When I first considered buying a house, my entire family got involved. I have the luck of being related to real estate agents, investors, and other experts that are more than happy to give advice about buying a property — even before you ask.
The first thing they asked me was exactly how long I expected to stay in the house. Though I didn’t know the exact amount of time, they wanted to make sure that I’d own the house for at least five years.
Why’s that? What’s the five year rule for buying a house?
The Upgrade Cycle
It definitely varies by geographic area — if not by specific neighborhood — but a lot of folks near me will buy a townhouse or condo as their starter home. After about three years, they’ll start looking for a bigger place to upgrade to, either a bigger townhouse or a single family home. This upgrade cycle will repeat itself a few times, as people work their way up to a house that they are happy with and that is big enough for their family.
The thought seems to be that if you’re making a little more money every year, you’ll be in a position to afford a bigger house in three years time. And everyone knows assumes that buying is more cost-effective than renting — as long as you’re paying down the principal on your mortgage, you’re going to come out ahead.
But with an upgrade cycle of about three years, there’s a good chance that you will lose money.
The Five Year Rule
When you purchase a house, the general rule is that you want to be sure you’ll be in the same location for at least five years. Otherwise, you’re probably going to take a hit financially.
The first hit is your closing costs. Every time you go through closing — buying and selling — money hits the table. Depending on where your house happens to be, the buyers and sellers pay different amounts, but everyone pays something. This can easily add up to thousands of dollars, and limiting how often you have to pay that kind of money is always a good idea.
And you take a second hit when you look at your mortgage statement to see exactly where your monthly payments are going. The way mortgages are structured, you pay much more interest in the first few years that you own a house. Usually, it isn’t until you’re about five years into paying down your mortgage that you’ve made enough progress on the principal to make it a better deal than paying rent each month.
David’s Note: When you take out a mortgage, you are paying an interest rate on what you owe. So, in the first year, when the principal is highest, the interest you need to pay is also the highest. However, since the monthly payment is the same throughout the term of the loan (at least with a fixed rate mortgage), more of the payment will be used to cover the interest payments, meaning less is going towards the principal. As your principal goes down, your interest payments will go down, leaving more of your check to go towards the principal.
If you can wait at least five years to move, you’re in a better position to be ahead of the game.
Defeating the Five Year Rule
Five years is a generality. If you add in a couple of other factors, you can make buying a house that you don’t plan to stay in long-term a better choice.
The biggest factor is how much you’re going to pay on your mortgage. A lot of people buy as much house as they can afford, according to what lenders offer them. That’s usually the upper end of what you can financially manage. If, however, you buy at the lower end of what you can afford and make extra payments, you can pay off a bigger chunk of the principal. You need to run the numbers for the specific house you’ve got your eye on, but you can often come out ahead.
You may also consider buying a house that you won’t stay in for five years — but that you also won’t turn around and sell. It’s not out of the question to purchase a house, start paying it down, and fix it up so that you can turn rent it out. You do need to be careful that you’re choosing a house that you can afford in addition to a mortgage for your next home, even if you can’t find a renter,. There are plenty of other arrangements that can work out similarly, but you need to study up on real estate before making such a choice.
[Click here for a discussion on whether you should buy an investment property.]
Bottom line: if you know you’re going to buy a house based on what the bank says you can afford, and you don’t want to think about renting it out, don’t purchase a house until you’re ready to spend at least five years in it.
David’s Note: Here’s a quick and dirty formula that you can use to help you figure out whether it’s better to buy or rent, which works with any duration of ownership. Try to calculate: Seller and Buyer Agent Fees When You Sell + Purchase Price + Maintenance Cost for the Time of Occupancy + Interest Paid on Mortgage + Investment Gains from Your Down Payment + Taxes Paid (Such as Property Tax) + Closing Costs – Selling Price. This number could come out negative or positive, but if it’s lower than the rent you would have paid during the same time frame, then you would be better off buying. If the number is higher, meaning that the selling price wasn’t high enough to cover all those costs, then renting would be the more cost-effective choice.
