Navy Fellas Realty Group

Real Estate, Residential sales and purchase

Most Renters Are Paying Far More Than Their Landlord’s Mortgage

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Most Renters Are Paying Far More Than Their Landlord's MortgageIt is not uncommon for renters to pay more in rent than their landlord’s mortgage payment. This is because landlords are typically looking to make a profit on their rental properties, and they will often set their rent prices based on market rates rather than the cost of their mortgage.

There are several reasons why renters often pay more than a mortgage payment:

Renters are not building equity: When you make a mortgage payment, you are building equity in your home. Equity is the value of your home that you actually own. As you pay down your mortgage, you own more and more of your home. Renters, on the other hand, are not building equity in their homes. They are simply paying for the use of the property.

Renters don’t get tax benefits: Homeowners can deduct their mortgage interest and property taxes from their income taxes, which can save them a significant amount of money. Renters, on the other hand, do not get these tax benefits.

Landlords have to cover maintenance costs: When you rent a property, the landlord is responsible for maintenance and repairs. This includes everything from fixing a leaky faucet to replacing a roof. These costs are factored into the rent payment, so renters end up paying for these expenses indirectly.

Supply and demand: Depending on the area and the rental market, there may be more demand for rental properties than there is supply. This can drive up rental prices, making them higher than mortgage payments.

Location: In some areas, it may simply be more expensive to rent than it is to buy a home. This can be due to a variety of factors, such as high demand, limited supply, or a desirable location.

Overall, there are many factors that can contribute to renters paying more than a mortgage payment. It’s important to note that while renters may feel like they are paying more than their landlord’s mortgage, they are also benefiting from the convenience and flexibility of renting. Renters typically do not have to worry about property maintenance or repair costs, and they have the ability to move more easily than homeowners. Renting can still be a good choice for some people, depending on their financial situation and lifestyle.

Owning vs Renting: Why High Rents Are Worse Than a Mortgage over the Long Term

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Owning vs Renting: Why High Rents Are Worse Than a Mortgage over the Long TermIf you’re at the stage in life where home ownership is nearly within your reach, you’re probably wondering whether you should start looking for a home or whether you should just keep renting. Renting is easier, people say, and it gives you more mobility. But over the long term, all that rent money can really add up – and it eventually reaches a point where buying a home is a better deal.

So why is paying a high rent a worse option than buying a house and getting a mortgage? Here’s what you need to know.

Renting Doesn’t Generate Equity

One of the single biggest sources of wealth in the United States is home equity – as you pay down your mortgage, you invest more and more of your money into your property, and it appreciates in value. When you eventually sell that home, you make a profit. The monthly payment is something you’d have to make anyway, whether you rent or own – but when you rent, your monthly rent money lines someone else’s pockets, while when you own, paying down your mortgage actually creates wealth for you.

Renting Doesn’t Give You Access To Homeowner Tax Credits And Deductions

There are all sorts of tax benefits available to homeowners that renters simply can’t access. As a homeowner, you can deduct your mortgage interest from your taxes owing, reducing your taxable income – but there’s no such deduction for renters. You can also deduct property taxes and some closing costs when you buy a home – there are no corresponding tax benefits for renters.

There are also several tax credits available to homeowners that aren’t available to renters. Things like renovations or simply buying a home for the first time can give you tax benefits that renters can’t access.

If You Can Muster Up A Down Payment, Owning Is Cheaper In The Long Run

One of the biggest hurdles keeping young people out of the real estate market is the down payment. It’s not easy, but if you can save up enough money for a down payment, you’re actually better off buying a home than continuing to rent.

According to Trulia, the median home price in metro Houston in Texas is just under $163,000, while the median monthly rent for an apartment is $1,550. That means renting would cost $18,600 per year, while buying a home (assuming a 20% down payment and 30-year term) would cost $9,384 per year in mortgage payments. In other words, owning is about half as expensive as renting in the long run.

Renting may be a good short-term solution, but over the long haul, owning is almost always better. Call a local mortgage professional to learn more.

Rent Is Going Up Across The Country: What People Can Do

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Rent Is Going Up Across The Country: What People Can DoMany people who rent sign a 12-month lease. With many people’s contracts up for renewal during the next few months, people may be surprised to see just how much their rent might be going up in the next year. Just as gas prices, car prices, and prices at the grocery store continue to increase, rent is going up as well. It is important to take a closer look at the reasons why, and what people can do to make their housing costs more affordable. 

Inflation Is Partly To Blame

One of the reasons why rent is getting more expensive is that inflation has reached record levels. Inflation has not been this high since the 1980s, and the cost of everything is getting more expensive. A lot of overhead expenses have gone up, and these rental companies have responded by increasing their prices. With a lot of demand for apartments, rent is going up. 

COVID Pandemic Deals Are Ending

In addition, a lot of rental companies had deals in place to make housing more affordable during the coronavirus pandemic. Some of the major cities provided emergency funding in an effort to keep rent down, particularly as many people were furloughed or laid off. Now that many of these COVID pandemic stipulations are starting to end, apartment buildings are starting to raise their rent significantly.

Buying A Home Is A Way To Save Money

As many people struggle to deal with the sticker shock of their rents going up, it is important to take a look at what people can do to make housing more affordable. Instead of renting, it might be prudent to look at buying a house this year. Interest rates on home loans are still very low, which could make it easier for people to afford a house. Furthermore, unlike rent prices, which tend to increase every time the lease is renewed, people have the option to get a fixed-rate mortgage for 30 years. This means that even as rent continues to go up during the next few decades, the monthly mortgage payment will stay the same even 30 years down the road. Now might be a smart time to buy a house. 

