Potential Move from Renting to Buying a Residence based on finances

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Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

Problem Statement: New Retiree. Potential move from being a renter to owning my own home in order to hopefully maintain better cost control over the housing category of my budget. Seeking feedback, based on financial picture below, as to the max amount I should spend on a home purchase in order to maintain a similar lifestyle, not increase my chances of running out of money in approx 25 years (obviously an estimate). Now paying $1600 in rent, but increases expected in the future.
Concerned about buying a home before corporations outbid me for anything I can possibly compete with them for.

Emergency Funds - yes
Debt: none
Tax Filing Status: Single

Tax Rate: Federal 2021: 22% Federal 2022: 12%
State (Florida)

State of Residence: Florida, but potentially moving to New York State (Not NYC)

Age: 62 - not yet drawing Social Security

Asset allocation: Currently 35% stocks / 65% bonds

Total Portfolio Value: $2.25M +/- (no real estate)

Current retirement assets

Taxable

$450K

401K (TSP)

$1M

ROTH AT SCHWAB

$220K

ROLLOVER IRA AT FIDELITY

$200K

HSA AT FIDELITY

$55K

Miscellaneous: cash and I Bonds

$230K

Expenses: $65K/annual

Pension Income: $13K/annual inclusive of health insurance (federal retiree)

Social Security:

At 62: $2,333
At 67: $3,347
At 70: $4,156
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AnnetteLouisan
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Location: New York, NY

Re: Potential Move from Renting to Buying a Residence based on finances

Post by AnnetteLouisan »

With your assets and income you can easily afford to keep renting and not worry you won’t be able to afford rent increases. Just my 2c. Less hassle than buying as a retiree unless you really want to, especially since you may move to another state at some point- what if it becomes hard to offload your place or values decline?

I bought for similar reasons approaching retirement (perceived security) and it’s been a hassle that I regret.
Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

I bought for similar reasons approaching retirement (perceived security) and it’s been a hassle that I regret.

If not too burdensome to share the details, would appreciate the highlights : repairs? maintenance? undisclosed problems?
adamthesmythe
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Joined: Mon Sep 22, 2014 4:47 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by adamthesmythe »

MandyLuna wrote: Sun Sep 18, 2022 8:21 am Concerned about buying a home before corporations outbid me for anything I can possibly compete with them for.
I think this is NOT a good reason to move on a purchase right now. I do not have the sense that "corporate" purchases are ramping up right now.

It MAY be a good opportunity as it is harder to purchase with a mortgage right now, property is moving more slowly allowing time for a more deliberate purchase, etc.This favors cash buyers.

I downsized to a townhouse-like association in part because of the stable costs of housing. No, I don't regret it at all.
THY4373
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Joined: Thu Mar 22, 2012 3:17 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by THY4373 »

I am in a similar position to you though 10 years younger (hoping to retire in 2-3 years) and my pension even at my age is higher than yours otherwise our situations are very similar. I currently rent (and my rent is below market). I am thinking about buying because I'd like to have some control over when I have to move and honestly after renting for years the attraction having my own place I can customize is growing on me though I know financially it is probably not as good as continuing to ride out my below market rent as long as possible. I cannot offer you any sage advice other than I'd echo the comment above that I wouldn't let FOMO drive your decision to buy. I suggest you start monitoring your local market and see how things are playing out. In my area prices have stopped increasing (back in June) and I'd say are likely down 5%-ish on average. I see nothing in my local market (yours might be different) that indicates I am at risk of being priced out of the market. So I am taking a wait and see approach. That said I know exactly what I am looking for at this point so if the right place comes up and the price isn't too out of line I'll purchase but I am also happy to take another 18 months to buy a place too.
Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

I recognize that my concerns derive from multiple news sources reporting this over the past year - that institutional investors are taking larger stakes in single family home properties - not sure if those concerns are overblown and perhaps a reaction to these stories... as if Joe Average (me) doesn't have enough to be concerned with already based on the recent financial news.

It's always good to hear positive news stories related to a home purchase. Wishing you the best.
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AnnetteLouisan
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Location: New York, NY

Re: Potential Move from Renting to Buying a Residence based on finances

Post by AnnetteLouisan »

MandyLuna wrote: Sun Sep 18, 2022 11:07 am I bought for similar reasons approaching retirement (perceived security) and it’s been a hassle that I regret.

