Buying vs Renting – why is 2020 THE year?

Welcome back! I admittedly took a month off this August because we were BUSY. I know that term gets thrown around like a piece of parade candy these days, but the White & Associates in July/August put 21 homes under contract and closed 21 transactions – that is our definition of BUSY. That being said, I thought I would take an opportunity to explain WHY we have been that busy. We had our share of “move-up” buyers and those downsizing… we have seen an influx of relocations to the area this summer (many for the reasons you may be thinking right now), but a good handful and a half were first-time home buyers taking advantage of some really rocking interest rates – the lowest I personally saw was a buyer on a Rural Development loan for 2.25% (WHOA.)

All of these first-time home buyApartment kitcheners were renters when we met. Some renting homes, some in apartments; a couple had pets, others did not; many had roommates or families; the ages ranged from 21-52 years old. There is no ONE description of what a first-time home buyer looks like. But the one thing this group had in common is that they were renting before they purchased.

Are YOU currently a renter? Do you pay your rent monthly to someone else? Do you realize you’re paying THEIR mortgage for them? Let’s stop and break this down:

 

Pros to Renting: Cons to Buying:
Flexibility & Freedom Less flexibility to move when you want
No responsibility in maintenance items Unexpected repairs & maintenance items
Can at times be more affordable/easier to budget Fluctuating taxes and insurance each year
No Home projects on the weekends Maintenance items could cut into your free time

 

Cons to Renting: Pros of Buying:
Your landlord can increase rent at any time Feeling of stability & settlement
No tax benefits to renting Tax benefits from interest paid, real estate taxes
You won’t build equity, as it is not your asset Real Estate is an investment in your future
You cannot make changes without approval Freedom in decorating, renovating, upgrading
If you have pets, you already know… Pets allowed if YOU want!
Landlord can sell the property at any time YOU can sell your property, keep the equity
You are bound to the obligation of your lease No lease! All you have to do is pay your mortgage

 

So, which column are you drawn to? Personally, I’ve moved 15 times in 34 years – all were rentals except this last move- I finally purchased 2 years ago. And let me tell you, I will never rent again. I have put sweat and money into my home to make it mine over the years. And for every project I finish, I feel a huge sense of accomplishment knowing I did it for ME. I recently refinanced and saw a very large increase in my equity. I could sell today and have more than enough money for a down payment on a larger home – or I can keep this home as a rental. Either way, I win.

 

So, let’s look at the numbers. The average rent for a 3 bedroom unit in Rapid City (as of 9/12/2020) is $1,098/ month. I did some math on a mortgage calculator using these numbers:

 Interest Rate: 2.75%

Down Payment: 3% of purchase price(*GIFTED FOR FREE)

Insurance/taxes: $300 per month

Terms: 30 year loan

Home Price: $200,000

And guess what… the monthly payment is $1,092/mo for principal, interest, taxes, and insurance.

An entire mortgage payment on a home YOU OWN for the same as rent. What does $200k look like in the Black Hills? Check out these recently sold homes as of this blog: Click Here to View Listings

Another question you may have is “How can I buy a home with NO money out of pocket”? The best answer is, “talk to a lender”. But for fun, I’ll let you in on some information: There are grants, state funded programs, gift funds, etc. to help you with a down payment (typically 3.5% for first time home buyers). There are also loan programs such as RD (most of the State of SD) and VA (for Veterans) that require ZERO DOWN PAYMENT! Many first-time buyers close on their home with under $1,000 total out of pocket expenses. If you are at all interested in buying, I encourage you to connect with a lender to discuss your options and create a game plan – whether for right now or for next year. Here are some great options:

Lorre Buhler – Gateway Mortgage

605-646-2268 | lorre.buhler@gatewayloan.com | gatewayloan.com/lorre-buhler

 

Mark Abrams – Epoch Lending

605-391-3895 | mark@epochlending.com | mark-abrams.com

 

Lindsay Mitchell – Keller Mortgage

614-310-3120 | lmitchell@kellermortgage.com | kellermortgage.com

 

 

If you think there is still so much to see in this world or you aren’t sure about career choices and where it may take you, or have a lot of debt at the moment, maybe renting is still your best option. But if you feel like your roots are planted (for at least 3-5 years) and you have a steady income, call us! Let’s chat about how we can get you into your first (or next) home while the time is SO right! We can even help you create a timeline for buying in 2021.

Call: 605-646-3336

Email: info@welcomehomeblackhills.com

 

Written by Holly Glatt, REALTOR
The White & Associates Real Estate Team
www.WelcomeHomeBlackHills.com
Keller Williams Realty Black Hills

Rent vs buy table graphic