Renting house but owners want to sell. Should I buy?

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JTHouz
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Renting house but owners want to sell. Should I buy?

Post by JTHouz »

We are currently renting. Owners have indicated they want to sell. Considering whether we should buy it from them so we don't have to move.

We are in a VHCOL area.
Rent is $5500. House value is now likely ~2.1M with recent increases (It was only 1.6M a few years ago. My thinking is it's a pretty good deal to rent at this ratio if you ignore the appreciation that has happened...)

Age 39 family of 4 with young kids.
Net worth 2.5M (across retirements accounts and taxable, downpayment isn't the issue). No current real estate holdings or debt.
Income 600k per year
yearly spending ~180k per year (including current rent)

We like the house and neighborhood, and will be there for a while with young kids in school system etc. We don't want to move and are very happy here (thought we don't necessarily want to retire in this area or home). Never having to be forced to move again is certainly a factor.

On the other hand, we are good savers and generally are skeptical of leveraging up on potentially overpriced real estate. It's also more house than we strictly need (3300 sq ft) and wouldn't call it my dream house (it's in a fairly standard suburban development).

My feeling is it seems a bit of a stretch relative to our income though rates are so low, and we have to live somewhere and everything is crazy right now.

We have saved a lot already and should continue to be able to save a lot given other expenses. No plans to FIRE but was hoping to be able to throttle back at some point.

What would you do in my shoes?
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Sandtrap
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Re: Renting house but owners want to sell. Should I buy?

Post by Sandtrap »

JTHouz wrote: Wed Dec 08, 2021 1:09 pm We are currently renting. Owners have indicated they want to sell. Considering whether we should buy it from them so we don't have to move.

We are in a VHCOL area.
Rent is $5500. House value is now likely ~2.1M with recent increases (It was only 1.6M a few years ago. My thinking is it's a pretty good deal to rent at this ratio if you ignore the appreciation that has happened...)

Age 39 family of 4 with young kids.
Net worth 2.5M (across retirements accounts and taxable, downpayment isn't the issue). No current real estate holdings or debt.
Income 600k per year
yearly spending ~180k per year (including current rent)

We like the house and neighborhood, and will be there for a while with young kids in school system etc. We don't want to move and are very happy here (thought we don't necessarily want to retire in this area or home). Never having to be forced to move again is certainly a factor.

On the other hand, we are good savers and generally are skeptical of leveraging up on potentially overpriced real estate. It's also more house than we strictly need (3300 sq ft) and wouldn't call it my dream house (it's in a fairly standard suburban development).

My feeling is it seems a bit of a stretch relative to our income though rates are so low, and we have to live somewhere and everything is crazy right now.

We have saved a lot already and should continue to be able to save a lot given other expenses. No plans to FIRE but was hoping to be able to throttle back at some point.

What would you do in my shoes?
"Not having to move" is not, in itself, a sensible reason for such a large purchase, that early on in one's earning years (accumulation stage) acts like a boat anchor drag to a well thought out long term financial strategy.

With this purchase (2.5 mil) comes the need for:
1. Longer work hours, more ambition, higher income stream.
2. Less time at home, work stress, etc.
3. Etc.

When you are shopping for another rental, get a good sense of whether the landlord will be keeping the home as a long term rental or is flexible to sell it. For example: if the landlord says, "this house has been in our family for 2 generations", and so forth, then that's good sign.

IMHO: while you are in your peak earning years, it's a good time to establish a rock solid financial foundation and right now, you're starting to do that.

Rent (or purchase a less expensive home).
Follow your instincts.
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Olemiss540
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Re: Renting house but owners want to sell. Should I buy?

Post by Olemiss540 »

How much longer on your lease? How much is your "dream" house? How stable is your job/income? When do you want to retire?
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niceguy7376
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Re: Renting house but owners want to sell. Should I buy?

Post by niceguy7376 »

If someone else buys it as rental, what should be a monthly rental for them to make money?
Are there other homes available for rental in that area or other areas that you want to live? What would be the rents ?

