By Paul Branton, Director of Investor Services at Home Rental Services
People buy or rent homes for lots of reasons. And I find myself being asked the question, “should I rent or own a home?” on a regular basis. Here are five reasons that it is still smart to rent instead of owning a home in Kansas City.
1) Housing Inventory
Inventory is low and it’s a very expensive time to buy. In just the past year, Kansas City has seen sales prices rise 11.6%. In contrast, rental housing inventory is stable and rental pricing has leveled off.
2) Maintenance and Repairs
Are you ready, willing and able to pony up extra money every year to cover general maintenance, repairs and improvements if you owned your home? Industry experts say that this will cost on average 1-2% of the property value. So, if you go out and buy a $200,000 house, you should anticipate and budget $2,000 – $4,000 per year to maintain your property.
Have you committed to living in Kansas City long term? If you put less than 10% down on the purchase of a home and need to sell within the first three (or so) years of ownership, you will likely not make anything when you sell. And hopefully you don’t actually lose money!
4) Down Payment
Are you ready to break open your piggy bank and lose access to those funds for the next (fill in the blank) years? Depending on your down payment, which varies by lender and loan type, you’ll need to put down anywhere between 3% and 20%. If you put less than 20% down, you will almost always be subject to paying what is called “PMI” or private mortgage insurance. This can easily add another $50-$200 per month to your mortgage payment.
5) Market Conditions
While we don’t expect a “bubble bursting” experience like we saw a decade ago, I still believe we’re in store for prices to start easing. You don’t want to put yourself in the position of buying at the top of the market, only to lose value shortly thereafter.
Don’t worry about rising interest rates. The difference between 4% and 4.5% on a 30-year mortgage (or even a 15-year mortgage) is about $10,000 – $20,000 more in interest over the life of the loan. This difference can be made up (in part or entirely) by buying the same house for less money when the market adjusts. It’s also quite unlikely that you will have the same loan the entire time you own the house. It’s likely you will either refinance or sell the house before you pay it off.
Those are just a few of the reasons why renting in Kansas City may be a better decision for you right now.