If not too burdensome to share the details, would appreciate the highlights : repairs? maintenance? undisclosed problems?
I can DM you if you want more details but to summarize: although your net housing cost can decrease by buying vs renting, buying a home (or selling, which I will also have to do at some point ugh) in itself isn’t an easy, inexpensive or hassle free process. You have to hire a lawyer, do a title search, negotiate the contract, review the board minutes if it’s a co-op, find out about the HOA if any, get an inspection done, etc. There can be delays. You have to write the down payment check and hope they don’t get a better offer later and drag out the closing on a pretext, trying to get you to back out so they can keep your down payment.

Once you finally close and pay the purchase price, move in fee, and various other fees, then repairs, decorating, homeowners insurance, TAXES (quite complex), state and local tax abatements and credits that need to be applied for, record keeping, then the HOA comes to get their fees and suddenly everyone knows you have $ to buy a place, so you get ads from all kinds of homeowner stuff.

Because the record of your purchase and the purchase price are now public on the internet.

Then a pipe goes. You repair it after choosing a plumber. Now you need a paint job. Now you have a mouse or two because in the pandemic all the restaurants closed and people stayed home cooking and the mice aren’t stupid. So now you need an exterminator and someone to find and repair the holes. So you need price quotes. Which of the fine upstanding exterminators and mouse hole renovation people will you choose?

Plus your money is tied up in your home, or you are dealing with a mortgage company and paying a ton of interest, all of which could be in the market instead. If you get sick and need long term care, who will tend to and sell your home? How long will it take?

I can’t wait to rent again. You pay rent. You live. If there’s anything just tell the landlord. And if you don’t like it leave. Easy peasy. Yes, you pay more to rent, but you also kn most cases get more if it’s a decent building: time, freedom and flexibility.
chassis
Posts: 1006
Joined: Tue Mar 24, 2020 4:28 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by chassis »

MandyLuna wrote: Sun Sep 18, 2022 8:21 am Problem Statement: New Retiree. Potential move from being a renter to owning my own home in order to hopefully maintain better cost control over the housing category of my budget. Seeking feedback, based on financial picture below, as to the max amount I should spend on a home purchase in order to maintain a similar lifestyle, not increase my chances of running out of money in approx 25 years (obviously an estimate). Now paying $1600 in rent, but increases expected in the future.
Concerned about buying a home before corporations outbid me for anything I can possibly compete with them for.

Emergency Funds - yes
Debt: none
Tax Filing Status: Single

Tax Rate: Federal 2021: 22% Federal 2022: 12%
State (Florida)

State of Residence: Florida, but potentially moving to New York State (Not NYC)

Age: 62 - not yet drawing Social Security

Asset allocation: Currently 35% stocks / 65% bonds

Total Portfolio Value: $2.25M +/- (no real estate)

Current retirement assets

Taxable

$450K

401K (TSP)

$1M

ROTH AT SCHWAB

$220K

ROLLOVER IRA AT FIDELITY

$200K

HSA AT FIDELITY

$55K

Miscellaneous: cash and I Bonds

$230K

Expenses: $65K/annual

Pension Income: $13K/annual inclusive of health insurance (federal retiree)

Social Security:

At 62: $2,333
At 67: $3,347
At 70: $4,156


Agree that with your assets, pension, Social Security and expenses you don’t need to take action on this immediately, or ever.

Renting takes your capital out of the market. It may cost you in terms of mortgage interest, if any. Renovations, maintenance and property tax need to be addressed.

What is the value of your time? As a homeowner you will be responsible for more upkeep than you would be as a renter.
Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »


Renting takes your capital out of the market.


Do I understand this correctly?

My thinking is that buying a home takes capital from my portfolio (and the market) while rent payments, I simply pay from my income sources.
Misenplace
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Re: Potential Move from Renting to Buying a Residence based on finances

Post by Misenplace »

This thread is now in the Personal Finance forum.
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Billy C
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Joined: Sat Apr 02, 2022 4:05 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by Billy C »

AnnetteLouisan wrote: Sun Sep 18, 2022 12:38 pm
MandyLuna wrote: Sun Sep 18, 2022 11:07 am I bought for similar reasons approaching retirement (perceived security) and it’s been a hassle that I regret.

If not too burdensome to share the details, would appreciate the highlights : repairs? maintenance? undisclosed problems?
I can DM you if you want more details but to summarize: although your net housing cost can decrease by buying vs renting, buying a home (or selling, which I will also have to do at some point ugh) in itself isn’t an easy, inexpensive or hassle free process. You have to hire a lawyer, do a title search, negotiate the contract, review the board minutes if it’s a co-op, find out about the HOA if any, get an inspection done, etc. There can be delays. You have to write the down payment check and hope they don’t get a better offer later and drag out the closing on a pretext, trying to get you to back out so they can keep your down payment.

