Last week we looked at some of the issues related to relocating amid all the uncertainty we’re facing. This is a popular topic these days. We focused on the question of selling your home here and transferring your equity to the new location, often leaving you with a good amount of cash.
We also touched on the idea of renting in your new location. Although this is likely anathema to many long-time homeowners (myself included), renting for a while has its benefits. The idea is to give yourself space to figure things out, investigate the new area and decide where you really want to be before pulling the trigger on buying a home. It takes time to determine which side of town you like best, the traffic patterns, where the nice parks are, and so forth. And since many housing markets around the country aren’t as active as ours, you’ll want to avoid feeling stuck in a hastily bought home in a less-than-ideal location.
Zillow, for example, says that on average nationally it takes about two to three months to sell a home (including the escrow period). Our area typically takes less than two. But beachy areas in Florida and South Carolina can take four months or more. Also, some of these markets are currently categorized as “hot” but are expected to flatten out or decline over the next year. So, while it’s possible to sell for a profit if you realize you made a mistake, it’s more likely you’ll need to hang onto your new home for a while. I think it pays to be cautious by trying to rent before buying unless you already know the area.
But what to rent and how? While it might seem obvious, this isn’t a time to think about being on vacation. If you need a vacation, take one. You’ll want to rent as if you’re living in the area full time. This means finding a rental that’s like a home in your target purchase price range and, ideally, even in your target neighborhood. In other words, no beachfront condos with amazing views unless that’s what you’ll be buying.
The traditional way to rent a home is by signing a one-year lease. The main advantage to this, I think, is a year’s worth of housing certainty as you get used to living in your new area. It’s also more or less flexible in that you’re only tied down for the lease period. Maybe you extend, maybe you don’t. This can be cost effective as well compared to options we’ll discuss shortly. But keep in mind you’ll be moving all your belongings at least twice in the next year, with all the cost and headaches (and backaches) associated with the moves.
Another way to rent is perhaps counterintuitive: using a furnished vacation rental. Again, not as a vacation but an opportunity to practice living in an area without having to disrupt your life all that much in the meantime. You could work virtually, your kids could practice going to school virtually, all while living day-to-day in your target area. And, perhaps most importantly, without feeling pressured to pack up and move all your worldly possessions while being worried about making a mistake.
Websites like www.vrbo.com are great for finding homes to rent in a specific neighborhood. These would be fully furnished, and you’ll pay a premium to go this route, but it might be worthwhile. If nothing else, it’s a low risk way to experiment. And if you fall in love with the new locale, it could save you from having to move multiple times.
Here’s a simplified example of how these two options might play out in Austin, TX (our city from last week).
Let’s say you want to move to the north of downtown and are looking for at least a 3 bd/2ba single family home. There are several traditional rentals in the area for around the local median of about $1,800, so that’s a straightforward option for perhaps a year. Or you could sign a month-to-month lease but, again, how many times do you want to move in a handful of months?
There are also several furnished homes on vrbo in the same area as the traditional rentals, sometimes even on the same street. But they cost over twice the price, say $4,000 per month. While this seems likes a huge difference it glosses over important details.
For example, all utilities are typically included with a vacation rental whereas you’re usually on your own with the traditional version. If we assume normal monthly expenses for utilities, the cost difference drops from $2,200 per month to perhaps $1,600. Then deduct other cost of living differences and savings from not moving an extra time. The difference, perhaps $1,200 or less, is the monthly “premium” you pay for the opportunity to explore the area without long-term commitments.
So, depending on your situation in California, maybe you do this for a couple of months and really feel things out. It’s possible to find someone to rent your place here for that time, or you could just leave it vacant. Maybe you fall in love with the new place and get the sale process started back home and find something to buy. Or maybe you realize it’s not all you hoped it would be.
Either way, it’s good to have options during uncertain times. Going the short-term rental route seems to give you more options even if you need to come out of pocket for the whole adventure. If you end up selling and moving, you can pay yourself back from the sale proceeds. It’s an investment in your future and, if things don’t go quite as planned, insurance money well spent.
Have questions? Ask me. I can help.
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