Downsizing in 8 years. Buy now?

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a_teacher
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Downsizing in 8 years. Buy now?

Post by a_teacher » Wed May 16, 2018 3:21 pm

With interest rates going up and the price of housing going up (doubling every 10 years in my area), would it be smart to buy now, in a hot rental environment? I don't think we will need a 3,500 sq ft home for 2. Or, would this be the equivalent of trying to time the market? I'm certain we'd be able to pay the monthly mortgage with rental income.

Chuck
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Re: Downsizing in 8 years. Buy now?

Post by Chuck » Wed May 16, 2018 3:35 pm

In 2010, 8 years ago, what did you think life was going to be like in 2018? Were you right?

a_teacher
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Re: Downsizing in 8 years. Buy now?

Post by a_teacher » Wed May 16, 2018 3:38 pm

Chuck wrote:
Wed May 16, 2018 3:35 pm
In 2010, 8 years ago, what did you think life was going to be like in 2018? Were you right?
My area was not hit that hard but I understand your point. Thank you.

delamer
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Re: Downsizing in 8 years. Buy now?

Post by delamer » Wed May 16, 2018 4:41 pm

So you want to buy a house now that you would rent out for the next 8 years? And then you’d move into it when you retired?

It isn’t just a question if what will happen to the housing market in 8 years, but what will happen in your life.

If one of you was run over by a bus the day after you bought the rental, would the other be happy being a landlord?

soccerrules
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Re: Downsizing in 8 years. Buy now?

Post by soccerrules » Wed May 16, 2018 4:54 pm

there are different views regarding being a landlord and buying a home. here are my views

1) Buy a Home to live in because you want to own a home.
2) If you are buying to then become a landlord now or someday -- understand what you are getting into (Not for me)
3) You can reap the benefit of a rising RE market buy owning REIT's. If you want to invest in RE, without owning the home, being the landlord or paying someone to manage your rental property.

I don't see an issue with buying something you want to live in for 8 years and then downsize. I would not buy a larger property than you need, hold it for 8 years and then downsize. (you are over buying) If you think you will stay in the same spot long term (past 8 years), buy the house you will need now. If you are going to relocate buy an appropriate sized house now and then relo and rent first to really get to know the area, then buy an appropriate sized house if you want. (unless the relo is to an area you have lived before)
Don't let your outflow exceed your income or your upkeep will be your downfall.

a_teacher
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Re: Downsizing in 8 years. Buy now?

Post by a_teacher » Wed May 16, 2018 5:25 pm

soccerrules wrote:
Wed May 16, 2018 4:54 pm
there are different views regarding being a landlord and buying a home. here are my views

1) Buy a Home to live in because you want to own a home.
2) If you are buying to then become a landlord now or someday -- understand what you are getting into (Not for me)
3) You can reap the benefit of a rising RE market buy owning REIT's. If you want to invest in RE, without owning the home, being the landlord or paying someone to manage your rental property.

I don't see an issue with buying something you want to live in for 8 years and then downsize. I would not buy a larger property than you need, hold it for 8 years and then downsize. (you are over buying) If you think you will stay in the same spot long term (past 8 years), buy the house you will need now. If you are going to relocate buy an appropriate sized house now and then relo and rent first to really get to know the area, then buy an appropriate sized house if you want. (unless the relo is to an area you have lived before)
It would be the same town we currently live in. Just a smaller home. Good points, thanks!

a_teacher
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Re: Downsizing in 8 years. Buy now?

Post by a_teacher » Wed May 16, 2018 5:25 pm

delamer wrote:
Wed May 16, 2018 4:41 pm
So you want to buy a house now that you would rent out for the next 8 years? And then you’d move into it when you retired?

It isn’t just a question if what will happen to the housing market in 8 years, but what will happen in your life.

If one of you was run over by a bus the day after you bought the rental, would the other be happy being a landlord?
Good point. I will avoid being run over by a bus :)

a_teacher
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Re: Downsizing in 8 years. Buy now?

Post by a_teacher » Wed May 16, 2018 5:26 pm

delamer wrote:
Wed May 16, 2018 4:41 pm
So you want to buy a house now that you would rent out for the next 8 years? And then you’d move into it when you retired?

It isn’t just a question if what will happen to the housing market in 8 years, but what will happen in your life.

If one of you was run over by a bus the day after you bought the rental, would the other be happy being a landlord?
Good point. I will avoid being run over by a bus :)

runner540
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Re: Downsizing in 8 years. Buy now?

Post by runner540 » Wed May 16, 2018 5:31 pm

If this second house will be only a small part of your total portfolio, maybe do it.

If you couldn't rent it, how long could you cover the payment?