Do you adhere to the five year rule when buying a house?
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The list of “costs” used to compare to rents seems to be missing the tax deduction. Most middle income folks are either in 28% or lower end of 33% marginal rates. In addition there may be incentives for certain homes – energy rebates etc. – that mean the actual cost of ownership is somewhat less than adding up all of the closing costs etc.
You said, “Most middle income folks are either in 28% or lower end of 33% marginal rates.”
I checked, and this seems strange to me given that median U.S. household income is around 50k. With deductions, the vast majority of Americans, including all middle income by any reasonable distribution, fall into 10%, 15%, and 25% tax brackets. If one runs in circles where most of his/her friends make 146k+, you are doing very well … and kudos (seriously) … just realize and appreciate that you are in actually very rare air.
Honestly man, I cannot imagine how families survive on less than $100k/year. Of course that depends on where you live and cost of living but let’s assume it’s a major metro area. $100k/year won’t even pay the most basic of life styles.
Ten years ago my wife at the time and I made about $250k/year combined, lived in a modest $175k home, had 2 car payments and 2 kids. After the government got their unreasonably high share of our hard-earned income, we payed our essential bills and contributed the maximum to retirement savings, we had nothing left of any consequence. We realize we were fortunate which made us wonder how in gods name families could survive on $50k/year or even $100k/year.
The US needs serious adjustments to middle-class taxation. Income below $200k/year needs much lower taxation and income, of ANY kind, above a couple million/year needs significantly MORE taxation. When we just got married and collectively made $35k/year, lived in an apartment and worked our way through school, we barely survived. The lower-middle class families in this country deserve better.
I wish with all my heart I could pay your unreasonable share of your so-called hard earned income in taxes. I make 30k a year, gross. Thank God the Houston area where I live is pretty cheap. Quit complaining about your ‘unreasonable’ taxes and next time you pay them, thank God you earn enough to afford it. You make me sick. And I seriously doubt you work harder than I do. Try working 12 hours a day in the fields!
Maybe if you spend less time leaving comments on random articles you would have more time to increase your skill set and in turn receive higher compensation.
b,
So non-rich people aren’t allowed to have an opinion on the internet. Got it.
What an awfully obtuse statement yours is, so packed as it is full of hidden, false assumptions and sneering disdain.
Listen to BOTH of you! OMG! TWO cry babies, both blaming the next guy up the ladder. The lower paying guy says to the upper mid guy that he should be thankful he makes enough to pay unreasonable taxes, and to shut up about it. The upper mid guy cries that he’s paying unreasonable taxes, and says that anybody above him should be paying more.
Is that what we’ve come to??? That the other guy needs to pay more?! I’m in agreement with both of them on the fornt end – that they pay too much in taxes. I disagree with them on the back end of their sentiments – that the NEXT higher guy in the ladder needs to be paying more than he already is.
If you can’t survive on $250k/yr, you have some “serious” money management issues.
It’s a pretty well-known phenomenon that almost everybody thinks that they make in the middle income range and that they pay too much in taxes. I have a hard time imagining living on $50k a year–let alone supporting a family on it!–but I also recognize that that’s a pretty typical situation to be in.
It is also my rather firm belief that my relatively high income reflects not just the effort and talent required to get some very good degrees, but also a huge amount of personal luck (starting with who my parents were, and I was really blessed when God handed out parents!), and a huge amount of support from society. So I don’t mind that my taxes go to lift up those with lower incomes than I earn. I’m glad that the latest contract has me paying a hgher share of my health premiums so that those making ridiculously small salaries can pay less.
And I make less than $100,000, so the people making $200,000 think I’m poor.
We need to accept higher taxes down to a much lower income level than $250,000 if we’re going to finance the elder-care we need and the educational systems we need. Or, on top of taxes, we’re going to find ourselves paying for private nursing homes and private schools.
