Should I buy my house from my landlord?
The situation
This is a specific situation, but hopefully the general themes of the question will be helpful to others. I read the question at In general, is it financially better to buy or to rent a house?, which provided a good sense of what to keep in mind. So, I am looking for advice that goes beyond these basic considerations.
We just moved into this place last August, on a 2-year lease. I came home yesterday to find a "for sale" sign in our yard, and an access box on our front door. I was pretty annoyed - my landlord gave us no warning (that he would be selling the house), and part of the reason we decided to rent this place was because we liked the guy.
Clarification: I should point out that the realtor is aware that they must give us 24 hours notice before showing the house, and so far has honored that. But still, we have busy lives and 24 hours is barely enough to, you know, make the place ready for strangers.
Technically our lease is with the property, not the person. So, the new owners would have to honor the remainder of our lease. However we live in a college town, and I dread the thought of one of the local slumlords becoming our new landlords.
The opportunity
I realized that I can also look at this as an opportunity. We have another 20 months on our lease, and the estimated (monthly) PITI based on his asking price is about 33% lower than our rent. We've lived here long enough to know that, other than needing a new roof, the place is in pretty good shape (which of course, we'd use to negotiate).
The house is not super-close to campus, but close enough that people are interested in renting (after all, we chose to live here, and the houses next door are also occupied by students).
Based on my calculations, we'd save several thousand dollars just over the course of our lease. Not to mention, the potential rental value of the place once we're ready to move.
The catch
Here are my hesitations: I have enough for a 20% down payment, but that represents nearly all of my liquid assets (which are currently invested in an S&P500 index fund). I would essentially be losing all of my diversification.
On top of that, this isn't exactly my dream house - it's comfortable, but too small. I'm also not sure how much longer we're going to be in this town. My girlfriend will finish her degree by the time our lease is up, after which we'll probably want to move out of this town. So, we'd have to sell the house again, or be absentee landlords.
Update: We do also own a small business in the town that we might end up remotely managing that from elsewhere. So it is possible that we could still have a tie to the town beyond the rental house.
Should I make him an offer? A couple already came by today to look at the property. It seems like I should probably act soon.
(3)3 Comments
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Can he legally break your lease if he sells the place?
If not I would just keep renting.
It doesn't sound like you love the house and you plan on moving or would prefer a different type of place long term. Unless you yourself plan on getting involved in being a renting it out to others in the future - just rent and move on at some point.
If he can break your lease upon sale of the property then I'd be casually keeping an eye out for another place to rent if that happens.
Never buy a house unless you really want to buy that house. If you want to buy a rental, look around and find the right rental to buy; saving a few hundred on moving costs isn't a good reason to buy the wrong property at the wrong price.
There are probably thousands of houses that you could buy. If you want to buy a house, it is very unlikely that the one you are renting right now is the best possible buy.
Usually people living in the houses they own are more interested in the quality of their property and the quality of their neigborhood than people who are renting, so I'd say that you are generally better off finding a home to buy in an area where the majority own their homes.
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