Renters Missed Out On Tens Of Thousands Of Dollars This Past Year

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Renters Missed Out On Tens Of Thousands Of Dollars This Past YearRent has gone up significantly during the past year. Even though it is not unusual for rent to go up over time, the average rent across the country has increased significantly during the past year. This means that the average rent will probably be even higher next year than it is this year. Even though this is one of the biggest deterrents against renting, there are other reasons to get out of the rental market as well. 

Renters Stand To Lose More Money This Year

One of the biggest reasons why renters are losing so much money is that the average value of a house has gone up significantly. During the past year, the average value of a home in the United States increased by more than $50,000. This means that the average homeowner gained this amount of money in equity. Renters do not get the same benefit. Because renters are not investing any money in property, they are not seeing any return on the money they throw away in rent. This means that renters lost tens of thousands of dollars by renting this past year instead of owning. 

Renting Can Be Very Expensive

A lot of people do not want to purchase a house because they are scared of maintenance expenses, property taxes, and the size of the down payment. On the other hand, renting is like throwing money down the drain. The money is going directly into the pocket of the property owner, and the renter is not seeing any sort of return on that investment. Furthermore, even though the price of renting can go up over time, many people who take out a mortgage lock in the rate for 30 years. This means the monthly payment will be the same at the end of the loan as it is at the beginning of the loan. If someone has a steady job, their income is likely to go up during the course of the mortgage, meaning that they have more financial flexibility in the future. Renters need to think carefully about what they can do to get out of the rental market and purchase property before rent increases in the future. 

 

7 Inexpensive Upgrades You Can Make To Your Rental Property

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7 Inexpensive Upgrades You Can Make To Your Rental PropertyUpgrading your rental doesn’t need to cut deeply into your profits. You can add curb appeal and help prospective tenants see your rental as their next home by making some simple changes. The following upgrades are all things that a handy landlord can do without needing to hire professional contractors.

1.  Decorative Switch Plates

Replace ugly cream switch plates with either stainless steel models or decorative designs. Fancy switch plates for light switches and electrical sockets cost very little, yet make any room look nicer. The best part is, you can do the replacements yourself, using only a screwdriver.

2.  Flower Beds

Beautiful flower beds make any rental look more inviting. You can enhance curb appeal by planting inexpensive perennials around the front of the rental and along the pathway leading up to the door. Top off your newly planted flower beds with a fresh layer of colored mulch.

3. Kitchen Cabinet Refacing

Kitchen cabinets are pricey, but it’s cheap to just reface existing cabinets. You can either replace the entire doors or take them off and give them a fresh sanding and a couple of coats of varnish or paint.

4. Fresh Paint

Even quality paint is inexpensive. Give your rental a beautiful new look with fresh paint throughout. You’ll want to use neutral tones, but consider making an accent wall, painted with an attractive color.

5. New Light Fixtures

Old light fixtures make a place look dated. You can pick up inexpensive light fixtures at big box home improvement stores. This simple upgrade will make your rental more attractive and modern.

6. Broom Storage Area

Most rentals don’t come with a broom closet, but you can create a makeshift broom storage area very cheaply. Just pick up some plastic broom holders and a shelf from the hardware store. Attach the broom holders to the wall and hang the shelf over that. Your tenants will appreciate the upgrade!

7. Fresh Window Treatments

Window treatments make a house look like a home. Replace window blinds or shades for an instant upgrade. Curtains are even cheaper and can be laundered and reused between rentals.

No matter where your rental is located, you can make it more attractive with these easy and inexpensive upgrades that you can do yourself.

Buying a Home While Relocating is a Smarter Choice

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Buying a Home While Relocating is a Smarter ChoiceThe idea of buying a home is challenging enough as the process requires a lengthy approval validation, paperwork, financing, and the actual move with logistics. However, when one really looks at what typically occurs with relocation, buying versus renting can start to make more sense over time.

Finances Have to be In Order

Buying a home more than once every ten years requires a good amount of discipline on one’s personal finances. Most of the initial decisions and approvals will depend heavily on keeping one’s debt versus income ratios in line and viable. That also means saving up a lot to have sufficient cash flow for fees and your down payment. It also means not letting credit cards get out of hand or taking on other significant debt unless necessary as both weigh against one’s ability to obtain new financing for the next home purchase.

Renting Versus Owning

Renting or leasing tends to be the go-to option during a relocation because it tends to be easier upfront, has fewer requirements to achieve, and involves less of a significant commitment financially. After all, what happens if there is another relocation just a year later? However, most relocations are fairly defined in time. Anything under a year would make sense for renting, but when one starts getting beyond a year, buying starts to become far more appealing.

First, all the dollars one pays in rent are a sunk cost. If one buys, some of that money goes into home equity. Second, many companies and organizations who relocate their people often have connections for quick purchasing and residential needs, leveraging corporate interests for their employees. This allows for the rotation of homes from one employee to the next and makes buying easier for longer-term stays.

Third, a purchase for a shorter-term stay doesn’t have to be a full-scale home. Smaller units that cost much less are easier to close and can work just as well for temporary living. Relocating buyers should really consider a wide range of housing options in a buy versus just a strict replacement of what they had before.

Finally, market costs in the target location have to be considered. Some markets are very affordable and might be cheaper than renting month to month but others are astronomical, and it simply doesn’t make sense to buy in these regions for a short-term stay.

The Bottom Line

Understand with renting everything paid is gone and won’t be recovered in any form at all. It’s a lost expense. That can be thousands of dollars after one year alone. Buying will have fees, but the money spent on the mortgage each month buys equity which can be recovered in a sale, plus a possible gain as well down the road. Buying doesn’t work in every situation where one is relocated, but it can be a viable option in affordable markets and when one is staying longer than a year.

As always, check with your local real estate professional for the best advice on your relocation and your personal financial situation.