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Thread: Would you buy real estate right now?

  1. #1
    Senior Member Geila's Avatar
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    Would you buy real estate right now?

    Or would you stay in the stock market?

    We plan to move in about 4 years to a small town with a much lower cost of living; it's 3 hours from where we are now. We have $150k available to invest in a home (which we would rent out until we move), or we can leave it in the stock market where it has been performing extremely well. We can rent out the house to cover the mortgage and then some as it's in a very nice neighborhood. Purchase price would be around $375k.

    Of course, it's all a gamble since we don't know where the stock or real estate markets will be in 4 years. Just wondering what folks who have invested in real estate in the past might think. We've never really wanted to be landlords, this just seems like maybe it might be a good time to cash in some profits and invest in a house. Our current house is paid off and our retirement is fully funded. No kids, so no need to save for college, etc.

  2. #2
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    Quote Originally Posted by Geila View Post
    Or would you stay in the stock market?

    We plan to move in about 4 years to a small town with a much lower cost of living; it's 3 hours from where we are now. We have $150k available to invest in a home (which we would rent out until we move), or we can leave it in the stock market where it has been performing extremely well. We can rent out the house to cover the mortgage and then some as it's in a very nice neighborhood. Purchase price would be around $375k.

    Of course, it's all a gamble since we don't know where the stock or real estate markets will be in 4 years. Just wondering what folks who have invested in real estate in the past might think. We've never really wanted to be landlords, this just seems like maybe it might be a good time to cash in some profits and invest in a house. Our current house is paid off and our retirement is fully funded. No kids, so no need to save for college, etc.
    I think it is impossible to answer unless there were so many more factors known about your situation, where you are going, what is special about a particular house you have found, what kind of support is available int he new town to manage property for you, how much more you will have left in the market, whether you are busy with jobs, how the local rental market functions, etc.

    One thing that jumps out is this:" We've never really wanted to be landlords, this just seems like maybe it might be a good time to cash in some profits and invest in a house."

    For me, that would not be compelling enough to put myself through all the hassles of buying and maintaining a rental property for someone else. Good rental properties are not necessarily the properties that you would want to move to in 4 years-- so would you be doing all this just to break even on the house or keep it from sitting empty?

    You could take profit and put it in something else if it is a profit taking move, and then sell your house when you are ready to move in 4 years and pay cash, and avoid all of this intermediary business, as it will be a job in itself.

    Those are my off the cuff thoughts.

  3. #3
    Senior Member iris lilies's Avatar
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    I want to echo Tybee in that a house that you want to live in is not often a good rental property. You have to run all of the numbers and you have to be knowledgeable about the numbers.

    Four years is a ways away and your plans can change. I would say by your house a year out from selling the one you live in.

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    I like index funds. Safe and liquid and no one lets their dog pee on them. 😄

  5. #5
    Senior Member razz's Avatar
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    Not being nosy but why wait four years if so many factors indicate that such a move is a good one right now?

    My experience - I was going to wait another three years before I left my beloved farm after my DH passed but the thought came, "If then, why not now?". I sold and moved. It was the smartest decision I could have made. Real estate prices for farms were at their peak, my newly built house was perfect in a neighbourhood that I love, and urban real estate soared after I moved in.
    Gandhi: Happiness is when what you think, what you say and what you do are in harmony .

  6. #6
    Senior Member SteveinMN's Avatar
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    There are so many more factors out of your control if you buy the house and rent it for four years: you may have to carry the mortgage for a few (or several) months in lieu of tenants; you could (despite your efforts) get a non-paying tenant (and/or a destructive one) and have to incur the expense of kicking them out (from afar); the house could need major repairs (roof, furnace, etc.) during your ownership and you won't be nearby to get bids from contractors or oversee the work; the real estate market could collapse again; something could happen to the economy in that small town which would affect the demand for housing (particularly that house, if it's above the median rental price in that market).

    If you don't really want to be a landlord, I don't recommend signing up for a four-year hitch as a landlord. You could consider rental-management companies which evaluate prospective renters, handle routine stuff like lawn care and snow removal, and can call tradespeople for small fixes (refrigerator dies, A/C inspections) -- but they take a percentage off the top of the rent. The rent you can charge in that market and the expenses you have to clear (mortgage, utilities, savings for repairs, etc.) may not provide enough room for that expense. And even buying the house will feature different "numbers" than your own residence: when I bought the place I rent out, I could not homestead it (not my primary residence) and even the mortgage interest rate was higher (because it was an investment property). You really need a realistic idea of what the house is as rental property and if it's so singular that it makes a great rental and the home you really will want above all others in four years.

    Personally, I'd keep my money in equities.
    Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome. - Booker T. Washington

  7. #7
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    No.

  8. #8
    Senior Member Ultralight's Avatar
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    I just have a knee jerk reaction of utter dislike about buying pretty much... anything! So no.

  9. #9
    Senior Member Teacher Terry's Avatar
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    I wouldn’t do it until ready to move. Being a landlord sucks. We have done it.

  10. #10
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    Location, location, location.

    Residential real estate is dropping in some elite spots... one theory is Chinese buying has been in decline. I think a location with declining property values would be terrible for the strategy of buying and being a landlord for 4 years.

    Is there a location where the residential property market has gone through a decline, and has begun to rise again? If so, does the community offer amenities and quality of life that you would appreciate for a minimum of 13 years?

    AARP, using a quantitative method, determines an annual Livability Index, and promotes discussions about "Age Friendly Communities". In the category of Smaller (Population 25K to 100K) cities in 2018, the top scoring locations were:
    Fitchburg WI
    Sheboygan WI
    La Crosse WI
    Lafayette CO
    Silver Spring MD
    Sun Prairie WI
    Bismarck ND
    Brookline MA
    Harrisburg PA
    Portland ME

    In smaller towns than these in northern WI, Zillow lists 2 BR ranchers on half-acre lots, at around $99 per square foot. Mind you, the purchase price does not include the ongoing financial and emotional costs of being an absentee landlord.

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