The Buyer's Market versus the Renter's Market
Renting several years ago was thought of as preposterous due to the vibrant climate of property purchasing.
NAR research the last year or so has shown a steady increase for renting in the real estate market. First-time home buyers, which make up 40% of the real estate market, are hesitant to invest in a market that's apparently plummeting.
But are these rental practices worthwhile? Could you be saving more money by investing than just spending on monthly rent? Let's evaluate the qualities and inefficiencies of each. Renting is currently favored because it's supposedly cheap and convenient. However, buying benefits are stability and return on your property investment. Rental has no strong financial risks and can have year-to-year or even month-to-month contracts. Then, when a lease agreement is over it's completely up to the landlord whether or not you can stay.
The biggest problem with renting is that you'll receive a guaranteed zero percent return on your investment. And, in many cases you wouldn't be spending much more on purchasing a home than you would to rent one. Most rental property comes with lofty moving in costs that is within reach of a down payment. For example: first month, last month and a security deposit can equal half or two-thirds of what you put in a down payment towards purchasing a property.
The current real estate market is symptomatic of balancing off. When prices hit rock bottom it will be the best opportunity for potential property owners to step up and invest. Buying a home may be a risky proposition in the current real estate market, but when you consider the prospect of renting property and spending similar amounts to buying it becomes a much more viable option.
- Last edited November 12 2008
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.
Contributors to this article include:
- 427 Contributions