I am also concerned if you would be forced to pay more as rent or move to a less desired location to get a house at a rent price you would like to have.
123
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Re: Renting house but owners want to sell. Should I buy?

Post by 123 »

Sandtrap wrote: Wed Dec 08, 2021 3:52 pm ..."Not having to move" is not, in itself, a sensible reason for such a large purchase...
+1 Having to move is a natural condition of living as a renter.
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exodusNH
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Re: Renting house but owners want to sell. Should I buy?

Post by exodusNH »

JTHouz wrote: Wed Dec 08, 2021 1:09 pm We are currently renting. Owners have indicated they want to sell. Considering whether we should buy it from them so we don't have to move.

We are in a VHCOL area.
Rent is $5500. House value is now likely ~2.1M with recent increases (It was only 1.6M a few years ago. My thinking is it's a pretty good deal to rent at this ratio if you ignore the appreciation that has happened...)

Age 39 family of 4 with young kids.
Net worth 2.5M (across retirements accounts and taxable, downpayment isn't the issue). No current real estate holdings or debt.
Income 600k per year
yearly spending ~180k per year (including current rent)

We like the house and neighborhood, and will be there for a while with young kids in school system etc. We don't want to move and are very happy here (thought we don't necessarily want to retire in this area or home). Never having to be forced to move again is certainly a factor.

On the other hand, we are good savers and generally are skeptical of leveraging up on potentially overpriced real estate. It's also more house than we strictly need (3300 sq ft) and wouldn't call it my dream house (it's in a fairly standard suburban development).

My feeling is it seems a bit of a stretch relative to our income though rates are so low, and we have to live somewhere and everything is crazy right now.

We have saved a lot already and should continue to be able to save a lot given other expenses. No plans to FIRE but was hoping to be able to throttle back at some point.

What would you do in my shoes?
A 1.7M mortgage would be around $7,000/mo.

What about offering to pay them that for another 12 or 24 months while you figure things out?
KlangFool
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Re: Renting house but owners want to sell. Should I buy?

Post by KlangFool »

JTHouz wrote: Wed Dec 08, 2021 1:09 pm

We are in a VHCOL area.
Rent is $5500. House value is now likely ~2.1M with recent increases (It was only 1.6M a few years ago. My thinking is it's a pretty good deal to rent at this ratio if you ignore the appreciation that has happened...)
JTHouz,

It is far cheaper to rent in this area. So, why would you buy the house? Just rent another house in this area.

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Re: Renting house but owners want to sell. Should I buy?

Post by Olemiss540 »

123 wrote: Wed Dec 08, 2021 4:21 pm
Sandtrap wrote: Wed Dec 08, 2021 3:52 pm ..."Not having to move" is not, in itself, a sensible reason for such a large purchase...
+1 Having to move is a natural condition of living as a renter.
Correct, but it is also a natural reason for not wanting to continue renting.
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59Gibson
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Re: Renting house but owners want to sell. Should I buy?

Post by 59Gibson »

No. With 20-25% dp you're looking at well over $8k/mo PITI..And your responsible for everything. Compared to 5500 rent.
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ResearchMed
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Re: Renting house but owners want to sell. Should I buy?

Post by ResearchMed »

KlangFool wrote: Wed Dec 08, 2021 4:32 pm
JTHouz wrote: Wed Dec 08, 2021 1:09 pm

We are in a VHCOL area.
Rent is $5500. House value is now likely ~2.1M with recent increases (It was only 1.6M a few years ago. My thinking is it's a pretty good deal to rent at this ratio if you ignore the appreciation that has happened...)
JTHouz,

It is far cheaper to rent in this area. So, why would you buy the house? Just rent another house in this area.

KlangFool

OP: Have you looked at the prices of other rentals in the area you want to live in that would be suitable for your family?
It may be that your rent was relatively low, or average, etc.
You should be able to get a general idea of comps by doing a short bit of online checking, for starters.

Just be sure what the reasonable choices are if you decide to move and continue to rent.