Once you finally close and pay the purchase price, move in fee, and various other fees, then repairs, decorating, homeowners insurance, TAXES (quite complex), state and local tax abatements and credits that need to be applied for, record keeping, then the HOA comes to get their fees and suddenly everyone knows you have $ to buy a place, so you get ads from all kinds of homeowner stuff.

Because the record of your purchase and the purchase price are now public on the internet.

Then a pipe goes. You repair it after choosing a plumber. Now you need a paint job. Now you have a mouse or two because in the pandemic all the restaurants closed and people stayed home cooking and the mice aren’t stupid. So now you need an exterminator and someone to find and repair the holes. So you need price quotes. Which of the fine upstanding exterminators and mouse hole renovation people will you choose?

Plus your money is tied up in your home, or you are dealing with a mortgage company and paying a ton of interest, all of which could be in the market instead. If you get sick and need long term care, who will tend to and sell your home? How long will it take?

I can’t wait to rent again. You pay rent. You live. If there’s anything just tell the landlord. And if you don’t like it leave. Easy peasy. Yes, you pay more to rent, but you also kn most cases get more if it’s a decent building: time, freedom and flexibility.
+100

Fantastic post. The best I’ve read during my time on Bogleheads.
“When there are multiple solutions to a problem, choose the simplest one.” ― John C. Bogle
Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

I can’t wait to rent again. You pay rent. You live. If there’s anything just tell the landlord. And if you don’t like it leave. Easy peasy. Yes, you pay more to rent, but you also kn most cases get more if it’s a decent building: time, freedom and flexibility.

I appreciate the time you spent pointing out the pitfalls and downsides. I am breaking out in hives just reading it....
I wish you better days ahead with renting.
Zeno
Posts: 905
Joined: Wed Sep 12, 2018 10:44 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by Zeno »

OP:

You can comfortably afford a $500K house, likely even more. You are in great shape financially.
Last edited by Zeno on Mon Sep 19, 2022 5:23 pm, edited 1 time in total.
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AnnetteLouisan
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Location: New York, NY

Re: Potential Move from Renting to Buying a Residence based on finances

Post by AnnetteLouisan »

MandyLuna wrote: Sun Sep 18, 2022 3:16 pm I can’t wait to rent again. You pay rent. You live. If there’s anything just tell the landlord. And if you don’t like it leave. Easy peasy. Yes, you pay more to rent, but you also kn most cases get more if it’s a decent building: time, freedom and flexibility.

I appreciate the time you spent pointing out the pitfalls and downsides. I am breaking out in hives just reading it....
I wish you better days ahead with renting.
Thanks. I think I just got lucky.

It doesn’t have to go that way. Good luck whatever you decide!
randybobandy
Posts: 226
Joined: Fri Oct 05, 2018 10:51 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by randybobandy »

Why did you bold so much?

-RbB
Grammar and spelling matter. | Quoting the OP isn't a necessity.
Topic Author
MandyLuna
Posts: 96
Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

I don't know, no reason, must have had too many cups of coffee at that moment.
SmallSaver
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Joined: Mon Mar 26, 2012 11:34 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by SmallSaver »

Predictions about the future are hard, but the data seem pretty clear that the buying frenzy is off, sellers do not seem to have adjusted to the reality of current mortgage rates, and inventory is still at 40-year lows. It remains to be seen what the equilibrium will be, but from a purely financial perspective I don't see the rush to buy now and, in fact, think that this particular moment is the one you're most likely to end up underwater in.

Of course, there are non-financial reasons to buy a home, and you're in a position with a lot of options. If you want to buy for those reasons, go for it.
chassis
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Joined: Tue Mar 24, 2020 4:28 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by chassis »

MandyLuna wrote: Sun Sep 18, 2022 1:44 pm
Renting takes your capital out of the market.


Do I understand this correctly?

My thinking is that buying a home takes capital from my portfolio (and the market) while rent payments, I simply pay from my income sources.
You are correct, my mistake. Typing too fast.

Buying a home takes your capital out of the market, and requires time, money and effort for upkeep.
THY4373
Posts: 1976
Joined: Thu Mar 22, 2012 3:17 pm

Re: Potential Move from Renting to Buying a Residence based on finances

Post by THY4373 »

Billy C wrote: Sun Sep 18, 2022 2:07 pm
AnnetteLouisan wrote: Sun Sep 18, 2022 12:38 pm
MandyLuna wrote: Sun Sep 18, 2022 11:07 am I bought for similar reasons approaching retirement (perceived security) and it’s been a hassle that I regret.

