If you’re considering whether it would be better to buy or rent a home in today’s real estate market, here is an analysis that might make the decision easier.
A snap shot of the rental market in Mesa, Arizona reveals owners of rental homes with 1700 square feet of living space featuring a two-car garage are currently asking an average of $1,300 per month for rent. That’s an increase since July of 2006 when the average rent for an equivalent home was $1,160. Those two numbers set the range one might reasonably expect to pay if renting a similar home today in Mesa.
Compare the above with recent sales in Mesa suggest that an equivalent home could be bought for approximately $260,000. The monthly expense associated with buying will rely upon the amount being financed as follows:
Zero Down Payment 20% Down Loan Balance: $260,000 $208,000 P & I @ 7% $1,720 @6.5% $1,308 Taxes 100 100 Homeowners Insurance 75 75 Approximate Monthly Payment $1,895 $1,483
The tax advantage at a 28% tax rate: $470/mo. $355/mo.
Net cost of ownership $1,425 $1,128
Since there is almost no initial expense associated with renting, the most reasonable comparison is comparing the “zero” down cash flow to the rental market. Reasonable expectations are the rent will be from a low of $1,160 to a high of $1,300. That’s a difference of from $265 to $125 monthly with the economic advantage to renting.
Fortunately for those of us who make our livelihood selling real estate, the “human factors” outweigh the strictly economic factors in the final analysis. Most people buy rather than rent to provide a stable environment for their families. They’re concerned with being in a neighborhood that has good schools and low crime. Then there’s pride of ownership most people won’t be able to put a value on.
Back in the economic column, home ownership still has tremendous investment potential. For most people, their homes will be the single best investment they’ll ever make. The long-term benefits far outweigh the short run savings of from $265 to $125 per month.
Bill Shipp is a 35 year Realtor in the Arizona residential marketplace. His website http://www.homebuyingbasicsaz.com is a site that allows Free No Registration Home Searches throughout Arizona, information about the process and about Arizona. http://www.homebuyingbasicsaz.com is the first site of a system of sites that will comprise http://homebuyingbasics.com, a nation wide network of similar sites. For more information, contact Mr. Shipp at info@homebuyingbasicsaz.com
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