RM
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adamthesmythe
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Re: Renting house but owners want to sell. Should I buy?

Post by adamthesmythe »

OP needs to look at other houses for sale AND other places to rent before making a decision.
j9j
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Re: Renting house but owners want to sell. Should I buy?

Post by j9j »

$5500 is excellent rental rate for a 2million plus home. I would not buy it. Depending on how long your lease, take the time to see what the market rents are and also look for a longer term house. Extend the lease if possible to give yourself time.
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Re: Renting house but owners want to sell. Should I buy?

Post by Watty »

JTHouz wrote: Wed Dec 08, 2021 1:09 pm What would you do in my shoes?
Changing schools gets harder for kids once they get into middle or high school. I had a middle school kid when I needed to do a corporate relocation and it was hard on him even though the new school was better.

If you expect to stay in that area for the long term then I would lean towards buying a home before your oldest kid starts middle school just for the stability. That might not be the best financial choice but it is not entirely a financial decision and you can afford it.

An important thing to do would be to get your finances in order so you can buy a house if you find one then take a hard to see what other homes are available for purchase. Once you have narrowed it down to your current house, or the other best house you can find then deciding which house to buy would be an easier choice.

If you do not have strong ties to that area and you can find similar work in a less expensive areas then I would take a hard look at moving to a different part of the country where housing is more affordable. One thing to consider is what living in your current area will be like for your kids when they are in their 20s and are moving out on their own. I have lived in expensive areas but I have moved around and I am now in an area where housing cost are low to medium and my adult kid was easily able to afford to buy a nice house that is about ten minutes from us which is great since we frequently get to see our grandkids. Virtually all of his high school and college classmates who stayed in the area were able to afford to buy houses when they were in their 20s.
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JTHouz
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Re: Renting house but owners want to sell. Should I buy?

Post by JTHouz »

Thanks for all the input.

We still have 6 months on our current lease.

The house has been a rental (not to us) for the last 15 years so we thought we were safe, but with the recent run up in prices I guess the owners are trying to get out while the getting is good.

My rent vs buy calculations told the same story as many of you are pointing to. I do not understand the rent vs buy market in this area, but the market is what it is and trying to make claims about whether an asset is under or over priced seems antithetical to the Boglehead way of thinking (certainly people who have bought have been correct so far in this market so what do I know). Given our current financial situation, at some point is having some of our wealth in real estate a good idea anyway from a diversification and tax perspective?

The Rental market seems to support similar homes in this price range and we moved recently so I would say it is still market rate. That said inventory is a big issue and we were lucky to get this one, so we are more worried about finding a new place to go to that fits our needs.

I'm not looking to retire any time soon but potentially downshift in 5 years with an income that is potentially 2/3rds of where we are at today. Given our current savings and savings rate if we were to buy a different/cheaper house rather than rent what would be a reasonable price range to be looking at given those financial goals? (though maybe we should just continue to rent at these prices).

My dream home is not at all affordable in this area, and even if it were, I don't think it's how I would choose to spend my money.
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Re: Renting house but owners want to sell. Should I buy?

Post by THY4373 »

If it has been a rental a long time I'd be concerned about how much of the maintenance is bottom of the barrel. I currently rent (by choice) and some of the repairs in my place make me wince. A six year old probably could have done better in some instances. There is no way I'd personally want to buy my current place just based on what I see maintenance-wise unless I was getting a discount. Also all the carpets and internal paint show a lot of wear due to prior tenants (and me by this point). I don't care about any of this as a renter but as an owner I'd have to drop some serious coin/effort to get the place to where I want to have it as an owner.
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Re: Renting house but owners want to sell. Should I buy?

Post by 4nursebee »

If I owned a 1.7M house I would rent it out for $17,000 per month.
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Re: Renting house but owners want to sell. Should I buy?

