Should I buy or rent a home if I plan on moving soon?

Question

Greetings BP,

I am finally ready to buy a property but I have the following dilemma.

My GF will be graduating college in May and we will need a place to live in Charleston. This seems like the perfect opportunity to  "house hack" a small multifamily.

The available MLS properties in my target area will sometimes meet the 1% rule (never 2% as I am sure most people face), but most are older homes that will require a good bit of rehab.

The kicker here is that we will be relocating to Charlotte, NC in about a year and a half (Q4 2017). My concern with this is that I will have all my capital tied up in a property that is now 4 hours away when I will also need capital to buy a new place in Charlotte.

So my question is, what would you guys advise me to do? Should I be patient and wait for a great deal to come along that meets my criteria? Should I change my criteria and maybe start looking for a lipstick SF live-in flip (needs to qualify for traditional mortgage). Or should I entertain the idea of renting and becoming an expert in Charlotte so I can make a good start there in 2018?

Thank you for your help!

Zachary Betters · Answer

Patience is always a great idea.  No matter what you do you want to fund the right property and a great deal.  If you find a good enough deal you can build instant equity in, you could leave yourself with options next year. To sell and take profits with you. Or if you built equity you may consider a HELOC on your first property to pay your down payment on your second property. Or you could buy now then rent when you move to Charlotte while waiting to know the market and looking for your deal there.  I would make sure you take some time to get to know both markets before purchasing though

Good luck

Lynn McGeein · Answer

Personally, if I could find a home that I could get a mortgage on, fix it up and turn a profit when you move, that would be ideal.  If I'm not mistaken, you can still take the exemption or a large portion of it if you lived there for 1.5 years and then transferred for work a certain distance.   If there are too many fees to sell, like heavy excise taxes and seller costs, that would make it not worth it or if you cannot find a good deal, I'd just rent for the time being and save up money rather than risk being tied up in a house long distance.

Conner Snodgrass · Answer

Thank you everyone for your replies, I would be interested to learn more about the capital gains exemption mentioned by @lynn M. , is anyone familiar with the exemption? I will also do some research on my own.

Conner Snodgrass · Answer

Thanks for the advice Gerardo! It is much appreciated. Unfortunately staying longer than the 1.5 years is not an option as she will have a job in NC starting Q4 2017. That was one of the negatives to buying now was the capital gains implications. However I agree with what you are saying that these interest rates will probably not be here in a year.

I am not sure if this effectively eliminates a SF live in flip option but that is my gut feel.

Luc Boiron · Answer

I would say it is best to get right into it and get started. I'm not sure that buying to rent is the best idea, as you won't be able to hold it long, and would need to either manage it long distance once you move, or sell it, with some costs associated with that. It won't give you much time to make money off the rental.

If you have the knowledge and skills, I would look for a flip. This could be SF or multifamily, but you should concentrate on increasing the value over the next year and a half, rather than trying to make money off the rental, as that is a longer term strategy.

Gerardo Dominguez · Answer

@Conner Snodgrass Welcome to BP!  If you're in a position to buy a good house hacking home now, I think that's a great way to start.  The mortgage rates have been historically low for quite a while now so there's no guarantee they'll still be this low in 2017/2018.  Also, since you're going to be there for 1.5 yrs, that's pretty close to meeting the 2 out 5 years you need to live in a property to avoid paying capital gains tax.  Maybe you hang back for another 6 months before relocating so you can meet the full 2 yr requirement.  This way you can have the option of selling it without taking a big hit from taxes.  If you rent it out after you move just make sure you have a good property manager in place.

Keep us posted.  Good luck!

JD Martin · Answer

I would rent in your case.

Should I buy or rent a home if I plan on moving soon?

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