Unavoidably these past few days I have been subjected to the media's announcement that it is cheaper to rent than to buy in many areas of the country.
One of the news reports I recently heard (in Orlando) said the typical home in the Orlando area was currently renting at just over $1000 a month, and that the same home purchased would cost about $1700 a month, so the newscaster's opinion was that it was clearly cheaper to rent than to buy.
I disagree. Cheaper today, maybe, but not in the long haul. I have always been taught that any time you put money in your own pocket, you are saving money. If you are giving away $1000 to your landlord, that $1000 is gone and you have zero to show for it. Personally, I would rather put $1700 towards a place of my own than give away my money and get nothing in return.
Clearly, home prices in many markets are finally hovering at or near the bottom. Some areas a reporting a mild increase in pricing. I keep telling everyone that if you find a home you like at a price you can afford and the price is agreeable to you, purchase it TODAY. You may soon find yourself looking in that proverbial rear view mirror and wishing that you had.
Last week, I had a Realtor in my (Jacksonville) office telling me that she had shown a home to a couple, and they decided to make an offer; they didn't get the house. It sold at full price to another buyer. They made a second offer on home choice number two for the full asking price. The seller rejected their offer and accepted an offer from another buyer that was a couple of thousand more than the asking price. Is it an odd coincidence that this couple just missed purchasing two different homes? I don't think so. The real estate market is again moving forward as people move away from the sidelines and enter the market.
On this rent versus buy thing: If I rent a home for $1000, my landlord gets it all, plus he also gets the tax advantage while building equity. I can also plan on not getting my deposit back, because let's face it, the minute I hang any artwork or spill something on the carpet, the landlord is keeping the money for repainting, carpet replacement, etc. So I'm down another grand there.
If I buy a home today, at $1700 a month, I now have the benefit of having a roof over my head that I can count on, and someday, it will be paid for. I am also going to enjoy the tax advantages of the home, and I am also going to do things which I will enjoy doing to improve it and create value. I can hang pictures anywhere I want, paint the walls any color I choose, add landscaping, fencing and whatever else my heart desires. I can rip out carpeting and put down wood flooring, take out the cheap mini blinds or window coverings and install something nice. I can take pride in the fact that this is mine, not the landlords. I may be paying $8400 a year more than rent, but I own it, and since real estate generally does appreciate, by purchasing TODAY I am getting in at the bottom of the market while interest rates are historically low, and some day I too am going to have equity. After all, aren't we supposed to buy low and sell high???? Isn't this the low???
Sorry, but I am never going to rent. I am going to grow my personal wealth by owning my home, and, hey, I may become a landlord again myself because there is always someone who needs to rent. it's just not going to be me.
As a proficient mathematician, I could have done the whole real estate agent worksheet thing which shows the true cost of home ownership, but I don't need to look at a bunch of numbers to know that owning a home of my own is still the greatest financial achievement. Buy low, build equity, trade up, yeah, I got it. That's why I have the gorgeous home I have today compared to the first little brick bungalow I owned in college. I can't wait until my next day off. I'm doing this Venetian plaster thing . . .
That's my thoughts on renting versus buying. I welcome yours.