Post by Blue456 »

Olemiss540 wrote: Wed Dec 08, 2021 4:47 pm
123 wrote: Wed Dec 08, 2021 4:21 pm
Sandtrap wrote: Wed Dec 08, 2021 3:52 pm ..."Not having to move" is not, in itself, a sensible reason for such a large purchase...
+1 Having to move is a natural condition of living as a renter.
Correct, but it is also a natural reason for not wanting to continue renting.
Some people like the flexibility of moving and being able to walk out on the job without anything anchoring down.
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Re: Renting house but owners want to sell. Should I buy?

Post by randomguy »

59Gibson wrote: Wed Dec 08, 2021 4:54 pm No. With 20-25% dp you're looking at well over $8k/mo PITI..And your responsible for everything. Compared to 5500 rent.
And when you did this math 3 years ago, did you come up with the right answer that you should buy or did you get the wrong one that renting was cheaper? VHCOL are their own world where appreciation is factored into all these equations. It ups both the risk and reward side of the choice you make.

I would not mix up the buy versus rent and the buy this house or another one decisions. The pain of moving is short term versus living in a place for a decade.
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Re: Renting house but owners want to sell. Should I buy?

Post by THY4373 »

Blue456 wrote: Wed Dec 08, 2021 5:56 pm Some people like the flexibility of moving and being able to walk out on the job without anything anchoring down.
This is why I rented post divorce as I wasn't sure where I'd want to live after my son graduates HS next year. My job is largely location agnostic and was prior to COVID for many years. It is looking increasingly likely I'll stay where I am so it might have been better to buy five years ago but honestly the stock market has done better than real estate in MCOL area so probably a wash. Though I am one of those folks who will rent less than I'll buy so I have saved money renting.
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Re: Renting house but owners want to sell. Should I buy?

Post by av111 »

OP

Here are your choices

Rent at 70% of PITI and live in a shoddier house with no personalization and always be ready to move. But keep money in stocks. Risky but liquid so job loss has less implications

Buy - spend money now for better enjoyment by your family and acquire leveraged real estate in a good area. Home possibly appreciates faster than stocks due to 5x leverage with less downside risk. But still risky because money is locked up in an illiquid asset. That can be trouble if the job is lost

I know what I would do. Other people similarly make their own decisions based on their rationalization. You get to do the same
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JTHouz
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Re: Renting house but owners want to sell. Should I buy?

Post by JTHouz »

av111 wrote: Wed Dec 08, 2021 6:57 pm OP

Here are your choices

Rent at 70% of PITI and live in a shoddier house with no personalization and always be ready to move. But keep money in stocks. Risky but liquid so job loss has less implications

Buy - spend money now for better enjoyment by your family and acquire leveraged real estate in a good area. Home possibly appreciates faster than stocks due to 5x leverage with less downside risk. But still risky because money is locked up in an illiquid asset. That can be trouble if the job is lost

I know what I would do. Other people similarly make their own decisions based on their rationalization. You get to do the same
It's an interesting way to put things (though not sure I could afford a less shoddy house than the one I'm renting in this market, perhaps the opposite!)

Certainly the stock market is more volatile than real estate, but long term is the diversified investment portfolio really more risky and downside risk than the 5x leveraged concentrated illiquid investment? Part of my personal rent vs buy calculus assumes basically the opposite, i.e that this particular idiosyncratic housing market in which I would be concentrated and leveraged in has more downside risk (think Tokyo real estate in the 90's etc.) than being diversified, not leveraged and invested across the global economy.
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Re: Renting house but owners want to sell. Should I buy?

Post by THY4373 »

Blue456 wrote: Wed Dec 08, 2021 5:56 pm Some people like the flexibility of moving and being able to walk out on the job without anything anchoring down.
Also no maintenance or nearly no maintenance. I owned for two decades and I was and am very handy. But by the end I was getting burned out and outsourcing isn't always the answer because you have to spend time finding folks who do good work which is not always easy. Outside of mowing my rental's lawn and fixing things like minor toilet flushing issues (if it is less than $50 and an hour of my time I won't bother my landlord and just fix it myself). I love not having to stress over maintenance and upgrades (upgradeitis is a real thing with some homeowners including me).
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Re: Renting house but owners want to sell. Should I buy?

