Renting VS Buying

What is the right move for you?

My job is to make sure you know all the facts to help you make the best decision for you!

Purchasing your starter home puts your first leg forward into building wealth. My job is to give you the facts that can help you decide what the best move is for you right now.

I'm not writing this blog as a Realtor trying to push you to buy, I'm writing this blog to inform you of the differences so you can make the best decision for yourself right now!

Working in property management for years gave me a good insight in writing this blog, I added stories from things I experienced and saw throughout my years.

#1 - Comparing #'s

I went through multiple property management websites and talked to a few of my connections from my property management years to get a down low on the current renting world.

I focused my research mostly on rental availability and prices.

Currently for rentals; the avg rent for a 3–4-bedroom single family home is $1,500 to $2,200, a duplex being around $1,400 on avg, and a 2-3-bedroom apartment around $1,300.

These numbers are for average apartments and homes. They are not for The Lights or fancier apartments/homes, which you can add $300 or so to the monthly rent.

I used a mortgage calculator to see what homes would fall around the same monthly payments using a 30-year mortgage at a 7% interest rate, and 3% cash down. (I also included some annual taxes, home insurance, and $3,000 in other costs to make it more realistic).

For the monthly payments to end up being around $1,870 monthly the home price was $290,000, which ends up being in the middle for avg rentals of 3-to-4-bedroom single family homes in the area.

There are currently 90 homes for sale in the FM under the price of $290,000.

#2 - Looking into the future

Something I discuss with my clients is the future, to build equity in your home you have to be there for a couple years at least.

Over the years the avg home appreciation has been around 3-5%.

The numbers below are based on a 3% appreciation.

If you buy a home for $290,000 at 3% appreciation....

3 years equity built - $17,661

5 years equity built - $36,398

10 years equity built - $88,384

Payments towards your mortgage go towards owning your home and building wealth for yourself, payments to a landlord help them build wealth and pays their mortgage.

There are also typically rent increases, which happen every lease renewal. Compared to a fixed rate mortgage, which stays the same throughout your years of payments. (There are other types of mortgages such as adjustable rate to talk with your lender about, but more commonly used is fixed rate).

TIP: Owning a home also leads to tax breaks, something to discuss with your accountant!

#3 - Deposits/Money Down

A deposit to your rental company almost never fully comes back to you, sadly I've seen too many situations of rental companies taking advantage. This may not affect everyone, but I know it affected me even when working for a property management company and knowing what to clean and what they look for.

There is also pet deposits which are typically non-refundable and sometimes monthly.

A "deposit" for your home is all money that goes towards your down payments.

There are technically two components to down payments when you purchase a home. The first is a down payment, which varies from 20% down, to 3% down, to 0% down depending on the type of loan and your financial stance.

Talking with a Realtor and Lender is a great way to find out what you qualify for!

Second is the earnest money, which is typically 1% of the purchase price. This also goes towards your mortgage amount and is basically a way of proving your dedication to the seller for purchasing their home.

#4 - Updates

In a rental when you make updates or paint it is benefiting someone else, and you only get to enjoy the benefits for the year or years you live there.

When you remodel, update, or paint your home you are adding value. Value that comes back to you when you sell down the road.

#5 - Maintenance

When you rent, maintenance and the expenses is taken care of by the landlord typically. I have seen cases sadly where the landlord blamed the maintenance issue was blamed on the tenants and they were charged for the maintenance call.

Owning a home does mean you are the one calling and scheduling maintenance, as well as taking care of smaller maintenance projects yourself. This is something to take into consideration when buying, especially when buying older homes. However I will say when you make the call, you know that you are getting a licensed professional coming out and typically they can get someone to you in the next day or so depending on the issue. For furnaces on cold days, they will try to get out same day, I know this from experience from my last home.

Fixes also add value!

Working in property management there were a lot of times we were short on maintenance workers, which meant maintenance requests were not always attended to in the timeliest manner. I remember one winter where a couple furnaces went out and people were having heating issues, some were not taken care of for a couple days because owners refused to hire it out and wanted our maintenance workers to take care of it saving them money.

The amount of angry phone calls I got from renters and parents was not fun.

I would see these same situations in the fall for flooding basements and AC units.

#5 - Flexibility

When renting and in a lease, you are obligated for a year typically, and have to give a 60-day notice. With some landlords (not all) at a cost you can break your lease earlier if something comes up, it does vary per company or landlord, however. You can also try to find someone to take over your lease, so you don't have keep paying rent for an empty apartment. In this case you may have to pay a re-rental fee, but it is sometimes an option.

I've sadly seen situations where tenants have paid the landlord a fee to help them re-rent their apartment and market it, and the landlord rented and showed the vacant units before theirs.

When you own a home, there is such thing as capital gains tax, which is tax on any profit you've made in the home if you sell under 2 years of occupancy. Sometimes there are ways around this, but definitely hard to avoid. The avg time that a person lives in a home is typically 5 years, of course the longer you stay in your home the more equity you will gain.

TIP: If you bought a home and are already wanting to move on, think about turning your home into a rental!

It's your life!

It truly is a preference and sometimes just where you are in life. It is always a good idea to take a step back and make a plan for yourself and your future!

Alot of people don't know that you are able to run your credit with a lender once a year without being dinged to figure out where you are and what you can do to prepare yourself!

If you are wanting to find out where you stand in the home buying process and what more you can do to prepare, reach out and I will help connect you with the right people and help you plan!

I'm always with you for the long run :)