Rent Versus Buy - The Real Cost of Renting!

By
Real Estate Broker/Owner with www.GreenHomeRealty.com 0548772
http://actvra.in/l9h

Being in real estate I hear Realtors talking all the time that it's better to own than rent.  I know that the general population thinks we say that just 'cause we want to sell more houses.  So let's take a REAL LOOK at why it is better to own than rent.

Set the stage:  The average price (mean) of a home in San Antonio, Texas is $156,000Given 30 years at 12 monthly payments on an FHA loan at 3.85% (today's market rate for outstanding credit score) compared to a rental payment of $1250 (including rental insurance).

 

Using my handy dandy rent v. buy calculator I get the following results in a full comparison:


Estimated Savings with Ownership vs. Renting

 

Number Of Years To Compare:   10
 
Concerning Rent: (Scenario One)
Rent Amount Per Month:   $1,200.00
Monthly Renter's Insurance:   $50.00
 
Concerning Home Ownership:
Purchase Price:   $156,000
House's Appreciation Rate:   1%     (very conservative rate)
State & Federal Tax Rate:   .25%  (federal income tax rate varies)
Loan Amount:   $150,540.00
Interest Rate:   3.85%  (today's rates for prime credit scores)
Number Of Years:   30
Discount Points:   0%
Origination Fee:   1%
Other Loan Costs:   $1,000.00 
Annual Property Taxes:   $4,200.00
Annual Maintenance Costs:   $1,000.00  (varies by owner)
Annual Homeowners Insurance:   $100.00
Selling Costs:   6%   (varies by Realtor)
 
RESULTS
Total Rent Per Month:   $1,250.00
Total Rent:   $150,000.00
 
Monthly Principal & Interest (PI):   $1,063.74
House Total:   $140,154.67
 
Selling Price:   $172,321.05
Total Tax Savings:   $235.36
Equity At Time Of Sale:   $54,324.51
Money Saved Through Home Ownership:   $38,760.61

 

Owning a home would cost $48,605.94 less than renting.

 

 
Notes: This data is for informational purposes only and accuracy of the figures hereinafter set forth is not guaranteed. The actual costs with respect to each transaction will vary depending upon the circumstances.

 

A you can plainly see, that owning a home is a more financially savvy way to manage your money. It gets even better over time - say 30 years.

THERE ARE OTHER (NON FINANCIAL) BENEFITS TOO!

  • You get to decorate however you want!
  • You get to own whatever pets that you want!
  • You get a pride of ownership & accomplishment!
  • You get a more stable life!
  • You save money not moving every 12 months by not moving, again!
  • You get a sense of community!

 

So what's stopping you from calling me today?

A note from Cathy Bureau - I received several comments regarding the assumptions that I made and a few errors. I went back and made an adjustment for insurance ($100/mo not year), 25% instead of .25% on federal tax savings, $7500 for closing costs on the acquistion, and $3,000 per year for maintenance (grossly high but to address some comments).  I' leaving the appreciation at 1% per year, again, to be very conservative for my neigh sayers.  The revised savings is $40,390.47 cheaper to buy than to rent.  The bigger picutre, however, is that if you can stay put for 30 years the savings is a whopping $148,190.5


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Re-Bloggged 4 times:

Re-Blogged By Re-Blogged At
  1. Kathy Schowe 10/12/2011 01:03 PM
  2. Charles Stallions 10/15/2011 07:33 AM
  3. Praful Thakkar 10/16/2011 10:26 PM
  4. Michelle Cooks 03/17/2012 09:49 PM
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Show All Comments
Rainmaker
687,003
Kwee Huset
Venice Florida Homes For Sale
Kwee Huset Realty

Cathy, congratulations on your FEATURED post. Great illustration of savings with ownership vs renting. Continued success!

October 12, 2011 09:47 PM
Rainmaker
647,735
Evelyn Kennedy
Alameda, Real Estate, Alameda, CA
Gallagher & Lindsey, Alameda, California

Cathy:

Your simple and clear analysis of rent vs. own is very good.  You lay out the fact for rents to see that they should become buyers.

October 12, 2011 09:55 PM
Ambassador
736,324
Jerry Newman
Texas REALTOR, San Antonio Military Relocation
Green Home Realty, 210-789-4216,www.Selling-SanAntonioHomes.com

Cathy, I came back to Congratulate you a well deserved Featured Post. I called this Shot but didn't say anything when I did. I know it was bound to be Featured.

October 12, 2011 11:32 PM
Rainmaker
360,327
Cathy Bureau
Your Personal Real Estate Concierge
www.GreenHomeRealty.com

Dear Consumer,

you brought up some very good points. I was trying out a new rent v buy calculator and there are a few relatively small errors from my input but rather inconsequential considering the amount of money on the table. I will be making an adjustment on this shortly.The insurance is $100/mo not year.  Yes double but so are your assets doubled. I won't make an adjustment for utilities as some have suggested because I'm comparing apples to apples so the size of the home is the same, so are the utility bills.  There is a bigger tax break than what I gave due to a decimal error too, in favor of the buy. There are 2 types of investment put back into the home, repairs/maintenance and then there are upgrades. Landscaping, painting, new cabinets, etc are an upgrade. Replace a broken window, roof repair, plumbing repair is maintenance. In an older home there will be more. I have been a home owner for over 20 years and I haven't spent more than a couple thousand a year on maintenance but many thousands on upgrades. This is just a baseline understanding of the comparison. Thanks for taking the time to write. I hope you come back to find me here. I'm also on Trulia.com. Blessings.

