What’s Your Rent Worth?
I hear it all the time; people figure what they are paying in rent is just about right for the home they are living in. And after that, just don’t think about it very much. Basically accepting it.
Most have heard Realtors or someone on TV say it’s cheaper to buy a home than to rent one, but what does that mean and does anyone really believe it?
So I Had this Idea…
I wanted to provide a simple and transparent way for people to see the numbers for themselves. I looked for automated ways of doing this and came up flat. Calculators and generic computations are far too broad for an individual to get a true feel of what I’m trying to help them accomplish.
I would actually have to take the time myself to analyze individual circumstances, it would have to be free and fun, with no strings attached.
But Before We Go There, WHY?
Ownership is this magical concept that seriously changes things financially. Not just home ownership but all ownership. It’s the bases of wealth. Far too many non-rich / non-wealthy people never really grasp this idea.
Ownership is the idea that the buck stops with you. If you are using something that someone else owns then you must have their permission of pay them, if you are that person then someone will need your permission and pay you. It’s that simple.
If you have a mortgage of course you are paying the loan off but you are not paying for the house, it’s already paid for.
That’s right, you are not paying off the house you are paying off the loan with a special piece of paper called a promissory note. The home is completely yours and used as collateral for the loan. Therefore with each payment you are paying both yourself and the bank. I think we all know what’s happening when we pay rent.
Here’s What I Came Up With
Those that would like a personalized report showcasing what homes they could afford based on what they’re paying in rent would only have to send me the amount they pay and give me the city they’d like to live in.
In return I’d take that info and use it to determine whats available in today’s market that would yield the same total monthly payment in the city they request.
A purchasers total monthly payment would include everything associated with the monthly out of pocket fees, including the estimated taxes and insurances. So you would see your rent vs. your loan payment , interest, taxes and insurance, plus any PMI (mortgage insurance) and HOA (homeowner association) fees.
If it’s hard to believe that one rent could be more expensive than all of those things above combined, know that it gets worse. Investment properties are taxed as non-homesteaded properties here in Michigan so they’re taxed at a higher rate for the landlord. And of course those rates are transferred onto the tenant.
The Bottom Line…
So here’s the bottom line… There are multiple reasons that factor into rent prices being higher than purchase prices. Of course right? The easiest one to grasp is that investors and landlord are in business to make money. The investor has to exceed his monthly cost in order to make a profit. Nothing wrong with that, in fact if you have the opportunity to become an investor it’s highly recommended that you take advantage of it. But know that when you are renting you are literately paying someone else’s expenses with a cherry on top making them wealthier using the same money that you should be using to establish your own .
Remember ownership is the key to wealth. If you’d like to know what your rent can do for you, don’t forget to send me your rent amount and the city that you’d like to live in.
Tyson Reeves is an Award Winning Real Estate Broker that has been servicing Oakland, Macomb, and Wayne county for well over a decade. His down-to-earth trusting personality and skillful assertiveness has been the winning formula for client success. Contact Tyson for your next real estate goal.