Thinking About Relocating? It Can Pay to Rent Before You Buy

Don't end up making an expensive mistake.

If you're thinking of making a major move and are contemplating buying a home in your new location, you may want to think twice about purchasing a property right away.

Instead of immediately jumping into the real estate market, applying for a mortgage, and finding a home to make an offer on, you may want to consider renting for a while first.

Here are three good reasons why renting when you relocate could be a better choice than immediately purchasing a new house.

1. You can make sure you like the area

Sometimes, you may have preconceived ideas about what a new place is going to be like and it may not fulfill your expectations once you actually get there. Or you may like visiting a place, but it could turn out that living there isn't all it's cracked up to be.

If you find out that your relocation was a mistake and you'd be happier living elsewhere, it's far better to discover that before you've incurred the transaction costs of purchasing a property.

2. You can really get to know the neighborhoods

When you're moving to a new place, chances are good that you don't know the area as well as a local would. You may not be familiar with the best routes to drive to work, which roads get backed up or are under construction all the time, or which restaurants and shops you enjoy visiting. And you may not know the feel of different communities.

If you rent before you buy, you can take the time to become intimately familiar with the area. You can discover a neighborhood that has people and places you love -- and that provides easy access to work and recreational activities.

3. It's easier to buy when you're local

Buying a house when you live far away can be difficult. You'll have to travel into town, hope there are houses you're interested in seeing when you visit, and then hope your offer is accepted so you can avoid another trip to find a different property.

If you're renting a place locally, it's much easier to go look at homes as soon as they become available, rather than waiting until you can travel to see them. You'll have more flexibility with looking at multiple places, and you won't have to rush to find the right one in a weekend just because that's all the time you have for your visit.

Of course, there are downsides to renting too. You will have to move twice -- your initial move and then another one after you decide to buy a home. And you may not be able to find a rental you're in love with -- especially if you're used to owning your own place. But enduring these disadvantages can be far better than ending up in a home that's the wrong fit for you.

After all, selling a home involves paying closing costs, so it can be difficult to break even on your sale unless you remain in the property for several years. And if you're lucky enough to sell at a profit before two years have passed, you could face less favorable rules for how your profits will be taxed.

You don't want to be stuck living in a home you don't like or having to wait to sell your property for enough to cover your costs. Instead, give yourself a trial run by renting and take the time to find the perfect home to meet your needs.