When to Rent, When to Buy

     As I mentioned in my last post, B and I are selling our family home, and we are thinking about renting a condo for a year or two instead of rolling over our equity directly into a new home.

     The main reason we're selling our house now is because this is a year when we can finally, actually sell it, after a number of years when the real-estate market was pretty dead. The main reason we're planning to rent for a while is because we don't know where we want to go. We have no grandchildren. Our kids are spread out over four states. And, it seems, the two of us have slightly different ideas about the nature of our retirement paradise. So we're taking a gap year to figure out the rest of our lives.

     Meanwhile, I don't know what it's like in your neck of the woods. But here in the exurbia region of the New York suburbs the real-estate market has heated up quite a bit this year. Our house is worth, probably 20 to 25 percent more than it was a few years ago, although still some 10 to 15 percent less than when we bought it at the top of the market in 2007.

One condo we've looked at to rent ... it's pretty small!

     Don't feel sorry for us, though. When we moved in together in 2007, B and I also sold our two old houses, and we paid less for our current home than we both received in selling our old homes. So the consolation prize? We've lost less money than we would have otherwise.

     Also, you have to look at your entire history. Like most of us, despite the Great Recession, I've done quite well over the past four decades since I bought my first home (three bedrooms, one-car garage, a quarter acre) for $70,000 back in 1977.

     What I find discouraging, though, is that when we look at the rental market, everything looks pretty expensive. For the same amount we're now paying for our four-bedroom home, we'd be lucky to get two to three bedrooms, in a neighborhood not as nice as our old one. We're now looking at a condo; the idea is to save money so we can travel. But it seems you get a lot less space, for not that much less money.

     This makes me question some of the current thinking, as represented by this article on TheSreet.com, that renting is cheaper than buying -- presumably because you don't pay real-estate taxes and a mortgage and the maintenance costs. When you're renting, the landlord pays all that.

     But think about it. Where does the landlord get the money to pay taxes and the mortgage and everything else? From the rent. So it all falls back on the renter in the end, anyway.

     One advantage of renting is clear, however. It doesn't tie you down to a particular place. And there aren't many up-front costs compared to all the fees involved in buying and selling a house. The old rule of thumb probably still pertains: rent if you think you're going to move again in five years or less; buy if you're going to stay more than five years.

     So we're going to rent -- because for us it's a temporary situation. One or two years, not five years. Then once we decide where we're going to settle, we'll buy another home. Because we can't afford to rent for long.