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Ask Dave

The Buying Decision

Ron isn't sure if he's better off buying or renting after his move.

QUESTION: Ron in Pennsylvania is accepting a new position out of state. He and his wife will be in the new area for a minimum of two years. He's not sure if they should rent or buy a house. Dave says if they buy, they will probably lose money.

Dave's ANSWER: Very seldom does it make sense to live in a place for two years and then sell it unless you get a great buy on it when you purchase it and are able to sell it for retail very quickly without any trouble. Most properties in the current marketplace don't go up enough in value in two years to offset your cost of sale. It's cheaper for you to rent.

If you bought something at 70% of its value, you could turn around and sell it for 100% two years from now and, even if the real estate market didn't move, you'd be fine. But if you bought something for 95% or 100% of the value, you are going to lose money when you turn around and resell it in two years. You are better off to rent.

That's why we tell a lot of military families to rent, because a lot of times they are stationed somewhere for just a couple of years. They buy something and can't get it sold, so they own rental property all over the United States. Every time they move, they wind up with another rental house. That certainly wasn't their plan. They just thought owning a house was a good idea.

Most of the time, owning a house is a good idea. But there are times that it's not. When you're not going to be in a place any longer than you are, I'm renting in that situation.