for closing costs. He will be responsible for all maintenance and repairs…everything. Does he really want to spend his weekends doing yard and house work? Really? With a new job in a new place? </p>
<p>In addition to his mortgage and insurance, he will have property taxes, and those aren’t a bargain either.</p>
<p>It is NOT inexpensive to own a house. It’s not. </p>
<p>We rented for the first seven years we were married. We wanted a substantial down payment. We wanted to be sure of the location and neighborhood. But most of all, we wanted to be sure we were going to stay put. </p>
<p>In our area, many folks bought homes because companies here routinely transferred folks after three years. That isn’t happening as much. Some folks weren’t careful about their housing purchases and now want to sell and move to a different neighborhood. The housing market here is not all that stable…some have sold easily, others have not. </p>
<p>Its going to likely cost a LOT more than $1000 a month for the type of house They are looking for. And as Oldfort pointed out…if they relocate and can’t sell, they will have a money pit on their hands.</p>
<p>I will say that unlike a lot of the country in terms of real estate, Texas is a growing market. Especially Houston, San Antonio and Austin. </p>
<p>Personally, if I were them, I’d use the first few years to save up for a house in the next location but I also don’t think it’s a disaster waiting to happen to buy in San Antonio.</p>
<p>I would buy, but I would be sure to check first on the regulations in the surrounding school districts regarding where teachers have to live. In some localities, the school teachers are required to live in the district in which they teach, which could narrow her options if she doesn’t get a job before they move. If it’s not an issue, I would go with buying over renting, as long as they don’t feel the responsibility ties them down too much.</p>
<p>I would never want to commit to buying a house until I knew the neighborhoods. Rent before owning to decide where to live. I thought the question would be about what to expect in a house, but this precedes that. Assuming they do the house search they may have a rude awakening. Even a new house may need changes. Time and money even just to paint. Then there is the “must have” list. I like watching the home shows and the lack of maturity of many young buyers is sometimes so apparent. Some want everything on a wish list without making any changes or realizing the costs. If this couple insists on buying instead of first renting they will likely run into many issues.</p>
<p>Without knowing their financial situation it’s hard to say. But I would never go into a new town over a weekend and purchase something.If your nephew has enough reserve to pay for living expenses for 8-10 months after paying all the expenses associated with the purchase, then perhaps he could weather a situation in which the house doesn’t sell after his contract is up.
If he were my son, I would advise him to rent.
Perhaps he could use the realtor his company provides to assist him in leasing a house.</p>
<p>Regardless of the financial particulars, getting a house when new in a marriage and beginning a career can be a magical thing, emotionally at least. So this one will be hard to offer perspective on, particularly from a finance angle.</p>
<p>If I had any advice, it would be: pick a place you want to live, don’t think of it as an investment. Be encouraging, stressing moderation.</p>
<p>Renting isnt throwing money away unless his alternative is paying nothing and living on the street/ with someone else.
Rent goes towards having a place to live, is staying at a hotel throwing money away?
My brother always bought a house when he was in the military, even if he didn’t know how long he would be there or even know where he wanted to live, but it was an enormous pita when he had to move and he had to take less for his house, just cause he couldn’t wait any longer.
Because he was so eager to buy, he also bought at the height of the market when things were overpriced.</p>
<p>At the very least, rent until they understand the city and where they want to live.</p>
<p>Back in the old days, when companies relocated employees frequently, this was not at all uncommon. Husband would get a new assignment, husband and wife would visit the new area for a weekend, see six or eight houses, and choose one. Since there was a lot of movement, it wasn’t a problem three or five years later to sell.</p>