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Choosing to rent vs buy, need help explaining to wife

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  • Choosing to rent vs buy, need help explaining to wife

    Hello everyone!

    My wife and I are currently in a situation where our opinions differ on whether to rent vs buy. For some background, we currently have 200k saved up (thanks papa Joe) due to loan forbearance, have 430k in combined student debt (all federal), no other debt, and 360k in annual income. As of now, we are planning to use our savings for our student loan debt once forbearance is up. We are currently paying 2800/month to rent a nice house which we like living in. Here's the problem - all of my wife's friends / family are telling her that she needs to buy a house now due to the fact we are "burning" money, this is something I disagree with. I have tried explaining to my wife the cost of buying a home now, would set us back on our student debt and potentially cost us more than the 33,600/year in rent. The tidal wave I am facing is her friends/family circle, who all seem to have bought into the FOMO of the housing market. I just want to clear our debt ASAP, any better way of explaining this to her? Am I completely wrong, should we be looking to buy?

    Thank you!

  • #2
    The problem is the transaction costs and additional costs a house brings.

    Presumably once you buy a house you would need money to cover closing costs and the other myriad fees that comes with buying a house. You need tons of money for furniture, the rule of thumb tends to be 10% of the cost of the house. Also any work done on the house will cost a lot, and you will definitely want work done, even if it's new construction. I have a new construction home and there are tons of projects I can think of to do, like putting epoxy floors on the garage, paint the mud room, tile the back porch, etc. All of this is not cheap.

    Also, of course you are on the hook for any maintenance and repairs. I had my dryer vents cleaned and my water heater serviced recently. That was a couple hundred bucks. Pest control, yard maintenance, the list is endless.

    You didn't mention how long you've been out of training. It's also wise to make sure you like your job before you buy so you get to know the area and you're not stuck with selling a house in order to move to get out of your job. You could definitely get hosed with that if your job doesn't work out.

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    • #3
      My two cents quite simply is that it is a significant sellers market right now so regardless of any other factors I would not be purchasing a home until things cool off. I think it’s a bubble the sequela will include not only those who over extended but also those who made hasty decision due to the urgent climate and will have an overpriced house that they don’t even like. I know a couple who put an offer in before a tour and waived home inspection to “win” the contract. I’m sitting tight with plans to start looking for an investment property in a couple of years if things play out as I anticipate.

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      • #4
        Didnt read all of it, but 2800/month to rent is a lot, thats a very nice house. I dont care about market, etc...this is not a real issue even if you make a mistake about the house, so what.

        What you dont want to make a mistake with is your wife, make her happy. Its probably not a bad money decision either with rates, etc....the market is already turning in many locales.

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        • #5
          you're up against a lot for sure. It can also be summed up this way: rent is the maximum payment you'll make each month for a roof over your head. a mortgage is the minimum payment you'll make each month for a roof over your head.

          you can also approach this from the standpoint that it's a seller's market. So if she wants a "deal" you need to continue to wait because you will pay through the nose to get that minimum monthly payment for the next 30 years

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          • #6
            Ah yes, sorry forgot to mention how far out of training I am. Currently 4th year out, 2nd job. I have a feeling this is where we want to settle, and we both love our jobs so far.

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            • #7
              There's a few factors at play here. Need more specific info like years out of training, is this going to be your forever house, are you staying in the area forever, kids now or in the future and such.

              When you're first out of training, everyone here says rent. This is mainly because you don't know if you'll like the job, the area, or what you even want/need for a house at first. Renting lets you build up your nest egg/get your finances in order before the major financial decision of buying a house.

              It's a common argument that renting is throwing money away, but no matter what, you have to pay to live somewhere. Show your wife the amortization schedule and see how much money actually goes towards the house and how much goes to interest the first 5 years.

              Now if you're going to stay in the house for 5+ years then it may be a financially smart decision as long as this housing market keeps up and doesn't crash. But realize what buying a house with a mortgage actually is, leveraged purchase into the real estate market.

              But sometimes happy spouse = happy house is more important than financial optimization.

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              • #8
                It's a very difficult uphill battle to override what "everybody else says". Maybe see if she will agree to set a time for you both to have a reasonable talk and each list your logical points for this big expenditure. Use dollars, not guesses. She should come with a couple of houses she has chosen, you should come with the current costs v future costs. If you really want to be fair, have a non-biased party mediate and vote on the winner. Someone who doesn't care if you both get mad at him/her 😂.

