Should You Rent or Buy a House in Missouri?
If you walk into a barber shop and ask anyone working if they should get a haircut, they’ll say yes every time. If you walk into a bar and ask if you should have a drink, you’ll be told absolutely every single time. If you ask a real estate agent if you should buy a home, you bet your a** they’ll see you as thousands upon thousands of dollars worth of commission.
Today, I am going to arm you with the information you need to make your own decision whether to buy or rent. Any real estate professional including real estate attorneys, lenders, title companies, etc, will also always tell you to buy. Why? Because a lot of different people make good money on every real estate translation. Including me!
My name is Greyson Roberts, a Realtor and owner of BOSS Properties in the greater Springfield, Missouri area. BOSS Properties, yes, does partake in real estate sales but also real estate education and contrary to popular belief, buying is NOT always in the best interest of my clients. Some think that buying is 100% of the time the right decision. Let’s talk about that.
Renting
All you need to rent a home is likely a security deposit and a decent credit score. It’s extremely easy to end up with any rental home you want even if you can’t afford it. Once I even faked paystubs to qualify for a particular rental property I used to live in. It’s easy and cheap!
Also, as a renter, you’re not responsible for leaky toilets and roof replacements. That not only gives you peace of mind but doesn’t cost you a penny. You pay your rent and that’s it. If you put holes in the wall or rip off the carpet, you’re on the hook for damages you cause. I found that out the hard way.
Now, that sounds pretty awesome! Cheap to get into and sounds like nice peace of mind. That’s true! Renting certainly has its benefits, however, you’re building your landlord’s wealth, not yours. Rent is essentially 100% interest. You’re not building any equity in the asset you’re living in. So although it’s easy, you’re not setting yourself up for passive net worth building. Let’s get into buying.
Purchasing
Now, you will be responsible for leaky toilets and bad refrigerators. Also, you’ll need a hefty down payment. Even if you qualify for an FHA loan at 3.5% down, you’d still be spending thousands of dollars plus closing costs. This can easily add up to $10k after it’s all said and down even on a more affordable home. However, you’re not actually spending that money.
You’re not spending $10k. Although this number obviously could be way more or way less, depending on your particular deal, we will use it as an example. You’re simply moving $10k of your net worth from cash to equity.
Not only that, did you know your monthly payments could easily be cheaper via buying vs renting? Although it’s more of an upfront investment, you could save money monthly. Here’s an example.
The average rent here in my city for a 3/2 home is about $2k/mo. Did you know that you could afford a $300k home with a 3.5% down payment at 4% interest? That’s nicer than most rental houses out there.
Here’s another example. Most rental properties are on the lower end of the quality spectrum. Let’s say the house you’re renting for $2k/mo is worth roughly $200k. If you were paying a mortgage, your monthly payments would only be around $1,300. That’s $700 in monthly savings! A.K.A. $8,400/ yr or $84,000 after only a decade!
Not only could you make your monthly living cost cheaper, but you’re paying off your home. Every month, you’re slowly building more and more equity in your home, and after a while you’ll own your 6 figure asset right. Making your payments build your net worth through loan paydown and equity build up EVERY MONTH! Rest easy knowing you’re building your wealth each and every time you hit submit payment.
Not only do you save money each month, pay off your own mortgage and of course have complete freedom to paint walls and renovate. You also build your net worth another way, in your sleep, passively through a wonderful and powerful thing called appreciation.
Have you heard your grandparents talk about a coke used to cost 10 cents back in their day? Maybe they bought a brand new car for $5k and a home for $50k. Well, as you’ve probably noticed, things are much more expensive these days. It’s called inflation. Every year, things slowly get more and more expensive, including real estate.
This means while you’re saving money and paying off your own mortgage, year over year your home is becoming worth more and more. You’re essentially printing money in 3 ways. This is why real estate has made more millionaires in the world than any other business on planet earth. Plus, did I mention you get some major tax benefits to save you even more money on taxes every year that are exclusively unique to real estate?
Long story short, if you don’t have much to invest (only a few hundred dollars) you probably shouldn’t spend your last dime on a down payment just to be stuck with a home that needs a $5k roof. Also, if you plan on moving quickly, buying also doesn’t always make sense. But as you can see, if you can truly afford it, buying is MAJOR in building your wealth without you even thinking about it. Not to mention the freedom to do virtually whatever you want with your property.
Not to mention, lenders are STRICT. It’s very difficult to buy a home that you can’t truly afford, unlike renting, where landlords will rent to anybody just to fill the vacancy so they can go back to having someone else build their wealth for them. There are also loan programs and contract strategies to buy a home with almost or literally zero dollars. However, that’s my job to help you out with. Thanks and see you next time!