Better Than Renting

January 18th, 2012 by keithandkinsey

In the Madison area the cost of renting is very comparable to the cost of buying when you look at monthly payments on a mortgage versus the monthly rental amount of a similar property. Many renters have said to me things like:

“Why would I buy when the real estate market is in such turmoil?”

“Why would I want the responsibility of ownership when I can rent for the same cost?”

“There’s no guarantee the market will go up in value.”

“I’m single, why would I own a house.”

I’m sure you can find a thousand other blogs that will explain the values of home ownership in terms of; appreciation, equity growth, stability, tax deductions, and freedom. However, I’m going to give you a real life example of one of our properties that didn’t really have profitable looking numbers.

Yesterday we closed on the sale of my old house. This was my bachelor pad prior to meeting Kinsey and moving in together. When I bought this house I never intended for it to be an investment. I was more concerned about having garage and driveway space to tinker with the combined 6 vehicles my roommate and I owned. I was also excited about the awesome yard space to grill out and party.

Thinking like a bachelor when I bought the house (in late 2003), I wasn’t concerned about resale value, and I didn’t care that the house had a few things that may hurt resale. Well, several years later I met the love of my life and later moved in with her and we got hitched. At the time I moved in with Kinsey (in 2009) the real estate market was in a steep decline. So rather than sell, we decided to rent the house and wait until the market recovered. Well here we are in the beginning of 2012, selling a house just past the bottom of the market.

We decided to sell in a down market, because it would put us in a much better position for buying our long term home. In any case, I bought the house for $159,200 in 2003, and did over $9000 worth of improvements. While I lived there I always had a roommate. After I moved out, we rented the house and lost a little on the rental. We sold the house for $166,900 with a $1400 closing credit. Sounds like a bad loosing deal right???

Take a look at this chart of incomes and expenses over the time I owned the property. It still looks like a losing deal right? Not so fast…

This “loosing property” only cost me $213 per month to live in! I challenge you to find a 3 bedroom 2 bathroom house on 3/4 of acre to rent for $213/per month in this area! Good luck!

This property was rented for $1195 per month (and that was probably a little cheap). So, even on a losing deal, I saved $982 per month over renting a comparable property!

Can you still make the argument renting is better than buying? The only instances I believe renting is better than buying are; If you aren’t planning to stay in the same place for more than a few years, you live in an area where ownership costs much more than renting, or you aren’t on stable financial ground.

Posted in Blog, Income Property, Money, Real Estate