Post by 59Gibson »

randomguy wrote: Wed Dec 08, 2021 6:21 pm
59Gibson wrote: Wed Dec 08, 2021 4:54 pm No. With 20-25% dp you're looking at well over $8k/mo PITI..And your responsible for everything. Compared to 5500 rent.
And when you did this math 3 years ago, did you come up with the right answer that you should buy or did you get the wrong one that renting was cheaper? VHCOL are their own world where appreciation is factored into all these equations. It ups both the risk and reward side of the choice you make.

I would not mix up the buy versus rent and the buy this house or another one decisions. The pain of moving is short term versus living in a place for a decade.
Well for the last several years anything less than maxed out leverage on everything one owns with the $ invested in pretty much anything RE or stocks would appear to be on the "wrong" side. VHCOL are certainly their own world, I maintain the risks are very high with the #s the OP shared and I wouldn't purchase
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Re: Renting house but owners want to sell. Should I buy?

Post by randomguy »

59Gibson wrote: Wed Dec 08, 2021 8:47 pm

Well for the last several years anything less than maxed out leverage on everything one owns with the $ invested in pretty much anything RE or stocks would appear to be on the "wrong" side. VHCOL are certainly their own world, I maintain the risks are very high with the #s the OP shared and I wouldn't purchase
People have beens saying this for 25 years in the VHCOL I am familiar with. So far they have pretty much always been wrong. Even the people who bought at the peak are sitting pretty 10 years later. As I said it is a higher risk/higher reward situation. If you plan on moving in 5-10 years, you might want to avoid the risk. If you plan on being there 30 years, you are probably going to come out ahead by buying.
59Gibson
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Re: Renting house but owners want to sell. Should I buy?

Post by 59Gibson »

randomguy wrote: Wed Dec 08, 2021 8:58 pm
59Gibson wrote: Wed Dec 08, 2021 8:47 pm

Well for the last several years anything less than maxed out leverage on everything one owns with the $ invested in pretty much anything RE or stocks would appear to be on the "wrong" side. VHCOL are certainly their own world, I maintain the risks are very high with the #s the OP shared and I wouldn't purchase
People have beens saying this for 25 years in the VHCOL I am familiar with. So far they have pretty much always been wrong. Even the people who bought at the peak are sitting pretty 10 years later. As I said it is a higher risk/higher reward situation. If you plan on moving in 5-10 years, you might want to avoid the risk. If you plan on being there 30 years, you are probably going to come out ahead by buying.
You're right, many of these areas have been on a tear since 90s. The risk I'd be most concerned with and it really only happened 2008-10. Property values reset a bit, a% of big tech jobs/high income jobs are cut back for whatever reason. You're now tanked on the property by $500k+, lost your job or pay was drastically cut. Rent doesn't come close to mortgage. However unlikely, it's one of those scenarios(btw not that farfetched) sitting out there that could sink someone. The ones who can ride it out will be fine. LCOL, MCOL, even HCOL BH could probably ride out this situation because the RE#s wouldn't be like vhcol. But who knows. :happy
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Re: Renting house but owners want to sell. Should I buy?

Post by av111 »

JTHouz wrote: Wed Dec 08, 2021 7:49 pm
av111 wrote: Wed Dec 08, 2021 6:57 pm OP

Here are your choices

Rent at 70% of PITI and live in a shoddier house with no personalization and always be ready to move. But keep money in stocks. Risky but liquid so job loss has less implications

Buy - spend money now for better enjoyment by your family and acquire leveraged real estate in a good area. Home possibly appreciates faster than stocks due to 5x leverage with less downside risk. But still risky because money is locked up in an illiquid asset. That can be trouble if the job is lost

I know what I would do. Other people similarly make their own decisions based on their rationalization. You get to do the same
It's an interesting way to put things (though not sure I could afford a less shoddy house than the one I'm renting in this market, perhaps the opposite!)