Well, that depends on where you live. If you live in OC, CA, a combined income of 250+ is still less, given townhomes cost 800K. You become slave of your mortgage, unless you can compete with all cash home sales for the same price.
Amen
My husband and I make a (combined) 98K, live in an urban center, own a house, and carry 45K in student loan debt (no other debt besides our mortgage). We live just fine, and I have no real desire to make a lot more money (not that I’d turn it down). We even manage a trip to Europe every other year. And yes we have a kid. When you say you don’t understand how people can live with less than 200K it tells me you consider a lot of non essential things essential. And, while we are at it, taxes are patriotic.
Rachel — yes on living decently on under 100K even in an urban center; and taxes are the price of civilization, unless you’re stuck with a political administration that deliberately siphons off the government’s tax income into worthless wars and giveaways to Agribusiness and corporations. At that point you start to wonder . . . So many rich people whine and moan about paying taxes because they have no need of a generally high level of civic safety and comfort; they can buy their own insulated bubbles of both, and let the rest of us rot. It’s sad to see a prosperous nation brought so low by such selfish thinking.
Taxes are patriotic?
Do you realize that there was virtually no taxes just 120years ago?
If you actually researched into what your taxes are buying, for a lot of it you would be proud. For another large percentage, you would shudder at the sheer stupidity of the governing body you elect and what they fund.
Try Washington DC, one of the more corrupt and amazingly ignorant city governments ever gathered. Always looking for taxes for social programs to help the low income. They just finished their pilot build of a 1million dollar bus stop. I kid you not, metal, plastic and glass, and about 20ft long. You stand under it and wait for the bus. Thats its function. It has computerized digital displays on the side to track buses, and you don’t even get a decent roof in that 20ft to keep the rain off you. $1million for each stop. This is one of a thousand projects just in the one city. This made it through the system until it was noticed by the press and people started to bitch. Yes… taxes at work. One very tiny example.
What people need to do is get more transparency in what their taxes are doing and elect smarter people. Not popular people. I work with politicians in DC every single day. (When I say politicians, I don’t mean Government GS workers – who I see mostly working their butts off and are really understaffed)
I would not hire most politicians to mow my lawn.
Yes, I said most – there are always exceptions to every rule. Trouble is, the exceptions are outnumbered by the bozo’s and funding is done by the most votes…
Bozo’s are not patriotically spending your money.. believe me.
Try surviving on disability, or on what that waitress that serves you your meals at your neighborhood Longhorns or steakhouse earns.
There were no taxes 120 years ago? There also was no highway infrastructure, trash pickup, sewage treatment, research and development of military weapons, airplanes, automobiles, or anything else that would require the collection of taxes.
I am disabled, my husband is retired. I planned on working until I was 56 because I would have 30 years at my job and a nice retirement. I became disabled at 43. Now my husband is 65 and I have been disabled for ten years. I am really glad we didn’t carry a lot of debt or we would have lost everything. Be very careful about carrying unnecessary debt and make sure you have a decent disability plan.
If you had nothing left making $250k, then you are spending way too much on fancy cars, insurance for those cars, eating out, entertainment and vacations, private school for kids?. Do you have any emergency savings? savings for kids college? savings for annual repairs and maintenance on cars and house? if not, why not? what happens if one of you loses one of those high paying jobs? – seems to me you should have no trouble savings $25-40k a yr in addition to retirement savings – even maxing out 401k plans, you will never save enough to maintain your extremely high standard of living. I gross $100k a yr and will have no problem living on soc sec and pulling 3k a month out of my retirement savings.
@Peter, many Americans dont have enough itemized deductions to take the mortgage so reality is if you dont make $100K+ a year or live in a tax hellhole you likely wont get any rebate. The mortgage deduc is an upper middle class tax break.
Duh. Like lower incomes should even be homeowners in the first place? Isn’t that how we got into this mess in the first place?
(wait for it… yup, here it comes. Go for it libs, tell me about greedy horrible bankers over-lent in a “predatory” manner is how we got into this mess. never mind libs in the first place were the ones strong-arming the bankers into lending it out to people who shouldn’t have been lent to!)
