Looking at potentially buying a house this Spring. I am really tired of renting and feeling like I am just throwing my money to the wind. I would be using the VA loan with $0 down. I know 2 years is hardly any time at all to build equity- is it worth it at all to consider buying a house or should I forget the idea? This will be in smaller towns in central Kansas and I am open to renting the house after I move via a property management company.
Is it worth buying if I will move again in 2-3 years?
byu/CollinStonksUp inRealEstate
Posted by CollinStonksUp
12 Comments
Probably not. You’ll probably be negative considering realtor fees and closing costs.
Make a budget and compare renting vs buying over a 2 year period
In a stable economy it is borderline, really depends on the market. Right now? Absolutely not.
Do the math for where you live/ will be living. I’ve done it for where I live and usually the answer is yes. Even if you break even that’s better than renting and losing the money altogether.
Many will say no, I’ll say it depends.
We bought our first house for $710k in 2023, we sold for $789,000 beginning of last year. That was not the most remarkable period for appreciation in our area. Our net proceeds were $745,000. So we had a gain of $35k. We paid our house off about halfway through that timeframe so we paid very little interest (6.5% loan, we felt comfortable with it). However, I understand most wouldn’t have had that experience, so I’ll simulate the actual interest we would have paid.
We paid $2,800/month at the beginning of the loan in Interest, taxes, and insurance. So basically over the course of those 2 years we would paid $67,200 in non-equity mortgage costs. We gained $35k, Thats $32,200 net. We put about $10k into it between move in projects, some roof issues, and an HVAC repair. All in all, $42,000 to live in the house for 2 years or $1,900/month. The house would have rented for $3,800/month conservatively.
In addition, houses like that aren’t for rent in our community. We had nicer finishes than any house currently for rent and we could customize it to our liking. We also bought and sold in a generally non-spectacular market, as I mentioned.
We now bought this house we are in for $1.5M and we’ve also put $3,000 into it. The HVAC may go (has been showing some signs) and we have quotes for $13,000 to replace it if need be. It’s currently valued at $1.53M so we may lose a bit on it if we sell in a year. I’d say to the tune of $40-60k, all factors considered. Again, we couldn’t rent for $40-60k over a 2 year span in a house of this quality so we’re willing to foot that bill. It’d likely run us about $6k/month to rent a house like this.
My point is, your down payment, your areas properly taxes, insurance, rental market, your circumstances, and your preferences all can make general principles fly out the window. I didn’t even discuss buying a house with shabby landscaping or lackluster finishes that can be cheaply added to increase value in the interim, which can make buying more appealing as well. 2-3 years is short but it can make sense.
I was told not to buy something unless I’m able to own it for at least five years.
No, you’ll almost certainly lose money. With zero money down you’ll likely need to bring cash to the table to close – you’ll need at least six percent to pay the realtors.
No, but it is a probability, not a certainty either way. I would say there is an 80 to 90% chance that appreciation will not cover the costs to sell after 24 months. There is also the chance of serious repairs and maintenance (roof, furnace, discovered issue, ect) that could be a big cost and/or decrease value.
If you want to convert to an investment property, do the math now to determine if you realistically will have positive cash flow. Keep in mind your taxes will go up when your property is no longer homesteaded.
Is it worth incurring 20k in fees (transfer taxes, title fees, broker fees) to live somewhere for two years in addition to mortgage payments?
Not likely to make Money in that short of a time so no
Yeah don’t waste your money. 2 years ain’t enough and if the market takes a tanky, guess who’s on the hook for the diff?
No. Zero down and you will probably have to bring money to the table to sell it.