The Post and Courier, Charleston, S.C., David Slade column
By David Slade, The Post and Courier, Charleston, S.C. | |
McClatchy-Tribune Information Services |
The point is that in some cases, particularly at new apartment complexes in desirable areas, tenants are now paying far more to rent a small unit than it would cost them to pay the mortgage on a nice house. Are these tenants making a bad financial decision?
The answer depends on information including a person's finances, credit-worthiness, risk tolerance and personal preferences. Buying property is, after all, a big decision -- like deciding to marry real estate instead of dating it.
Just looking at the question in dollars-and-cents, there's a good argument to be made in favor of buying, for those who are in a position to buy and have no near-term plans to relocate. The trade-off is, buyers take on financial risk and have less flexibility.
So, how high are the rents that started this discussion?
The Boulevard's website lists one-bedroom apartments starting at around
For context, at today's interest rates,
Rent that same house, and your rent's going to be paying the owner's mortgage, plus roughly triple the property tax an owner-occupant would pay, plus some profit for the owner, and maybe a management fee.
Most people who rent in the
A confluence of factors have pushed up demand for rental housing after the last recession and the housing meltdown. Some people lost piles of money when real estate prices dropped, or watched others lose lots of money, and don't want the economic risk of owning.
Others saw their personal finances and credit scores take a beating during the recession, and may be unable to get financing. Young adults are burdened with college loans, but often are underemployed, and many have delayed what economists call "household formation."
For those who do want to own, there's lots of help available. I've written before about
People who have previously owned a home aren't excluded from these programs. Typically, "first-time buyer" either means you don't currently own a home, or you haven't owned one recently.
Those who truly are first-time buyers do need to do their homework and understand that a monthly mortgage payment is just one of the costs of owning, so you can't just compare a loan payment to a rent payment.
Homeowners insurance can be a huge expense in the
Oh, and don't forget that, like buying a car, a home is essentially worth less the moment you close the sale. With a home, that's because you'll probably have to pay commission of up to 6 percent to sell the home, so it will have to gain value just to break even.
But if all goes well, a home can provide permanence and an opportunity to build wealth. It's a trade-off, of course. Those who aren't ready to make the commitment can keep dating real estate instead of marrying it.
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