Certainly the stock market is more volatile than real estate, but long term is the diversified investment portfolio really more risky and downside risk than the 5x leveraged concentrated illiquid investment? Part of my personal rent vs buy calculus assumes basically the opposite, i.e that this particular idiosyncratic housing market in which I would be concentrated and leveraged in has more downside risk (think Tokyo real estate in the 90's etc.) than being diversified, not leveraged and invested across the global economy.
Generally what people can afford to buy and what they are prepared to buy are different. Yes there are several triggers that can be detrimental to the price you paid for stocks or houses but desirable homes are always more attractive than desirable tickers because of their uniqueness. Logic says that diversified portfolio of businesses is better but you can't live in it. And life keeps ticking along. Decisions decisions.
AV111
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Re: Renting house but owners want to sell. Should I buy?

Post by randomguy »

59Gibson wrote: Wed Dec 08, 2021 9:13 pm You're right, many of these areas have been on a tear since 90s. The risk I'd be most concerned with and it really only happened 2008-10. Property values reset a bit, a% of big tech jobs/high income jobs are cut back for whatever reason. You're now tanked on the property by $500k+, lost your job or pay was drastically cut. Rent doesn't come close to mortgage. However unlikely, it's one of those scenarios(btw not that farfetched) sitting out there that could sink someone. The ones who can ride it out will be fine. LCOL, MCOL, even HCOL BH could probably ride out this situation because the RE#s wouldn't be like vhcol. But who knows. :happy
Then you turn in your keys and walk away. Thats why you don't put 20% down:) Seriously it is a tough situation to be in. The right move is most likely to buy. But if the downside shows up it is painful. The problem is much, much more complex than just going 5k in rent versus 7700 to buy once you start thinking about the next 15+ years instead of just the next 1. locking in a 1.5 million house instead of 2.0m can really affect your quality of life. And a 2.0m that goes to 1.5 will hurt it.
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Re: Renting house but owners want to sell. Should I buy?

Post by reader79 »

You're doing great with your income and net worth. I'm also a renter and I wouldn't buy it. It's 4x your income. You're winning by renting a nice place at a great price, without having to worry about any maintenance expenses or anything else. You have plenty of time to find another place that I bet will be just as good or better.
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Re: Renting house but owners want to sell. Should I buy?

Post by Watty »

59Gibson wrote: Wed Dec 08, 2021 9:13 pm
You're right, many of these areas have been on a tear since 90s.
You need to be cautious about looking at that. With some zigs and zags mortgage interest rates have been pretty steadily dropping since the 1990's which is a big factor in housing prices going up so much.

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K72
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Re: Renting house but owners want to sell. Should I buy?

Post by K72 »

Ultimately you have to rely on gut feel / instinct, but some questions come to mind that I think you should consider:

1. how stable is job/income?
2. How many years can you imagine enjoying living there?
3. Good schools for kid?

Being that you are in a VHCOL area I think it's difficult for a lot of people to appreciate what that's like. We also live in a VHCOL area and upgraded when we outgrew our 1200 sq ft home after the 2nd kid arrived. We've never been able to afford our dream home in the area (probably 2-3x the price of the home we bought), but the kids had great schools and we've been very comfortable for the past 23 years.
Last edited by K72 on Wed Dec 08, 2021 11:22 pm, edited 1 time in total.
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nonamer800
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Re: Renting house but owners want to sell. Should I buy?

Post by nonamer800 »

Don't make it purely a financial decision. Bogleheads tend to do that. Talk to your partner. Not everything is dollars/cents.
You make 600k for heaven's sake.
In your shoes, if I really liked the house and can envision a great life with the kids there and plan to live there for 10 years, I might buy it. I think you are paying about 2.5k/month more than rent (which is 30k/year).
If I'm not really satisfied with the house, I would pass. I think there is a lot of value in seeing a happy family enjoying the house, commute, neighborhood, schools etc.
Before buying, I would look around (past 3 months of sales), to ensure that I'm happy with the price/property that I'm buying.
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Re: Renting house but owners want to sell. Should I buy?

