Cheaper to Buy than Rent?
Tuesday, August 16, 2011
There has been much publicity in the media, and no doubt from your local real estate agent, that the time has come that house payments may be less expensive than rent payments.
While this is certainly true in some geographic areas, like right here in the Pleasanton & Tri-Valley areas, there is more to maintaining a household than the actual house payment itself. Once you make the leap from renter to homeowner, many maintenance issues and expenses that a landlord has taken care of now become the responsibility of the homeowner. These additional expenses could wipe out any monthly savings you were expecting to gain in your reduced payment.
For example:
- Utilities – as a homeowner these are now solely your responsibility (water, garbage, gas/electric, cable, phone, internet) .
- Property Taxes – in Alameda County, taxes are approximately 1.25% of the purchase price of the home. ($500,000 home = $6250 year in property taxes, or $520.84 per month).
- HOA Fees – if you buy in a homeowners association, be prepared to pay monthly. The cost depends on amenities at the complex (pool, common areas, maintenance, etc.) Do your homework on this!
- Yard maintenance – you now have to buy a lawn mower, edger, blower, tree/shrub trimmer OR hire a gardener
- Pool maintenance – you must consult with an expert at your local pool store on how to maintain your pool, then purchase chlorine, a brush, net, and other chemicals and cleaning supplies OR hire a pool service to maintain your pool.
- General Home Repairs and Appliances – the home you buy might be in great shape when you buy it, but over time, you will need to maintain many things that may have been taken care of by a landlord while you were renting. New water heater = $1000; New heater = $3000; new air conditioner = $5000 +; new refrigerator = $2500; washer/dryer=$1500, New Roof – $10,000+; along with various other repairs like, leaky faucets, plumbing leaks, plumbing stoppages, electrical issues, painting, flooring, garage doors/openers, leaky windows, roof leaks, chimney cracks, fences & gates, the list goes on.
- Insurance – if you have a mortgage, you will be required to carry homeowners insurance on your property. The cost of the insurance is based on the replacement value of your home. For example on my 1800 sf home in Pleasanton, my annual insurance is approximately $700. If you are in a flood zone, add another $500+ per year. If you want Earthquake Insurance, add some more $$.
So, when you are planning to make the leap from renting to homeownership, make sure you consider ALL the expenses you will incur, not just the amount of your house payment. Some of the expenses can be tax deductible, but many are not.
As always, it is a good idea to consult with a real estate professional, professional lender, and CPA to help you gather information to assist you in your home buying decision.




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