Should you rent or buy? We’re talking about this now because buyers have a lot more power in this market with a lower down payment (5%-15%). Previously when interest rates hit rock bottom and the market was super competitive folx with lower down payments had a much harder time getting an offer accepted. Now buyers can get an offer accepted pretty easily and and have negotiating power on top of that! Which is pretty incredible, given that just 6 months ago the opposite was the case. The payoff is higher interest rates for buyers, which can mean slightly higher monthly payments until rates go down and you can refinance. Rates taking a downturn when you want to refinance can be unpredictable, and buyers should only purchase a house they can afford now and later assuming they will keep this current interest rate for awhile.
Advantages of Renting
Less responsibility
Easier to move
Less money needed each year to upkeep a home
More free time, home tasks and yard work take time
If property values decrease you’re not affected by it
It can be less expensive per month, depending on what and where you rent
You don’t have to pay for property insurance (but likely your landlord has rolled those costs into your rent)
You don’t have to pay for property taxes (but likely your landlord has rolled those costs into your rent)
No surprise expenses (like, surprise, you need a new furnace!)
Let’s be honest, renting is easier in a lot of ways. If you want a carefree lifestyle with lots of freetime, renting may be the ticket for you!
Owning a home requires time and money. You have to have some money saved for unexpected expenses, and keeping up a house takes up otherwise free time. But there are some disadvantages as well.
Disadvantages of Renting
Instability- your landlord could ask you to leave or not renew your lease
You have no control over your rent raising
If you live in an apartment, you don’t have your own outdoor space esp if you like to garden
But the absolutely biggest disadvantage is you’re building equity for someone else, when you could be building it for yourself.
What does Building Equity Mean?
Simply owning a property over time builds wealth for yourself. This happens two ways:
1. When you pay your mortgage part of your payment goes towards you principal (what you owe on the house, not the interest), and you’re paying what you owe on your home each month.
2. Simply owning property over time, it appreciates (this depends on your market, but I’m speaking to the Portland market and this has been true, historically). We tell all clients that owning a property for at least 5 years gets you a good return on your investment, and owning for 10 years or more, as long as you maintain it, gets you a great return on your investment.
A Return on Investment—Carla’s personal story
This is the home we sold in 2021
In 2009 we (Myself and my husband) bought a home for $435,000. At the time the real estate market was in free fall and everyone said buying a home was crazy. We invested approximately 95K in it over the 11 years of owning it. Some of the cash we came up with on our own, some we took out with a home equity line of credit.
We sold that house in 2021 for 800k
That’s a profit of $270,000 in 11 years.
But since we were actively paying off our loan with our monthly payments, paired with our initial down payment, we netted much more, closer to 500k with our sale.
Our property appreciated by 84% in 11 years.
some of the updates in the 95k on improvements were: a complete remodel on our kitchen, added air conditioning, new water pipes, converted or oil furnace to gas, added drainage to the property, remodeled the landscaping and the back patio, new roof, cosmetic items like floors, paint, adding an egress window.
Advantages of Buying
Building equity for yourself and your family (number one reason, for sure)
Paying down your own loan with your monthly mortgage payment, not your landlords loan
Freedom of doing what you want to a house
Stability and security
Outdoor space if you like to garden (and you buy a single family home with a yard)
Conclusion
I bought my second home during a time the bottom was falling out of the real estate market. Friends and family thought we were crazy for buying such an “expensive” property. Our friends and family didn’t support our decision at that time, but we knew it was the right time for us.
Home ownership isn’t for everyone. If you feel uncertain in your job or where you living this is not something you should do
It costs a fair amount of money maintaining and updating your home when needed and if you don’t want to budget for unforeseen expenses, it’s not for you
If you can afford to save for a house, it’s a great way to build wealth for yourself and your family
Right now the real estate market is more favorable to buyers than it has in the past few years
If you’re interested in talking more about this, or talking to a lender, please reach out!
Contact Sheet
Carla Mink
carla@altpdx.com–503-317-1302
Sally Schwartz
sally@altpdx.com— 503-319-2617