Post by Olemiss540 »

Blue456 wrote: Wed Dec 08, 2021 5:56 pm
Olemiss540 wrote: Wed Dec 08, 2021 4:47 pm
123 wrote: Wed Dec 08, 2021 4:21 pm
Sandtrap wrote: Wed Dec 08, 2021 3:52 pm ..."Not having to move" is not, in itself, a sensible reason for such a large purchase...
+1 Having to move is a natural condition of living as a renter.
Correct, but it is also a natural reason for not wanting to continue renting.
Some people like the flexibility of moving and being able to walk out on the job without anything anchoring down.
Whilst no one likes the actual process of moving and being forced to move due to the needs of others.
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Re: Renting house but owners want to sell. Should I buy?

Post by Jimsad »

nonamer800 wrote: Wed Dec 08, 2021 11:22 pm Don't make it purely a financial decision. Bogleheads tend to do that. Talk to your partner. Not everything is dollars/cents.
You make 600k for heaven's sake.
In your shoes, if I really liked the house and can envision a great life with the kids there and plan to live there for 10 years, I might buy it. I think you are paying about 2.5k/month more than rent (which is 30k/year).
If I'm not really satisfied with the house, I would pass. I think there is a lot of value in seeing a happy family enjoying the house, commute, neighborhood, schools etc.
Before buying, I would look around (past 3 months of sales), to ensure that I'm happy with the price/property that I'm buying.
I second this .
You make a lot of money and do not have any real estate .
You may regret not buying the house a few years later as prices may go up more .
Also you may not realize how much your kids will miss their friends. You and you wife may not realize it now but may miss your neighborhood
We moved a few times and each time was harder and we regret not buying sooner .
You have the money and you have ‘0’ real estate
IMHO you should buy
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Re: Renting house but owners want to sell. Should I buy?

Post by Blue456 »

Olemiss540 wrote: Thu Dec 09, 2021 5:40 am
Blue456 wrote: Wed Dec 08, 2021 5:56 pm
Olemiss540 wrote: Wed Dec 08, 2021 4:47 pm
123 wrote: Wed Dec 08, 2021 4:21 pm
Sandtrap wrote: Wed Dec 08, 2021 3:52 pm ..."Not having to move" is not, in itself, a sensible reason for such a large purchase...
+1 Having to move is a natural condition of living as a renter.
Correct, but it is also a natural reason for not wanting to continue renting.
Some people like the flexibility of moving and being able to walk out on the job without anything anchoring down.
Whilst no one likes the actual process of moving and being forced to move due to the needs of others.
Agreed. I moved every year for 5 years. I hated it but I also become a pro at it and I was able to move on a weekend pack and unpack fully.
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Re: Renting house but owners want to sell. Should I buy?

Post by Nowizard »

Could you rent your "dream house" for a relatively small increase in rent?

Tim
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Re: Renting house but owners want to sell. Should I buy?

Post by Jimsad »

Nowizard wrote: Thu Dec 09, 2021 7:50 am Could you rent your "dream house" for a relatively small increase in rent?

Tim
Even if he finds it , it may not last if he is forced to move again and he has to keep looking for a ‘dream house ‘ every few years and his family and kids would not Thank him for that
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Re: Renting house but owners want to sell. Should I buy?

Post by mikejuss »

What if the owners were willing to sell you the house for less than $2 million?
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Re: Renting house but owners want to sell. Should I buy?

Post by MaxDakota »

With kids, the rent vs buy calculus changed for us and buying made more sense.

We were in a very similar situation - had been long time renters of a home, friendly with the landlord, considered buying. Unfortunately, the landlord passed away, the heirs decided on a crazy asking price, and while that house sat on the market for over a year, we had already moved on.

I would buy the current house if you can make a deal off market. If they put it on the market, you would have to deal with open houses, etc.
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Re: Renting house but owners want to sell. Should I buy?

