I'm looking to buy into the game and have a few questions I would sure appreciate some input on. Thanks to this forum I'm pretty comfortable with the rulebook/sourcebook setup as currently available. I really want to play either Durin's folk or Minis Tirith, which if I understand correctly means I need the Hobbit SBG book and the Free Peoples source book? I then read about a new rumored rulebook which will update the lotr line. I'm trying to figure out if it's a bad time to invest in books and units that may be retconned in a few months.

Durin's Folk is in The Free Peoples, Minas Tirith is in Kindoms of Men.
The dwarf armies from the Hobbit are in the main rulebook (Army of Thror, Thorin's company) and There and Back Again (Erebor Reclaimed, Iron Hills).
I don't know whether the older Lord of the Rings books will be updated or replaced anytime soon, I guess its a waiting game to see how the new Middle Earth team manage it.
I think a brand new book would be safe though, so if you want Iron Hills I'd jump on the new book.

There been rumors from some credible channels that a book(s) updating the Lord of the Rings range to the standard of stateline found in the Hobbit will be coming out sometime in mid to late 2017. Whether that will entail a new main rulebook is unknown but I think it's unlikely to be that extreme. But like Antonio said it is really a wait and see sort of thing.

I would advise you to do what seems the most economical for your interest in the hobby. If you think you can have a force up and table ready soon, and that there will be people around to play against regularly, you might just consider buying the books you need along with the models so you can go play. Unless you can borrow or lookover the sourcebooks of the veteran players then just get the main rulebook. If your not like to do much gaming in the next six months or so I'd say just get the models and have fun painting. You can use the forums here to make an outline of an army, with the current rules, to buy without needing to have the books. It's not as though the models themselves are going to become useless down the line anyway.

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"Draw your sword with a heavy heart, but swing it with a heavy hand"

What Wan Shi Tong said.

The only additional comment I'd make is that the newly released Hobbit "There and Back Again" book is probably not going to be a bad investment, if you're interested in playing Dwarves, as it has the profiles for Thorin's company (I mean that figuratively - all profiles relating those Dwarves) and the Iron Hills dwarves. Not that you need this right away or anything, but it's not likely to be made redundant anytime soon.

Thanks for the quick and thorough responses! I am tempted to buy the free people's book and both of the new hobbit books but I think I may wait and see how the new book plays itself out. If the units themselves won't be "replaced", I will just start collecting and painting a small army while waiting for the new rule set.