Considering that Fannie and Freddie were very late arrivers to the subprime mortgage market, I find it hard to see how they can be blamed for the subprime mess.
What got a lot of people in trouble was not living below or within their means. I guess I am what you would call lower income and I own a home and has never been late on a payment. I do have credit card and student loan debt but plan on being out of it within the next 4 years. Lets stop the blame game.
my primary residents is in California,I also own a home in Costa Rica.
If I sell the home in CR will I have to pay US capital gains tax,after I have paid tax in CR ?
Thank you
Heinz
Yes
This is the primary rule for buying a house. After buying house, you can apply insulation in your house as a way of heat transfer.
The 3 biggest risks to your finances are:
-unemployment
-divorce
-health problems
make sure you take care of those items first before worrying about anything else.
You need a 4th:
Over-bloated government spending and the subsequent increased taxation.
Put retirement planning back in the hands of citizens, eliminate the retarded social security nonsense and things might be different.
The operative word in the above post is “might”. There are no guarantees in life period!
Hello sir,
I want a house were i could stay forever and work with my family. I am just 18 yrs. I want to buy with my own money. and settle there with them. I would like to gift a house for my family. I would like if u understand my feeling. And they like to visit in California. I would like to know the proper amount of your house and i would like to bring them in the month of December 2013.
Abigial Fernandes
From Goa.
I am looking at buying a house that currently rents at 300-350/month
What price should i offer as a general rule?
Depends on:
Where it is
Condition
Appraisal value
How deep are your pockets
Very outdated analysis. With interest rates around 3% a very large part goes to principle starting month one (compared to just a few years ago when 7-8% was normal).
Buy a house you want to live in and can afford, everyone has a different take on that because different people have different income levels and the amount they can put down.
Put your money in a place were its
-Safe
-Liquid
-0 to 12% Rate of return guaranteed
-Maximum upside potential with no downside risk
-Accumulates tax free and withdraw tax free
-Blossoms in value
Another consideration with regards to taxes and interest paid is the deduction that you get each year for the interest paid on the loan. Granted that is taken off your gross and in reality equals only your taxe rate percentage and not the total amount, however if you are paying a 28-32% that means that your effective cost of your loan is reduced by reducing your income tax burden, equity is gained and you are paying on an assest that you can sell or rent later. This is a deduction afforded everyone regardless of income levels. Additionally, with a 30 year fixed rate mortgage, your monthly costs will go down when taking into account inflation (especially with 3-4% loans) and even though local taxes might increase, again they are a deduction off your Fed income tax. All of that beats throwing money at just renting. The key is to buy what you can afford, not necessarily what you think you deserve. In that scenario you will come out okay, regardless of how much you hate the government or taxes or all the other things you don’t have any real control over. With the ratching down on credit that has occurred (the “whys” of that is whole other topic), more and more folks are going to be put in a position that they can only rent, which is going to be good for the property owners who have a desire to rent. My take on this topic is to buy what you can in an area that has potential upside and growth, compromise on the whole “dream house” idea with a first house and get into something affordable as quickly as you can before interest rates go up or inflation starts to kick in again (always does, economics is cyclical).
The deduction for mortgage interest doesn’t help you at all if that plus other things you can deduct don’t exceed the standard deduction. I only financed 125k on my house, and at 4.8% interest, married filing jointly, and even adding in state and property taxes, etc. itemizing doesn’t get me to the standard deduction. And every year that deduction becomes smaller because there is less interest paid (Not that I want to pay more interest!). Ownership is still a win for me because my mortgage is $300/month less than renting comparable houses in my area, though. Even the apartment we lived in before buying the house had a higher rent than my PITI.
Don’t you think the mtg deduction is already baked into house prices, that is, making prices higher? How long before Congress kills it off as a means to raise revenue w/o actually raising taxes? If so, house prices will drop as the value equation shifts.
