Hi all,
At some point I will definitely read this entire thread from start to finish -- but the parts I've read so far are great -- so I thought I'd go ahead and post my situation now and see if I get any feedback...
Basic information:
Location: Northern Virginia (DC suburbs) -- moving away from this area is not an option
Income: ~$93,000/year (my income -- wife is stay-at-home mom)
Current residence: Townhouse that was purchased 15 years ago before kids and is too small for us
Credit: Very Good (my score is ~725... Wife's score is ~750)
Liquid cash/savings: Virtually none -- I have a lot in 401K plan for retirement, but don't want to touch it
Debt: Virtually none -- financing one car, but the other is paid off -- $0 credit card balances monthly
My family and I will be moving sometime next year (probably April - August). We will walk away from closing with ~$160,000..
We can afford to pay up to $2,000/ month and be okay -- anything in the 2500 range and we would be stretching it, but could make it... Closer to 3000 and we'd be cooked..
Here's the deal -- in 15 years I will be retiring and will be set financially -- my retirement at my job will pay me close to 40k/year plus I am projecting ~1.1 million in my 401K which will give me some options..
At this point -- I am
just trying to get to retirement. I want my family to be able to live in the nicest house possible (sick of the small townhouse with virtually no yard) and don't care how much equity I have in 15 years because with the money I will have then, I will have plenty of options on the table (the kids will all be moved out by then)..
I know my wife, and looking at the houses in this area -- she will not be happy with anything less than $600k -- 650-700k would be even nicer --- but anything in the 500s and she is not going to be thrilled -- we almost might as well stay in the cramped townhouse that we currently own...
So, I am looking at all kinds of interest-only loans and 5-year ARMS to see what gets me the most house for the smallest payment, and the best I see for a 600,000 house (with 135,000 down) is ~1,400 payment for the 1st 4 or 5 years and then it jumps to 3,000+
So, we basically can't afford the monthly payment on the cheapest house we want to live in, but we have some money up front and we have great credit.
Sure we could find something closer to 500k and struggle to make a 22 or 23 hundred dollar a month mortgage, but then I thought about renting...
I've found some really nice homes (looks like they would sell for 700-750K) in the area that rent for ~2,500.. With this, we would only need to put <10k down instead of most or all of the 165K that we will get at closing next year and we can put the remaining in CDs or whatever to help us with the payments over the next 15 years.. I think I can get ~1,000/month for 15 years out of the 135K that I am not putting down on a house to make the actual rent payment ~1,500 (very nice
)
Some obvious downfalls to this idea are:
160K we get at closing does not get rolled into a new home purchase, so we get to pay Cap Gains Taxes on it (right?)
May be forced to move at some point if the owner wants their house back.. We'd have to do some upfront research on this -- find several we are interested in and contact the owners to get an idea of why they are renting and if they think they might be interested in renting very long term
No interest deduction at tax time (I don't think this is as big a deal as many make it out to be in the big picture for our situation)The pros are:
Much more affordable monthly payments
Able to live in a much nicer house than otherwise would be able to affordOne thing that can be a pro or a con depending on how you look at it is the fact that with renting there is less flexibility with what you can do with the house.. If I want to paint the living room purple, I can't do it -- I have to check with the owner first. But the plus side is that if I did want to do something with the house (put granite counters in the kitchen let's say) -- while I would have to coordinate with the owner on the selection of the counter tops -- he/she would likely go in on the cost with me at least part way since it is an improvement to his house...
So, I guess what I'm asking first and foremost is: Is there anything major that I'm missing? Is my idea just not going to work for any reason?
If my idea seems feasible, then I would think that we would be "ideal renters" -- Very good credit -- likely to take care of the home -- etc...
Is it unrealistic to think that anyone would be willing to rent a house for 15 years (or even 10)? Do landlords typically only keep rental properties for a shorter period of time before trying to sell or move back in themselves?
TIA for any comments/suggestions/ideas...
And sorry for such a long post...