In this segment of the Motley Fool Answers podcast, Alison Southwick and Robert Brokamp are joined by a special guest, Million Dollar Portfolio's Jason Moser, to help them consider a somewhat more complex than usual variation on the "rent or buy" dilemma.
MFA fan Mattai thinks he and his wife may be moving to a new state, but would prefer to hold on to their current home and turn it into a rental. His investment portfolio has done well, but is taking money out of it to buy a second primary home the right move here? And if so, what's the time frame they should be looking at?
A full transcript follows the video.
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This video was recorded on Nov. 14, 2017.
Alison Southwick: It's time for "Answers Answers," and before we get into the question I should remind everyone that Jason Moser is joining us in studio today.
Jason Moser: Hey, hey!
Southwick: So, you're going to have some thoughts on this " Answers Answers," right?
Moser: I've got thoughts on all sorts of things, Alison, but yeah. I can offer some thoughts on these things, too.
Southwick: So, the good news for Mattai is that he's getting twice the advice...
Robert Brokamp: That's true.
Southwick: For the same low, low price...
Southwick: ... of free.
Moser: More value. Value add. In the investing world, that's what we call a margin booster right there.
Southwick: Yeah, well...
Southwick: You get what you pay for, Mattai. So here we go. He writes, "My taxable portfolio is up around 100%, which I am thankful for, but now I have a dilemma. My wife and I are considering moving to Dallas. We are homeowners, here, in Colorado, and would like to keep our house and rent, which means that I would need to sell the stocks in the taxable portfolio to buy a home in Dallas. But I'm not sure if or when we are moving. I would need to find a job. Should I keep the stocks or sell them?"
Brokamp: Well, I'll give my thoughts on it and then we'll see what Jason says. First of all, I would say do not sell the stocks, because it sounds like there's a good bit of uncertainty about what you're going to do. And even if you decide to move to Dallas, I would recommend that you rent for a while. You don't know if you're going to like Dallas. Maybe you're familiar with Dallas, but generally when you move to a new city...
Southwick: [Laughter] I take it you're not a fan of Dallas.
Brokamp: No, no! I've never been to Dallas.
Southwick: Don't lock that down.
Moser: It's a very big place.
Brokamp: I've never been to Dallas. What I'm saying is if you're moving to a new city with a new job, you don't want to buy. Rent for a while. You may not like the job. You may not like the city. Plus, if you live there for a year, you'll get a taste of the neighborhoods. The schools. You'll get a better idea of where you want to live, even if you want to stay. Then I would buy. So that's my take on it. Jason, I'm interested in your take, not only because you're a smart guy, but because you're someone who kept a house in another state as a rental.
Moser: I did, but more on that later, Bro. It's interesting, your take on renting first. In theory, I agree with you. Now I will offer the caveat that when we moved up here in 2010, when I accepted the job here, we were looking for a house to buy immediately. We didn't want to rent because we didn't want to have to move twice, basically. So there were some stocks that I actually had to sell to help with the down payment because the cost of living up here is significantly more.
Now we had a home in Georgia. We decided to keep that and rent it out, because we didn't need to sell it. We had some equity in the home and we thought, "Let's give renting it out a shot and see how that goes, and if it works out OK, then fine." We had someone in the area who helped keep eyes on the house for us. We ended up renting it out for about seven years...
Southwick: Oh, wow.
Moser: And then we recently moved at the beginning of this year, so we sold that house and sold our other house up here to combine everything into the one house that we bought here. But going back to the original point that you made in the uncertainty that seems to be prevalent, here, I agree. I think with that level of uncertainty, I wouldn't do anything so permanent as selling all of those stocks because it doesn't sound like they are fully committed, yet, on what they want to do.
And I think that's the beauty of renting and why, ultimately, I would agree with that, is because renting gives you plenty of options. And if you're unsure of moving there, and then you decide to do it, who knows if you're really going to like it. Maybe the job isn't what you thought it would be, but renting gives you those options whereas buying doesn't. And selling those stocks, especially if you're 100% up, there's going to be some capital gains to pay. You'll probably be able to offset that a little bit with some of the closing costs from buying a house, but I don't think that ultimately works out in your favor. Until you have some real conviction there, leave yourself as many choices as possible.
Brokamp: Did you have any uncertainty about whether you would like your job at The Fool?
Moser: I really didn't.
Brokamp: Was it due to the Fool Buddy program?
Moser: It was...
Southwick: Were you his buddy?
Moser: Where is this leading? Yes, exactly. He was my Fool Buddy. I didn't know that coming up here. It was so funny. When he came up to my desk, he was like, "Uh, hi! You must be Jason." And I'm like, "You're Bro!"
Moser: I knew who he was because I was a member before I came to work here, and I knew I would love it. I was really hoping to get the job up here. I had a good feeling I would like it and want to stay. And plus, my wife already works up here, anyway, so it just all worked out.
Brokamp: That's true.
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