The first thing they asked me was exactly how long I expected to stay in the house<\/strong>. Though I didn\u2019t know the exact amount of time, they wanted to make sure that I\u2019d own the house for at least five years.<\/p>\n Why\u2019s that? What\u2019s the five-year rule for buying a house?\u00a0<\/strong> It definitely varies by geographic area \u2014 if not by specific neighborhood \u2014 but a lot of folks near me will buy a townhouse or condo as their starter home. After about three years, they\u2019ll start looking for a bigger place to upgrade to<\/strong>, 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.<\/p>\n The thought seems to be that if you\u2019re making a little more money every year, you\u2019ll be in a position to afford a bigger house in three years time. And everyone But with an upgrade cycle of about three years, there\u2019s a good chance that you will lose money.<\/strong><\/p>\n When you purchase a house, the general rule is that you want to be sure you\u2019ll be in the same location for at least five years<\/strong>. Otherwise, you\u2019re probably going to take a hit financially.<\/p>\n The first hit is your closing costs<\/strong>. Every time you go through closing \u2014 buying and selling \u2014 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.<\/p>\n 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 you own a house. Usually, it isn\u2019t until you\u2019re about five years into paying down your mortgage that you\u2019ve made enough progress on the principal to make it a better deal than paying rent each month<\/strong>.<\/p>\n David\u2019s 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.<\/em><\/p>\n If you can wait at least five years to move, you\u2019re in a better position to be ahead of the game.<\/p>\n Five years is a generality. If you add in a couple of other factors, you can make buying a house that you don\u2019t plan to stay in long-term a better choice.<\/p>\n The biggest factor is how much you\u2019re 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\u2019s 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<\/a><\/strong>, you can pay off a bigger chunk of the principal. You need to run the numbers for the specific house you\u2019ve got your eye on, but you can often come out ahead.<\/p>\n You may also consider buying a house you won\u2019t stay in for five years \u2014 but that you also won\u2019t turn around and sell. It\u2019s not out of the question to purchase a house, start paying it down, and fix it up so that you can then rent it out<\/strong>. You do need to be careful to choose a house you can afford\u00a0in addition to a mortgage for your next home,\u00a0even if you can\u2019t 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.<\/p>\n [Click here for a discussion on whether you should buy an investment property.<\/a>]<\/p>\n Bottom line: if you know you\u2019re going to buy a house based on what the bank says you can afford, and you don\u2019t want to think about renting it out, don\u2019t purchase a house<\/a> until you\u2019re ready to spend at least five years in it.<\/p>\n David\u2019s Note: Here\u2019s a quick and dirty formula you can use to help you figure out whether it\u2019s 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 \u2013 Selling Price. This number could come out negative or positive, but if it\u2019s lower than the rent you would have paid during the same time frame, then you would be better off buying<\/strong>. If the number is higher, meaning that the selling price wasn\u2019t high enough to cover all those costs, then renting would be the more cost-effective choice.<\/em><\/p>\n One of the realities I had to face when I recently moved across the country was that I needed to sell my home fast. I ended up listing with a relatively new real estate agent who could help me immediately find someone to buy the house<\/a>. Our family was also willing to take a loss on the home and pay out of pocket to make the deal go through if necessary. In the end, we sold the house in less than a week without it ever being officially listed.<\/p>\n If you want to sell your house fast, there are a few other things you can do to improve the chances of selling your house faster. Here is what Bennie D. Waller, a Professor of Finance & Real Estate at Longwood University, suggests when it comes to selling your home fast:<\/p>\n Waller suggests that you begin with an appraisal for your property. That way, you have a better idea of what your home is really worth. Too often, we attach a higher value to the home due to sentiment. An appraisal ahead of time can help you see what your home is likely to fetch on the market.<\/p>\n Your next step is to price your home below market value. If you want to sell your home fast, you need to offer an attractive deal. It might not be what you want to do, but if you sell for less than you owe, you can move the home off the market much faster.<\/p>\n You also have a better chance of attracting multiple offers, which will not only increase the selling price with a bidding war but motivate buyers to eagerly do what he or she can to close without giving you too much of a hassle.<\/p>\n Make sure that you present your home in its best light. \u201cPut pets in kennels. Rent a storage unit if there is excessive clutter<\/a>,\u201d says Waller. That way, you will be able to show your home when it\u2019s most attractive. Curb appeal goes a long way toward helping you sell your home a little bit faster. If you fix cosmetic issues to make your home more attractive, you will have better luck selling your home fast.<\/p>\n Waller suggests you attract brokers willing to list your property by offering better commissions. \u201cFor example, offer 8% commission,\u201d he says. \u201cGive 3% to the listing broker and 5% to the selling broker. This will generate traffic from your listing agent as well as cooperating agents.\u201d Money talks, and nothing motivates an agent to bring in buyers more than higher commissions.<\/p>\n He also suggests hiring someone experienced as well. However, he says that you should avoid a broker that is marketing his or her own property or has a lot of listings similar to yours. \u201cI have a research paper that shows that agents marketing their own properties displace efforts.\u201d Make sure that your listing is going to have priority if you want your home to sell fast. The last thing you want is for the agent to be suggesting interested buyers to look at his or her other listings.<\/p>\n The truth is that selling your home fast is likely to be an expensive experience. You will probably have to do a little more, and pay extra for the convenience of a fast sale<\/a>. If you can swing that, or if you know you need to move, then it might be worth the cost.<\/p>\n![\"buying](\"https:\/\/moneyning.com\/wp-content\/uploads\/2016\/09\/photo-1492889971304-ac16ab4a4a5a.jpeg\")
My entire family got involved when I first considered buying a house<\/a>, since 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 \u2014 even before I ask.<\/p>\n
<\/span><\/p>\n![\"five-year](\"https:\/\/moneyning.com\/wp-content\/uploads\/2016\/09\/five-year-rule.jpg\")
The Upgrade Cycle<\/h3>\nknows<\/del> assumes that buying is more cost-effective than renting<\/a> \u2014 as long as you\u2019re paying down the principal on your mortgage, you\u2019re going to come out ahead.<\/p>\nThe Five-Year Rule<\/h3>\n
Defeating the Five-Year Rule<\/h3>\n
And If You Do Need to Sell, Here are 5 Tips to Sell Your Home Faster<\/h2>\n
Start with an Appraisal<\/h3>\n
Price Below Market Value<\/h3>\n
De-Clutter Your Property<\/h3>\n
Attract Brokers by Motivating Him or Her<\/h3>\n
Hire an Experienced Professional<\/h3>\n