Post by Carefreeap »

nonamer800 wrote: Wed Dec 08, 2021 11:22 pm Don't make it purely a financial decision. Bogleheads tend to do that. Talk to your partner. Not everything is dollars/cents.
You make 600k for heaven's sake.
In your shoes, if I really liked the house and can envision a great life with the kids there and plan to live there for 10 years, I might buy it. I think you are paying about 2.5k/month more than rent (which is 30k/year).
If I'm not really satisfied with the house, I would pass. I think there is a lot of value in seeing a happy family enjoying the house, commute, neighborhood, schools etc.
Before buying, I would look around (past 3 months of sales), to ensure that I'm happy with the price/property that I'm buying.
+1

No where have we heard about the partner's perspective.

This is more than a financial decision. It affects the whole family.
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JTHouz
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Re: Renting house but owners want to sell. Should I buy?

Post by JTHouz »

My partner is certainly getting a lot of pressure from friends and family to buy and thinks we should "consider" our options (which I agree with whether it's this home or something more affordable).

The town is big enough that if we move (either rent or buy) it won't be an issue to stay close and keep the kids in the same schools. We both appreciate not having to worry about maintenance, and it's clear that what we're paying in rent (right now anyway) will get us a very nice place we would be happy in. We're also pretty efficient movers at this point.

On the other hand, there's certainly some angst (on both our parts) about missed gains not being owners (so far) and about potentially being priced out of the neighborhood in the future (something that likely would have happened to both our parents had they not purchased many years ago which is where some of the pressure is coming from.). And as others have pointed out, we don't have any real estate holdings which one could argue should be part of a balanced portfolio.

I certainly will see what type of offer they give us. Not sure how good of a deal we would need to make it worth buying. Certainly a sub market offer combined with not having to deal with a potential bidding war on the open market could change the calculus considerably. The home is in decent shape for being a long term rental (it's professionally managed).

For the people saying you are crazy to buy a 2.2M home that you could rent for $5500, how low would you need to see a potential offer to make it more interesting given the above?
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Re: Renting house but owners want to sell. Should I buy?

Post by Watty »

JTHouz wrote: Wed Dec 08, 2021 5:38 pm I'm not looking to retire any time soon but potentially downshift in 5 years with an income that is potentially 2/3rds of where we are at today.
That makes it a lot easier, even if you could get a loan you can't afford a $2.1 million dollar house with a $400K income when you have four kids. You would at best be house poor.

It would be good to keep renting until you are ready to downshift and then decide what to do then. Even if you decide to not move to a less expensive area you might need to move to the other side of town to find a different job and that could leave you with a terrible commute.
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Re: Renting house but owners want to sell. Should I buy?

Post by mikejuss »

JTHouz wrote: Thu Dec 09, 2021 11:32 amFor the people saying you are crazy to buy a 2.2M home that you could rent for $5500, how low would you need to see a potential offer to make it more interesting given the above?
The standard answer is 3 times your income, so around $1.75 million. If you can get the owner to go sub-$2 million, and you don't have to deal with an open-market bidding war and the associated nonsense, you should strongly consider buying the house. Already living there, liking the house and the neighborhood, and seeing yourself there for a while (I hope these things are true) is a huge leg up over buying something you're coming into fresh.
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neowiser
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Re: Renting house but owners want to sell. Should I buy?

Post by neowiser »

If the owners have given you 6 months notice that they intend to sell they are probably hoping you will make an offer. Purchasing from them directly will save you both money, so perhaps you could negotiate a price lower than the appraised value. A lot can happen in the next 6 months, it may be too soon to be running your numbers.
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Re: Renting house but owners want to sell. Should I buy?

Post by ray.james »

If this is bay area, those ratios of price to rent and buying at 2.1mill sounds like a deal. You can check with owners at what price point they would let it go and avoid commissions by splitting would save easily 50k both sides. The rent ratios in California will always be lopsided due to prop.13.

We offered our condo owners the same opportunity in 2018. While they were willing, they couldn't. The house is part of landlady's mother trust. The mother passed away this year and they sold it immediately.

With prop 19 from last year, a lot of house owners are willing it to sell it now since heirs will not inherit the prop13 values. A great lobbying move by cal-realtors..
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