Those two reasons (rising interest rates and rising home prices) don't seem good enough to me. Besides, in 8 years you'll have a lot more equity in your current house and may not even need a mortgage when you downsize...

I'm a renter and happy to see more amateur landlords come into the market and keep rents down :)

JoeRetire
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Re: Downsizing in 8 years. Buy now?

Post by JoeRetire » Wed May 16, 2018 5:34 pm

a_teacher wrote:
Wed May 16, 2018 3:21 pm
With interest rates going up and the price of housing going up (doubling every 10 years in my area), would it be smart to buy now, in a hot rental environment? I don't think we will need a 3,500 sq ft home for 2. Or, would this be the equivalent of trying to time the market? I'm certain we'd be able to pay the monthly mortgage with rental income.
It is indeed trying to time both the housing market and the rental market.

Do you want to have a second job (landlord) for the next 8 years, and then hope for the best?

SQRT
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Re: Downsizing in 8 years. Buy now?

Post by SQRT » Thu May 17, 2018 5:49 am

Seems like too long a period to me. Too much can change.

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goingup
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Re: Downsizing in 8 years. Buy now?

Post by goingup » Thu May 17, 2018 8:44 am

a_teacher wrote:
Wed May 16, 2018 3:21 pm
With interest rates going up and the price of housing going up (doubling every 10 years in my area), ...
Housing goes through periodic slumps. It may seem like a straight trajectory up, but it's not. We've owned 3 homes in 30 years in 3 different areas of the country. There were really soft housing prices in the mid-90s, 2000's and where we are now in Seattle area, 2008-2011 was a slow soft market.

The real estate market changes and I wouldn't buy 8 years in advance of when you need it.

mak1277
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Re: Downsizing in 8 years. Buy now?

Post by mak1277 » Thu May 17, 2018 8:50 am

goingup wrote:
Thu May 17, 2018 8:44 am
a_teacher wrote:
Wed May 16, 2018 3:21 pm
With interest rates going up and the price of housing going up (doubling every 10 years in my area), ...
Housing goes through periodic slumps. It may seem like a straight trajectory up, but it's not. We've owned 3 homes in 30 years in 3 different areas of the country. There were really soft housing prices in the mid-90s, 2000's and where we are now in Seattle area, 2008-2011 was a slow soft market.

The real estate market changes and I wouldn't buy 8 years in advance of when you need it.
This...if I was a betting man, I'd be happy to say that we will see a depressed housing market sometime in the next 8 years.

radiowave
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Re: Downsizing in 8 years. Buy now?

Post by radiowave » Thu May 17, 2018 8:58 am

a_teacher wrote:
Wed May 16, 2018 5:26 pm
delamer wrote:
Wed May 16, 2018 4:41 pm
So you want to buy a house now that you would rent out for the next 8 years? And then you’d move into it when you retired?

It isn’t just a question if what will happen to the housing market in 8 years, but what will happen in your life.

If one of you was run over by a bus the day after you bought the rental, would the other be happy being a landlord?
Good point. I will avoid being run over by a bus :)
a_teacher post, thanks for the good laugh, you made my day :)
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

radiowave
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Re: Downsizing in 8 years. Buy now?

Post by radiowave » Thu May 17, 2018 8:59 am

radiowave wrote:
Thu May 17, 2018 8:58 am
a_teacher wrote:
Wed May 16, 2018 5:26 pm
delamer wrote:
Wed May 16, 2018 4:41 pm
So you want to buy a house now that you would rent out for the next 8 years? And then you’d move into it when you retired?

It isn’t just a question if what will happen to the housing market in 8 years, but what will happen in your life.

If one of you was run over by a bus the day after you bought the rental, would the other be happy being a landlord?
Good point. I will avoid being run over by a bus :)

a_teacher, thanks for the good laugh, you made my day :)
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

Chris K Jones
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Re: Downsizing in 8 years. Buy now?

Post by Chris K Jones » Thu May 17, 2018 9:40 am

I wouldn't unless you really want to be a landlord. Eight years is a long time for life to happen to you. Best wishes.

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randomizer
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Re: Downsizing in 8 years. Buy now?

Post by randomizer » Thu May 17, 2018 9:50 am

I wouldn’t do it. If the market is crazy when you want to downsize, rent.
75:25 — HODL the course!

Dottie57
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Re: Downsizing in 8 years. Buy now?

Post by Dottie57 » Thu May 17, 2018 10:54 am

Don't buy 8 yrs before you need it. 8 yrs can be a long time.

bloom2708
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Re: Downsizing in 8 years. Buy now?

Post by bloom2708 » Thu May 17, 2018 3:02 pm

Don't just do something. Stand there. Revisit in 7 years.

1 year out, form a plan based on current information. Much can change in 7 years.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

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