Some people hate taxes but yet they want traffic lights, side walks, schools fire protection (think insurance), police, highways, the list goes on. None of that is free and someone has to pay for it and as users we pay. I don’t like taxes but until someone has a better idea we have to live with what we have. Don’t complain too much until you can do something about it. Just live within your means and not your credit cards means. You want to impress people than you pay with where you live, drive, and wear. That simple.
LLAK, I don’t know anyone who complains about funding the government and government services perse. The complaints come because politicians from both sides of the aisle treat our hard-earned money like their own personal campaign funds! They don’t respect the $ they spend. It’s like Monopoly Money to them…not OUR hard-earned dollars!!
Big diference between local taxes and the money our lovely federal government grabs every month.
Have any of you wondered what retirement would look like if we had the 12% of our income social security took (6% from the individual, 6% from the employer) and were allowed to invest it ourselves?
It depends on how much you earn and how long.
1. If you are high income earner and worked for over 30 years, you will have a much better retirement.
2. If you are low income earner and/or disabled your quality of life will be much less.
Yeah… those things cost like 1/1000th of a percent of what the rest of our federal expenditures are (particularly social security, medicare, medicaid). Most of the items you listed are local or state anyway, not federal. So you should go back to the drawing board for a better argument.
to “living Like a King”‘s comment:
the problem is not that we hate taxes. Ay sane person knows you have to pay SOMETHING into the kitty. The root of the problem is that half of our people with incomes don’t pay into the kitty at all but they do have a vote in picking the ruling class that promises them they won’t have to pay into the kitty but they can dip their grubby paws into the kitty. I’m not knocking progressive taxes in theory that state the millioniare should pay more than the minimum wager. But I am highly incensed that the minimum wagers pay NOTHING, have a say in choosing our leaders who GIVE them stuff that we put in, and then tell millionaires (AND US TOO, BTW!) that we have to pay more, again, and then more again after that again, just to keep the whole scheme running. Oh , and btw, everyone who pays in are collectively labeled as not paying their share. Hmpph! EVERYBODY should be made to pay at least SOME token amount.
You have a very SIMPLISTIC view of the world. Many of the people who do not pay federal income taxes are disabled (as in living in nursing homes). Many are retired with no other income than social security. Many are retired military. Many are unemployed. Virtually EVERYBODY pays SOME taxes, whether it is at the supermarket or by paying higher rates for rent to cover the landlord’s property taxes. Not everybody who does not pay taxes is living off the government till. The minimum wagers you are so quick to complain about are the very people that are helping to keep your prices low. Imagine if we paid a living wage to everybody who works at McDonalds. How long do you think they would be able to offer $1.00 hamburgers? Again, they are paying sales taxes when they buy something. They are paying property taxes as part of their rent. Oh yeah, I like your “incensed” feeling also. You don’t seem to think that minimum wagers want to better themselves. I guess wanting better schools and better training opportunities is asking for too much. I guess wanting good police and fire protection is asking for too much. Maybe asking for better roads is asking for too much. That tax money that we pay at the gas pump does not give us the right to decide how it is spent, right??? Just because someone does not make enough money to satisfy YOU, the same type of selfish person who does not want them to have anything in the first place.
If people either take out a 15 year loan or have a 30 year loan but pay it off in 15 they will be saving a lot in interest. Granted your tax deduction on the interest will go decrease faster, but it is a good way to build up the equity quickly. Granted it is nice to get an interest tax deduction but its nice to have your house paid off and you aren’t making any payments.
The author’s formula at the end omits something big: All the capital improvements you put into your home in those first 5 yrs. There are always surprise major investments you need to make, even if you had the home inspected like we did prior to buying, and unfortunately, you can typically recoup less than 50% in the eventual sale price. In the first 5 yrs we owned our 1994-built townhome we put in about $40,000–2 new A/C units, a new roof, new gutters, sided the rotting wood trim, patio, new windows, security system after being burglarized, new carpeting. Only 1/2 of those were anticipated, and although we bought just post-peak, the realtors were telling us our offer was too low. By now we’ve done probably better than renting (by a hair) only because we had a huge down payment and relatively low interest payments, having refinanced 3 times. With a 6% broker’s commission, we’d have to sell at a loss if we were to sell this year.
