When newcomers ask me about renting a house in Colorado Springs, it makes me smile a little inside, because once more begins the age old question of rent vs buy. Don’t get me wrong, renting is the best answer for some people based on factors that go way beyond just the financial issues. Some people CAN’T buy right now because of credit, debt or job factors, and some people SHOULDN’T buy because of their job situation, etc. But for those that can, here are some hard facts.
- A house that sells for $200,000 or so in our market will typically rent for $1200/month or so (depends on area etc)
- The principal and interest payment (PI) on a $200,000 loan (not purchase price, loan amount) is only $926 at the current VA rate of 3.75%. This is plus taxes, insurance and mortgage insurance if required, and you have to allow some maintenance costs on a house you own, but this is quite a spread. To put that in perspective, at the height of the market when rates were 6.5%, the same payment would have been $1264.
- A $200,000 house today might have been $230,000 or so in 2006, making the spread even wider.
- The selection of rental homes is shrinking, and while our current inventory of homes for sale is at a 10 year low, there are still over 3200 homes for sale, and this number will grow as the selling season arrives (typically there are closer to 5,000). You have more choices when you buy. Moreover, many rental homes have rules regarding pets etc that you don’t have to worry about when you buy. And you can ‘feather your nest’ any way you like, not worrying about nail holes in the walls, etc.
- Rental rates are likely to increase over time, but when you buy a home on a 30 year fixed mortgage, they can’t raise the rent on you, or decide to the sell the house to someone else and make you move. And at the end of 30 years, you own the property outright, eliminating your mortgage payment altogether.