buy a house or rent?

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therealityhits
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Joined: Tue Jun 17, 2014 7:30 pm

buy a house or rent?

Post by therealityhits » Sat Nov 10, 2018 2:52 pm

I have been informed by my spouse that we are moving next year to be closer to the grandchildren. We are in our late 60s and early 70s. We are both retired and very well off. Net worth in the high seven figures.

We are moving from a very high cost of living location to a medium cost of living location. Housing cost will be 50% of our current home.

Right now we are debating between renting and buying. If we rent it will be in a luxury apartment building with 24 hour security, staff to help out if needed etc. This is what we like and currently have. Rent will be between $3,000-$3,500 a month: $36,000 to $42,500 a year.

Conversely we could buy a luxury condominium for about $750-$800K. Since we are cash buyers, we estimate our cost to buy will be about .5%. This includes our portion of the title insurance, capital contribution to the condo’s reserve fund, etc. Our taxes should be about .3% a year HOA fees about .6%. I consider insurance cost to be a semi-draw.

Now if we did not buy the condo, the money would be invested in a Vanguard mutual fund like Wellington or something similar. We would pay about 20% income tax on the actual income. I am not considering and possible increase in the fund’s value any more than an increase in the condo’s value.

So what would you do: buy or rent and why?

Thanks for any help.

Ben Mathew
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Re: buy a house or rent?

Post by Ben Mathew » Sat Nov 10, 2018 3:59 pm

I posted my thoughts about the financial advantages of buying over renting in this thread.

But in your case, housing costs, whether renting or buying, will be such a small component of your overall net worth that it won't move the needle much either way. Just go with what you prefer.

Olemiss540
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Re: buy a house or rent?

Post by Olemiss540 » Sat Nov 10, 2018 4:33 pm

I would rent, just for the sake of simplicity and convenience. If you have a noisy neighbor or decide to relocate later (or have health issues), it just seems easier. It obviously matters little in the grand scheme which way you go though, not really a numbers game considering you have the financial means to do whichever.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Watty
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Re: buy a house or rent?

Post by Watty » Sat Nov 10, 2018 4:58 pm

Rent for a year and then decide if you want to buy or not.

That will give you time decide if you want to really live in that city and to learn more about the local housing market.

SoAnyway
Posts: 196
Joined: Tue Jul 31, 2018 11:49 pm

Re: buy a house or rent?

Post by SoAnyway » Sat Nov 10, 2018 8:38 pm

therealityhits wrote:
Sat Nov 10, 2018 2:52 pm
I have been informed by my spouse that we are moving next year to be closer to the grandchildren. We are in our late 60s and early 70s. We are both retired and very well off. Net worth in the high seven figures.

We are moving from a very high cost of living location to a medium cost of living location. Housing cost will be 50% of our current home.

Right now we are debating between renting and buying. If we rent it will be in a luxury apartment building with 24 hour security, staff to help out if needed etc. This is what we like and currently have.....

So what would you do: buy or rent and why?

Thanks for any help.
You're overthinking, OP. This one's a no-brainer. Rent in the luxury apartment bldg.

At your ages and NW, if that's your current living situation and you like it, that's what you should do. Not EVERYTHING has to (or should) be strictly based on the dollars, esp. in your position. I appreciate and respect that the type of analysis that I've deleted from your quoted post above is likely how you achieved the FI-level that you have. Yay you! That said, it's important to know when it's time to "turn it off" and focus on other no-less-important considerations.

You didn't say how far a move this is, either by distance or by "geographical culture" between the two areas. There will be plenty enough adjustments for the two of you in any move - the bigger the "gap" (literally and figuratively), the more there will be. Staying with the type of living situation that's as close to what you are familiar with and that suits your and your spouse's lifestyle/needs/preferences takes at least one adjustment (or part of it) off the list. For example, if you and your spouse are currently living in the Trump Tower in NYC, and are looking at luxury apartments/high-end condos in suburban Chicago/Atlanta/Seattle, you'll be living in a nice place in your new locale but there will still definitely be some adjustments from your Fifth Avenue life.

Renting (at least initially) has other advantages: As others have said, you can get to know the area and local real estate market. You can establish your social circle (other than the family, of course), and figure out how to be in proximity. If you decide you hate living there, it's easy to pick up and leave. If you decide you love it, you'll have more info about where exactly you'd want to buy.

Another consideration: You didn't say whether the parents of your grandchildren are committed to the area, are stable in their situations, etc. FWIW, I had a number of friends whose parents and/or in-laws moved closer to them in the early to mid-'00s in order to be closer to their grandchildren. When the financial crisis hit, some of these friends lost their jobs, and for some, their jobs went from being rewarding and enjoyable to completely intolerable (e.g. 3x the work at lower pay due to corporate cuts, being threatened with job loss if they didn't do things they considered unethical, etc.). Either way, they had to do the right thing for themselves and their kids, and ended up relocating OUT of the area that their parents/in-laws had recently moved to in order to be near them. In some cases, the parents/in-laws made the move with them; in other cases they didn't because they had established their social circle, liked the area, had health issues and/or just didn't have the energy to make another move.
Last edited by SoAnyway on Sat Nov 10, 2018 9:26 pm, edited 2 times in total.

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leeks
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Location: new york

Re: buy a house or rent?

Post by leeks » Sat Nov 10, 2018 8:51 pm

Rent at least for the first year. You could always buy a condo later if you change your mind.

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