For those who think the mortgage interest deduction lessens the cost of owning vs. renting, you need to consider that those mortgage pmts could be invested, and earn, after-tax, more than what you save in taxes.
What the mortgage payments could earn after deducting rental expenses…
It’s easy to generalize, but timing within the real estate cycle and location can make a big difference.
Notice how the author hides the BIGGEST cost associated with “the five year rule” — the ridiculous 6% real estate agent fee for “selling” your house.
He mentions “closing costs” and how “buyers and sellers closing costs are different” but the truth is that the seller’s closing costs are usually less than a grand UNTIL the seller gets hit with that bull crap 6%.
Think of it this way: does your house’s value go up 6% in five years? Not in this market. But let’s imagine it did. The profit from value increase is erased by these ridiculous fees.
In the internet age, the house sale fee is too high.
Like I always say to clients if they inquire of such. “You are free to attempt to sell your home on your own.”
Like good luck with that when most of my clients have MOVED at least 500 miles from the home they are selling.
You missed the point, Tim. Steve was telling you your fees are too high! If you are making more than $36,000 a year as a realtor, then your fees are too high! And I’ll bet most realtors make way more than that! Secretaries don’t make more than that and they have a more difficult job than you with 8 hour days.
Not to side with the realtor, especially one who takes the approach above, but 36k is a little low. The bottom line is that a sales commission should be earned. Most realtors got used to the easy money, and the 6% is not real money since everything is financed …. so what right. Now they hold it as a fee to sell your house (try to do it on your own??) instead of defining why the service is worth that ….
Can you count on your job lasting 5 years or being able to find another job commutable from your house?
What do you all want? The American Dream? You can by it from any Saudi Business man or CEO for a Chinese Industry…
I can live on $50K per year easily… It’s all a matter of living within one’s means. Now, if one’s means mean a BMW, 3600sqft. home with all of the ‘cool’ things that consumers can be trapped into buying in order to keep up with the Jones’, then it’s going to strap you a little bit more. But hey – you want that American Dream.
Who came up with the American Dream anyway? Obviously some deviant manipulator that has a way with words and making you want things you never thought you could own, so you can be viewed a s ‘Winner’!
Just live for God’s sake… You’re going to die anyway and worms have to eat!
You realize that following the 5 year rule would prevent most military families from ever purchasing a home until after retirement.
I think the biggest issue in society is that too many people don’t know how to manage their finances. They taxes we pay are the taxes we pay and we can all cry about it , but in the end it makes no difference , we are stuck paying them. We are all left to deal with living on what resources we have. The bulk of society would serve themselves better if they learned how to live below their means in stead of barley within them , or grossly over them. I have in my line of work watched thousands upon thousands of people of all walks of financial life waste so much of their money on ” poor choices ” than on daily living. It isn’t to say that there aren’t masses out there suffering and scraping their pennies to get by and make ends meet making all the best choices for their circumstances, there are. I am talking about the ones who waste hundreds and thousands a year on things they claim they ” need ” , that truthfully are only ” wants ” that can be done without or saved for instead of splurged over. And it’s these repeat offenders who find themselves deep in debt, unable to make bills, or end up in foreclosure. They usually have little to no retirement , and the few who do keep digging into it today , with no worry for tomorrow. It’s the vicious cycle of ” I WANT IT NOW, NO WAITING” , ” BUY NOW PAY LATER” MENTALITY.
Then they find them selves whining and crying when they are drowning with no life preserver! There needs to be a finance rehab for addicts who can’t keep their money where it should be and make sound choices . So they can break these habits .
No , I am not wealthy, Our home is modest in income under $100k per yr. We have 4 children, and only one income.
We don’t live like prairie people , but we are frugal . Everyone can save money ! It’s a matter of what it is worth to you, and what you are willing to give up to do it!
