With renting now half as affordable as buying a home in the US, it may be time to move out to the burbs and put a down payment on a house.
Here’s one thing to keep in mind though: It takes time for homes to appreciate in value, so if you’re not planning on staying there for several years, don’t buy.
Just how long is several years?
According to Manisha Thakor and Sharon Kedar, authors of “On My Own Two Feet,” five years is a good rule of thumb to stick you when buying a home.
According to Thakor and Kedar, staying less than five years in a home you’ve bought can be very risky.
If you buy a house that you plan to live in for less than five years, it is important to understand that what you are doing is essentially betting on the short-term direction of property prices. This kind of bet is an awful lot like gambling in Vegas. Things may go in your direction, but then again they may not.
Over the long run, housing prices have gone up. However, you typically need at least five years to have reasonably high odds that your home will appreciate enough in price to offset the additional costs of home ownership.
There is an exception to this rule of thumb. Home flipping — buying a home and then selling it quickly for a profit — has become popular in recent years, and it can be very lucrative. In the second quarter of 2014, 31,000 single-family homes were flipped for an average gross profit of $US46,000.
Flipping a home is expensive, time consuming, and requires a fair amount of skill and knowledge, though, so most buyers are best-served planning to stick around for a while.
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