Today I was browsing the rental ads for around the Greeley/Evans real estate home market area. From what I saw it appears that rental rates for a 3 bedroom house are somewhere around $1700 a month. More or less depending on the house itself and the location. Plus one should probably add rental insurance to that.
So what would it cost per month to own one of those homes instead of renting?
The average price of an average 3 bedroom home is about $250,000. Currently the interest rate is about 4% and if going with an FHA loan they require 3.5% downpayment. Which out of $250,000 would be $8750. There are programs to help with that downpayment also. These programs are really just small loan programs. Loan closing costs to get that loan would probably be around $6000 or so also. And after that you would have a monthly payment of about $1182 a month. FHA requires mortgage insurance so add another $150 or so a month. That is if you chose a 30 year mortgage. A 15 year mortgage would pay it off much faster, but then a higher payment. If you own a house you have to add about $150 a month for taxes, You will have to pay water where most rentals you don’t. So figure another $100 a month. You would have to have home insurance so figure another $200 a month. I also highly recommend putting away another $200 a month for future repairs. So to own a $250,000 home the monthly payment on a 30 year mortgage plus expenses would be about $2000 a month. Renting would be about $1850 depending on the house. These are just estimates. Each property and person is different.
Plus I don’t like using this as it seems to be the way real estate brokers like to sell people houses. But for now we have a tax deduction for mortgage interest. Though I would consider that kind of a bonus and not really a good reason to buy.
The reasons to buy from my point of view is that the payments on the mortgage shouldn’t go up. Rent can go up. How many times does a landlord offer to lower rent? To get lower rent a person usually has to move. Landlords can kick a renter out after the term of the lease is up. Some landlords don’t keep up properties as they should (many home owners don’t either). So possibly owning a home can be more stable for a person. More freedom on what you do with your property. If you want to upgrade the kitchen you can. If the basement isn’t finished you can finish it. You can do those things as a renter sometimes, but you will be upgrading a property that is not yours.
Why would someone want to rent? First some people are not capable of owning a property. There is more responsibility to owning then renting. Mostly regarding upkeep. If someone is moving to the area quickly and would have to make a quick decision to buy something without really knowing the area I quite often recommend renting for 6 months to a year. Get to know a place. Get to know the neighborhoods, the schools. Then take time finding a place to buy. Because under $250,000 for a house these days a home buyer doesn’t have time to make much of a decision. If a person has the type of job that moves them around the country every 2-3 years possibly renting is a better idea also. If you rent you don’t have to worry about your property losing value and falling less then what the mortgage payoff. Right now we are at very high property values. A home that cost only $120,000 6 short years ago is now $220,000. For those that bought 6 years ago it’s great. Kind of. They could sell and realize quite a gain. But if they want to buy something else it will be expensive also.
I don’t pretend to know where the real estate market is going to go. I won’t say that it will always go up. We know that isn’t true. In fact there are mortgages out there that are very similar to the risky loans that were offered in 2006 before the housing crash. Also we have found it interesting lately that the people that could barely qualify for a $130,000 loan 6 years ago now can magically qualify for a $240,000 loan now. Incomes haven’t gone up that much across the board.
We are not the type of agents to try and talk you into buying or selling a property. We like to provide the right information to you so you can make the best decision for you. If it is to rent it is to rent. If to buy we will help you find the property that best meets your needs and guide you through the process as easily as possible.
If you have any real estate questions give us a call. Marc 970-302-1233 or Yarie 970-381-5356. Or send us an e-mail.