Buy Primary Residence Then Eventually Rent
I am wanting to buy my first property for my primary residence but only will be living in it for a few years before moving cities. I am wondering if I am better off just renting until I get to a more permanent location or if selling after a few years or renting it out after I move are the best.
I currently live in a high growth city but do not want to rely on speculation. Thanks all.
Most Popular Reply
Hey Edmund,
This is a great question! Typically the break-even holding period for a house is 5-7 years because when you sell you'll have to pay 6% realtor fees, and 2-4% in closing costs, for a total of about 10%.
If you buy a house for $250,000 and in 3 years you sell it for $275,000 (a 10% growth over 3 years) you'll actually lose money!
- Purchase Price: $250,000
- Down Payment: $12,500
- Maintenance: $7,500 (conservative 1%/yr)
- Mortgage Interest: $27,753 (4% interest rate)
- Sales Price: $275,000
- Fees & Commissions: $27,500
- Loan Balance: $224,434
- Net Proceeds: -$12,187 (275k - 27.5k - 224.4k - 7.5k - 27.7k)
I love real estate but what most people fail to realize is non-cashflowing real estate is not as great of an investment as you think.
If you're only going to be in a city for a short time, keep the flexibility and peace of mind that comes with renting.
Hope that helped!