                This is another one where a financial plan or checkup could make a big difference. You might be wrong, who knows? We're only interjecting our opinions, too.
                Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  It's really difficult to be the lone contrarian, even if you're in the right.

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                  • #10
                    Right now, around here, everybody who’s been renting for years wants to buy a house. It seems to be the worst possible time to buy a house, but since we are herd animals, people just can’t override their programming because of all of the news and social pressure right now.

                    We bought a house after renting a condo for many years, by pure luck, just before the pandemic hit. It has its benefits (space, privacy), but man, it is a lot of work, upkeep, and expense. Get ready for expenses that come in chunks of $1K-$10K with regularity, and weekly trips to Lowe’s for $200, and taking a day all the time to fix this and that little thing.

                    My taxes, insurance and upkeep on the house are higher than rent was at our luxury condo building, so I don’t agree with the throwing money away argument. And it’s a big trade off living worry free, vs always having something that needs attention at the house.

                    I’d wait a while and blow all my cash on student loan pay down so you can use the “save up for a down payment” excuse to buy more time. Enjoy the renter’s good life as long as you can.

                    Family and friends love to talk people into the same miserable traps they fell into. Be original. You do you. You don’t need a fancy house, four kids, two dogs, etc….right now.

                    Go on a tropical vacation to a hot “couples only” resort instead, and enjoy the piece of mind that if all the pipes in the house explode while you’re gone, it’s “barely an inconvenience” for you. Don’t forget to send awesome pics to your friends and family of your debaucherous adventures.

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                    • #11
                      Originally posted by Kubbster View Post
                      Ah yes, sorry forgot to mention how far out of training I am. Currently 4th year out, 2nd job. I have a feeling this is where we want to settle, and we both love our jobs so far.
                      "Burning" money to pay rent is nonsensical. Even if you paid off a home you are still on the hook for maintenance and property taxes.

                      Spend a day with her looking at homes. Compare the asking price of the homes you would be interested in vs your $2800/month in rent. If it's more buying a home decide whether it's worth the extra cost. The real estate market in my area is still overpriced. The only homes left are the sellers fishing for a desperate buyer.


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                      • #12
                        My wife and I bought in a seller's market in 2006 purely because everyone in our lives were telling us it was the "right" thing to do, you'll have FOMO, prices will only go up, how else will you know you've "made it", etc. We paid $310k for the place and put $2-10k into it every single year we owned it for repairs and upkeep, plus a lot of sweat equity. Then we sold it in 2018 for $270k.

                        Don't be us.

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                        • #13
                          Where you live and where you are trying to buy should be a factor as well. Perhaps a simpler way to make the argument would be something like this:

                          We currently pay $2,800/mo (or $33,600 per year) to rent a home. As the landlord, there are 4 buckets that money goes into: Taxes, Insurance, Maintenance, and a Mortgage.

                          I went to the state/county tax collectors website and determined that our landlord is spending ($T) of our rent to cover property taxes. On top of that, he/she has to pay home insurance and maintenance costs. Provide her with those estimates. From my own experience, I've paid between 0.3-0.6% of my home for annual insurance premium and a rule of thumb for home maintenance costs is 1-2% of home value.

                          Then figure out the difference and that would be how much of a mortgage the landlord could presumably afford. This is also the amount that you would be paying to purchase a home of similar or better quality than the place you are currently renting. If there are nicer/better/more conveniently located homes for that price, maybe you take the dive into home ownership. If you don't like the homes you could buy for that amount, that may be the ammo you need to settle the disagreement.

                          Telling someone what to do or not do rarely works. If you can take them on a path of discovery, you stand a chance to change their mind, or maybe change yours! Best of luck.

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                          • #14
                            All good advice. Run the numbers and be sure to include mortgage insurance (if applicable), property taxes, and a maintenance budget.

                            Tell her to prepare for all kinds of expenses and time consuming stuff in this brief list of things I've had to spend money / time on since I bought a house built in 2000 in July 2018: lawn treatments 5x/yr, spraying for pests biyearly, leaf removal, HVAC maintenance, water for the sprinklers, weed control, removal of trees that will die soon, replacing the water heater, replacing the oven, replacing faucets / handles, installing gutter guards, managing bizarre electrical problems, pipes freezing (installed incorrectly 20 yrs ago), expanding natural gas line to the house (installed incorrectly ? yrs ago), etc.

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                            • #15
                              Thank you all for the great responses. Great to get some different perspectives, will try to break down everything including taxes/maintenance for her and go from there. Appreciate it.

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