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Buying a house cash or renting without steady income.

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Money Talk > Real Estate

Should I buy cash, finance, or rent?
Buy a house cash and have zero mortgage
33%
 33%  [ 1 ]
Buy a house by financing after finding a lender to give a mortgage to someone without steady income
33%
 33%  [ 1 ]
Keep renting and hope to find a job before the rental house gets sold
33%
 33%  [ 1 ]
Total Votes : 3

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Yackadus
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Buying a house cash or renting without steady income.  Reply with quote  

Should I buy a house or keep renting?

I recently sold my house and made 100k profit. I quit my job and moved out of state to be happier in a more suitable area for my tastes. I am renting a house for $800/month from a friend of a friend, who plans to sell in the next couple of months. I have not found steady employment yet but I have a college education and 10 years of professional work experience. I do presently have some work and money coming in by doing independent contracting but for little and unpredictable pay. I have been shopping to buy a house cash for no more than $85k, however all my friends and family say I'm making a mistake by doing so. They all say I should keep renting until I find a job.

What advice does anyone have in regards to this? Am I overlooking something important?

Thanks for any feedback.
Post Mon Nov 10, 2014 1:45 am
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Publius
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I suggest continuing to rent until you find something steady. Tying up all your cash in an illiquid asset when you aren't enployed is risky. What if you get offered a dream job 500 miles away? Selling quickly could cost you thousands.
Post Mon Nov 10, 2014 3:33 am
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oldguy
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quote:
Am I overlooking something important?


Well, most people send out resumes and get a new job in the new state BEFORE they quit their old job - lol.
That aside - available cash is way more important to you now than a house. A house would tie you down if you need to move to a different part of town to be near work. Plus a extended job search could burn thru your savings - so keep the liquid cash & rent. And if you have to move to another rental, AVOID a friend of a friend and rent an apartment from a stranger. [/i]
Post Mon Nov 10, 2014 3:39 am
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Wino
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Never buy unless you are certain you want to stay in that area. The only eception is vacation properties near family.
Post Mon Nov 10, 2014 5:34 am
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Yackadus
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Thank you so far for everyone's input.

I am very certain that I want to stay right where I moved. I know most people fill out resumes before moving to a new area (which I did), but my house sold first. I walked away with 100k profit. I still have my savings that I have been building while paying my last mortgage. As far as a dream job... I won't be applying for anything in a location I don't want to be, I am quite happy with my decision to move in the city I am in. In fact, right before I left my last job, I was offered a 40k raise to do the same job I left. Money does not interest me. Happiness is what interests me and money is a means to survival.

If I am buying a house cash for 85k or less, I will still have a remaining of 15k just from the profit of my last home on top of my savings. My concern is renting a place, you usually have to sign a one year lease. This will blow through 12k that I will never see a return on.

Anyway, the point is... I will find a job right in this city. Is there some other reason to not buy a house cash? Please put aside your own personal fears of getting a dream job somewhere else or not finding work. Jobs are easy to come by if you are not lazy.

Another thought of mine was that if I buy a house cash and I really needed some liquid money, could I not get an equity line of credit or loan against the home I purchase?
Post Mon Nov 10, 2014 1:24 pm
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Yackadus
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Also, I should mention that I do not have a family or pets or anyone to take care of but myself. I am 37 years old and there are no foreseeable children coming in my future.
Post Mon Nov 10, 2014 1:29 pm
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Publius
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The HELOC isn't a bad idea, but keep in mind that qualifying for a line of credit will be dependent on your income. Even with equity in the house, it is unlikely that you will qualify for the loan unless you either have the income to pay it back or significant assets in the bank. Even if you do qualify without first securing a job, the terms of the line of credit will not be nearly as good as if you had a paycheck coming in.

If it were me, I would find a job first. This conversation is moot if jobs are easy to come by there and you land one before your current situation is interrupted by the sale of the house. Even if your friend sells the house, you likely have a couple of months before it can close. I would be looking today, and if you want to hedge for more time, there are apartments that will lease for shorter terms than 12 months, albeit with a higher monthly rent, usually.
Post Mon Nov 10, 2014 1:47 pm
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Yackadus
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Again, thanks for the input.

I have income coming in by being an independent contractor. I am being extremely picky with the jobs I am applying for, as I want to enjoy myself, not get rich. Of course if I could do both, that would be great! I have zero debt and my credit scores are all around 830. I have a couple of retirement accounts that built up small amounts since 1999 (I have always invested conservatively).

I am curious, what would be the consequences of buying the house cash? I would still have liquid funds after the purchase and I have income coming in, just not a career job or 100% steady income.

I realize I would not get a tax benefit for interest paid, but that doesn't exactly make you money.

I realize there is a commitment once purchasing and it's harder to move when you want to (I want to stay in this area). I have purchased 3 homes since 2001, so it's not new to me. The only thing that is new is buying it for cash. I'm trying to find out if there is a reason not to, aside from tying up 85k in liquid funds.

So, the conclusion is that if I am willing to risk tying up my liquid funds and I don't plan to move out of the area, I should go for it?
Post Mon Nov 10, 2014 2:55 pm
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oldguy
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[/quote]I am curious, what would be the consequences of buying the house cash? I would still have liquid funds after the purchase and I have income coming in, just not a career job or 100% steady income.
I am being extremely picky with the jobs I am applying for, as I want to enjoy myself, not get rich.
quote:


IMO, 'contentment' is better than struggling to get rich - and it trumps" enjoying yourself" and "seeking happiness".
If you stick most of your cash into home equity, it will give you a return of maybe 5%/yr, ie, not much. And it really will be illiquid - if you got into a pinch, no lender is going to lend to you, not a mortgage, and probably not a HELOC. If you want the contentment of having liquid money, you must keep liquid money. I would invest it in the SP500 Index at 11%/yr, let it grow tax-deferred, and use some whenever you want to.

(Disclosure: I'm wealthy, but I always keep mortgages on our rentals - US mortgages are the cheapest capital in the world. Where else can JoeBlow go into a bank, ask for $100k or $200k to buy a house, ask for a 4% rate, insist that it be guaranteed for 30 yrs at a fixed rate?)
Post Mon Nov 10, 2014 9:43 pm
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littleroc02us
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quote:
Originally posted by Yackadus
sts me and money is a means to survival.

If I am buying a house cash for 85k or less, I will still have a remaining of 15k just from the profit of my last home on top of my savings. My concern is renting a place, you usually have to sign a one year lease. This will blow through 12k that I will never see a return on.




This isn't true, I'm a landlord and I would do a month to month or 6 month lease for someone like you if the situation worked for both of us. I'd personally rent especially since you don't have a job.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Nov 10, 2014 10:04 pm
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