If not too burdensome to share the details, would appreciate the highlights : repairs? maintenance? undisclosed problems?
I can DM you if you want more details but to summarize: although your net housing cost can decrease by buying vs renting, buying a home (or selling, which I will also have to do at some point ugh) in itself isn’t an easy, inexpensive or hassle free process. You have to hire a lawyer, do a title search, negotiate the contract, review the board minutes if it’s a co-op, find out about the HOA if any, get an inspection done, etc. There can be delays. You have to write the down payment check and hope they don’t get a better offer later and drag out the closing on a pretext, trying to get you to back out so they can keep your down payment.

Once you finally close and pay the purchase price, move in fee, and various other fees, then repairs, decorating, homeowners insurance, TAXES (quite complex), state and local tax abatements and credits that need to be applied for, record keeping, then the HOA comes to get their fees and suddenly everyone knows you have $ to buy a place, so you get ads from all kinds of homeowner stuff.

Because the record of your purchase and the purchase price are now public on the internet.

Then a pipe goes. You repair it after choosing a plumber. Now you need a paint job. Now you have a mouse or two because in the pandemic all the restaurants closed and people stayed home cooking and the mice aren’t stupid. So now you need an exterminator and someone to find and repair the holes. So you need price quotes. Which of the fine upstanding exterminators and mouse hole renovation people will you choose?

Plus your money is tied up in your home, or you are dealing with a mortgage company and paying a ton of interest, all of which could be in the market instead. If you get sick and need long term care, who will tend to and sell your home? How long will it take?

I can’t wait to rent again. You pay rent. You live. If there’s anything just tell the landlord. And if you don’t like it leave. Easy peasy. Yes, you pay more to rent, but you also kn most cases get more if it’s a decent building: time, freedom and flexibility.
+100

Fantastic post. The best I’ve read during my time on Bogleheads.
I agree and it sums up the thoughts I was having earlier this week when I looked at a really nice house I was considering buying. I currently rent and since I'll rent less than I buy and my rent is below market even a decently priced place I am looking at would cost me 40%+ more a month. Anyway the place I was looking at was in decent shape but clearly had been occupied since new (1996) by somebody who had either passed away or had to move for care. And while it was well cared for nothing serious had been done to the place. So I had a similar "playlist" in my head as AnnetteLouisan. I was like well it needs two new HVAC systems, roof is original and will need replacement soon, kitchen was original with all original appliances and updated by painting the former wood cabinets (I am not a fan of this as it doesn't wear/age well), it has a crawlspace and my last one in this area had mold issues so I'll probably want to seal it up, it will need window treatments, I'll need more furniture, etc.... And I was like why the heck am I going to do that to myself now ? It sold quickly and before I was ready to make any decision (I still have a 9 months on lease so not great timing) and I wasn't really disappointed. There are aspects I miss of home ownership but there truly is a freedom that comes with renting.
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AnnetteLouisan
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Re: Potential Move from Renting to Buying a Residence based on finances

Post by AnnetteLouisan »

It might be appropriate to mention the classic film here, Mr. Blandings Builds His Dream House (1948). Starring a young Cary Grant I think. He actually buys the house but it turns out it needs a lot of work. Entertaining and true to life, except for the home price of course.

PS: buying can be a good thing. It really depends on the house, the market, the price and other conditions and your personal situation. When I bought, my monthly housing cost dropped by about $2k, giving me the biggest positive discrepancy between my salary and expenses that I’ve ever had in my life. Plus of course the value went up in just a few years. Also rents in my area went up faster than even I anticipated, so had I not bought I’d be priced out by now most likely. My point is just that it’s an illiquid asset that takes some management. It’s possible that in ten years I can sell it for twice what I paid, but overall I wish I had just rented elsewhere and saved myself the hassle.
Topic Author
MandyLuna
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Joined: Sat Oct 02, 2021 7:37 am

Re: Potential Move from Renting to Buying a Residence based on finances

Post by MandyLuna »

As a former urban dweller of 3 decades and now retired, it was sort of a half fantasy to actually have some space, a lawn, ability to have a small grill and some privacy...but I realize it comes at a price and not all of that is financial.

A townhome or condo seems something of a compromise between single family home maintenance and renting.

Runaway rent increases are a concern, I guess it remains to be seen whether that concern is overblown.
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