The Wall Street Journal recently published an article indicating that vacancy rates have dropped to 4.7% across the nation, resulting in increases in rents. As a real estate agent, you may have renters that question whether or not it is cheaper for them to rent or to buy. While there are many factors to consider (such as how long the person will be living in that area), here’s a few things to tell your prospective buyer to consider from a real estate math perspective:
Consider all of your rental expenses:
- What is your monthly rent?
- What does the rent include and exclude? Utilities? Internet? TV?
- How much would it cost to break your lease early if you decided to buy?
Now consider the expenses of owning a home?
- Do you have enough down payment to buy a place?
- What will your mortgage payment be, including taxes and insurance? Consider talking with a lender to see what your options are.
- What will your expenses be (e.g., utilities, HOA fee, home repairs)?
- Owning a home allows you to deduct your mortgage interest on your taxes. Will you get a tax break from owning a home?
- Can you buy a place and rent out one of the rooms? Or rent out your parking space? This allows someone else to help you pay for your mortgage!
As we all know, mortgage rates are at an all time low, making a great case for renters to buy. However, each renter is in a unique financial situation, so in some cases, it may make more sense to rent than to buy. By helping your renter understand the real estate math behind deciding whether to rent or buy, he or she can understand the financial implications of the decision. Even if your renter decides not to buy, you have helped them make that decision. When they ARE ready to buy, they will come back to you!