The Cost of Renting Vs Buying


Let’s talk about the cost of renting vs buying.  Is buying a home the more financially profitable decision in the long run?  The rent vs buy decision can include many factors, and we will cover the factors I am asked about the most.  I wouldn’t try to put a dollar value on the experience of owning your own home versus renting, or assign merit to the stability that tends to come with ownership verses the flexibility of movement that may come with renting.  Let’s just look at some of the basic financial reasons for buying vs renting:

What do you get for your dollars?

One way to look at the rent a home vs buy a home decision is to consider what you get for your housing dollars.  The typical 3 bedroom 2 bath home in Smyrna TN rents for about $1500.  A home buyer with that same monthly payment applied to a mortgage would get a larger and/or nicer home with no landlord and no rent increases!  You might be surprised at just how much house you can buy for $1500/mo.

Along those lines, here’s an interesting comparison.  Take a look at the housing available for rent and the housing available to purchase in Smyrna, TN.  Both searches have been set to approximate the $1500/mo payment.  (We could do the same rent vs buy analysis of housing in Murfreesboro, Nashville, or anywhere else in Middle TN with similar results.)

Renting $1500/mo.  Here are the homes for rent in Smyrna, TN up to $1500/mo.

Buying $1500/mo.  Here are the homes for sale in Smyrna, TN up to $250,000 (approximately $1500/mo or less,  including taxes and insurance)

Clearly, you have more choices and can get more home for your money in Smyrna, TN by owning your own home.

What about housing cost increases?

Many people I speak to fear that they can’t afford to purchase a home because of increasing home prices.  Increasing property values actually work in homeowners’ favor.  Landlords increase rent prices regularly.  Every time you sign a new lease, you may have to pay a higher monthly payment.  On the other hand, fixed-rate mortgage payments don’t increase.  That’s right.  The typical FHA, VA, or conventional mortgage terms require the principal and interest portion of the payment (P&I) to remain the same throughout the life of the loan.  30 years with no mortgage payment increases?  That’s right!

Down payments smaller than your security deposit

Another fear renters have related to affordability has to do with the down payment.  Some people think they have to have a large sum of money to put down on a home.  That’s just not the case.  There are many low down payment, no down payment, and 100% financed mortgages available to qualified home buyers.  Down payments in the 3-6% range are typical.  Your plans, income, credit scores, and other factors all create a picture pointing to the best strategy for you to use.  (This is where it really comes in handy to speak to an excellent mortgage lender who knows about all of the programs – national, state, and local – available to you.)

How much of your income should go towards housing costs?

This is a question that touches on income, cost of living, and choices about how you want to live.  Have you ever heard that 20-30% of your income should go towards housing?  It doesn’t have to be so high.  For homeowners, the numbers are usually much lower:

Some Highlights:
  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

Check out these new listings in Smyrna, TN 37167

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Aaron Lovett is a full-service Realtor in Smyrna, TN.  His service area includes Smyrna, Murfreesboro, the remainder of Rutherford county and surrounding areas, including Nashville and Davidson county. He cares for the needs of sellers, buyers, and investors. Aaron has lived in the area for over a decade. He takes pride in helping home buyers and sellers reach their real estate goals.

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