As an example, my wife has set herself a monthly budget for groceries of 250$, she will not and does not exceed it. ( Her choice ) She has taken the time to find ways to save enough money by couponing and bulk shopping to cut our bill from 1000$ mo. And still feeds a family of 6, and has food to donate to our local food pantry.
She then went over our household budget and cut our internet, tv and phone down to the minimums and saved us 240$ on our home and cell phones, 160$ on our tv service , and 75$ on our internet.
She even went as far as to home school our 4 boys which cut hundreds of dollars a year in school fees, and food costs for packing and buying school lunches. And sports fee’s . She signed them up for sports through our local Y for the homeschooling PE credits at half or more than it would have cost if they played for our local school. Saved us 200$
These are just some of the things we did to cut back and save money that greatly impacted our household finances.
Many other small things were done as well , but even the small things add up over time and in a year can amount to hundreds of dollars saved and not wasted.
It’s your money! Spend and Save wisely!
Her best idea was turning our home into a rental property instead of selling it to purchase another home. A great way to help kick uncle sam where it hurts and shake some of your hard earned money back out of his hands and into yours!
Sadly, myself and many others are making less each year once you account for inflation and the absence of salary increases. Despite doing better work and more of it, I’ll be looking to downgrade in the next few years, not upgrade.
The 5 year rule is fine if your goal is to break even on owning a house over renting. But if you want to accumulate true wealth, the only way to make money on owning a house is to spend at least half the loan term in your new house.
That means 15 years for a 30 year mortgage, 10 years for a 20 year mortgage, 7 years for a 15 year mortgage, etc.
All of these rules will only work when the housing market isn’t dropping and interest rates aren’t skyrocketing. If the housing market drops, you have to be prepared to spend even more years in your home to build wealth.
And, if you buy another house, keep the original mortgage end date the same instead of starting over with a 20 or 30 year note.
I have found it necessary to move frequently to capture career opportunities while owning a home.
My solution: I have never sold a house I bought. I convert them to rentals and let someone else pay them off. I plan to retire on the rental income after mortgages are paid off.
This sounds like a good strategy for lifelong debt bondage. Why should anyone need a new or bigger house every 5 years? All you do is guarentee that you’ll never pay off your mortgage. Most of what you pay is interest, and you only recover a third of that (at most) with the tax deduction.
Don’t listen to these 5 year rules. If you get enough coin from a sale, sell and use the coin to get more for your money.
Make your own rules in life as long as they are within the law of-course. Live and be happy and don’t feel trapped by rules and other sh.. you read online. Writers get paid to write sh.. that sounds good, but in the end, it’s your one life. Live it well and on your terms.
Rule #1: do not follow, make your own trail but read (educate yourself) a lot.
I do understand it is hard on the beginning, but everyone is different, plus difference in time could cost you a lot of losses. Have multiple views on same issue than make a decision. Do not think (sit on it) too much (too long) otherwise opportunity will be gone.
I’ve bought my first house in 2005 and did not sell it yet.
Only regret I have had I did not buy it earlier.
Now I would like to get bigger one, and working on it.
About taxes. We have to pay them only problem we do have is “wrong” spending.
I was married at 17 and my husband was 18. We rented for two years and then decided to purchase our first home. My dad (who was not educated and could not read) advised us to purchase a duplex so that we could have help with the mortgage payment each month. We listened to his advise and purchased our first home in 1974. In 1987 we took out a home equity on our first home in order to buy a bigger home for our family that grew in size to number 6. We have been married now for almost 41 years, raised four children and have two houses completely paid for. We are still receiving monthly rent on the two units we purchased in 1974 and this will greatly add to our retirement income. If we can make it on high school diplomas and income of less than $75,000 per year, anyone can.
So you’re a boomer that started life at the cusp of the most advantageous bull market in history (and likely ever), and you were able to do well with your investments? Yeah, can’t imagine why everyone doesn’t just do this.
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