October 13, 2011 12:08 AM
Rainmaker
360,327
Cathy Bureau
Your Personal Real Estate Concierge
www.GreenHomeRealty.com

Richard - Ummm super cute ghost right?  I'm just kinda silly like that.

Fullmalls.com - You know you hit it big when fullmalls.com hits you back!

Kwee - Thanks!

Evelyn - Thanks and glad you liked the simplicity of it.

Jerry - You're the bomb!  Love you!

 

October 13, 2011 12:10 AM
Rainmaker
338,151
Lloyd Binen
Silicon Valley R since 1976;408-565-8177
Certified Realty Services

Cathy,

I addition to the economic advantages and the other advantages you've mentioned, don't forget that the home is owned free and clear in 30 years of less.  Rent continues forever and ever; loan payments stop when the loan is paid off.

October 13, 2011 01:18 AM
Rainmaker
1,153,540
Cheryl Ritchie
Southern Maryland 301-980-7566
RE/MAX Leading Edge www.GoldenResults.com
That is neat. Where do you get the rent vs buy calculator?
October 13, 2011 01:33 AM
Rainmaker
63,934
Kimberley Rosenstein
Superior Service
HomeSmart

Great information Cathy.  The information was layed out easily for renters to understand the benefits with facts.  Thank you.

October 13, 2011 02:09 AM
Rainmaker
158,785
Angelica Blatt
Selling the Monterey Peninsula over 15 years!
DeLuca Real Estate

The sad part is that so many people that are displaced or have lost there home can't buy right now. But I do agree that it is always better to own then rent.

October 13, 2011 07:56 AM
Rainmaker
1,048,730
Scott Godzyk
One of Manchester NH's Leading Agents
Godzyk Real Estate Services

Congratulations on your featured post Cathy. Great post as you get right to the point without alot of fluff. I agree utilities should not be included as you would pay them if you own or if you rent. Have a great day

October 13, 2011 09:01 AM
Rainmaker
133,486
Sherri Wellborn
Murfreesboro TN Homes & Real Estate
Reliant Realty, Murfreesboro

Cathy - I thought you laid out your argument on why it makes MORE financial sense to buy vs. rent perfectly.  You have to live somewhere and right now it just makes more sense to buy than rent!  Great post and congrats on being featured!

October 13, 2011 10:50 AM
Rainmaker
145,120
Kevin Vitali
Helping Massachusetts Home Buyers and Home Sellers
EXIT Realty- Massachusetts Short Sales & Residential Sales

Cathy- Thanks for taking the time to do the calculations and spell out the difference between renting and owning a home in a clear and concise manner.

October 13, 2011 10:58 AM
Ambassador
895,064
Missy Caulk
Realtor - Ann Arbor Real Estate
Missy Caulk TEAM

I have an app on my Iphone that compares so I always use that, makes it easy. 

It is by homes.com and a free App. 

October 13, 2011 11:08 AM
Rainmaker
247,267
Bruce Kunz
REALTOR®, Howell NJ Homes for Sale
Bruce Kunz @ Veltri & Associates, 866-483-5874 x464

Great information, Cathy!  Proving the "it's better to buy than to rent" mantra with and apples to apples comparison is really well done.
Interestingly, many of the younger people are opting to rent, even when they can afford a down payment, because they do not want to be "tied down". It's not always dollars that is important - especially with so many expecting to change employers every few years throughout their careers...
Thanks for posting!
Bruce

October 13, 2011 12:58 PM
Rainer
154,413
Lisa Dunham
REALTOR, MBA, CDPE, Alexandria VA Real Estate, Short Sales
Keller Williams Realty

Excellent post Cathy!  I love the level of details you included here.  Great job and a well-deserved feature!

October 13, 2011 02:37 PM
Rainmaker
1,322,713
Charles Stallions
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.
Charles Stallions Real Estate Services

Excellent post and I reblogged it so my clients would get the facts as well thanks for all your hard work.

October 17, 2011 10:18 PM
Rainmaker
233,086
Mark Montross
Listing and Buyer Specialist
Catamount Realty Group

Cathy, fantastic article. You make some very good points and it is a very compelling article for home ownership!

February 21, 2012 07:26 PM
Rainer
45,004
Jairo Arreola
VA Home Loan Specialist - SF Bay Area - South Bay - San Jose
Aladdin Realty

thanks for the breakdown Cathy! Hope you have a great week!

March 04, 2012 09:53 PM
Rainmaker
826,568
Tim Lorenz
949 874-2247
TIM LORENZ - Elite Home Sales Team

Great job and it is such a no brainer for the potential buyer.

March 17, 2012 09:53 PM
Ambassador
502,626
Lynn B. Friedman
REALTOR ATL BuckheadMidtownWestside 404.939.2727
- - - Concierge Real Estate Services for YOU - - - Providing SERVICE for Sellers & Buyers is our BUSINESS

Cathy -

You certainly put a lot of information into this post! Consumers will learn tons from your very hard effort. And REALTORS will learn as well.

Have a happy day -
Lynn 

July 21, 2012 11:38 PM
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Rainmaker
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Cathy Bureau

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