SterlingResidential.com | Buying & Selling Residential Properties in Texas | Houses for Rent Houston Area | Humble Atascocita Kingwood & Spring Texas Realtors | Sterling Residential®, Realtors® | Real Estate Broker: Rent Versus Buy -- When Renting Makes Sense

In recent years, Houston property values and homeownership costs have outpaced rental rates. Real estate investment is also up, increasing the number of available rental units. Just in the last few years, the number of Houston apartment units has increased by thousands, making the market for tenants highly competitive. For now, it’s a tenant’s rental market.

While it seems like everybody is buying real estate in today’s market, don’t let feelings of being left out influence a prudent decision to hold off on that home purchase. Renting makes good sense if you’re not prepared for the time and money investment required to buy and maintain a home.

When should you choose renting over buying? Some time ago, a corporate manager asked me the same question. She’d just been transferred to Houston from Boston for a project lasting up to two years. Although interested in purchasing a home, I recommended renting. Market conditions at that time dictated a minimum holding period of two years so that she could build enough equity to cover her selling costs. Fortunately, she’d taken my advice because her company, Enron, went bust a few months later and her job was in jeopardy. The story illustrates two points: your employment stability and holding period are two essential considerations for a home buying decision.

Another consideration is the easy-credit zero or no down-payment loans offered by many lenders. While zero or low down-payment loans are attractive, cash strapped buyers are particularly vulnerable to unexpected expenses after closing. Even budgeted expenses are subject to inflation. As property values increase, so do property taxes. Texas homeowner insurance rates are among the highest in the nation and are going up even further. If you’ve used an adjustable or interest-only loan to make your purchase, you’ll need to plan for the inevitable increase in your monthly payments — and don’t count on refinancing to keep your notes low. Waiting to purchase when you’ve built up your cash reserves is often smarter.

After examining your personal and financial situation, have a look at the numbers to determine whether renting or buying makes good economic sense. The Rent-vs-Buy calculator takes into account financing, selling, and tax consequences to determine your breakeven point —- how long you would have to remain in your home to recoup the costs of buying and selling.

Renting is a better solution when you start a new job, if you plan to move within a few years, if your purchase leaves you strapped for cash, or if you don’t foresee a rise in income to offset rising homeownership costs. Rental rates have not kept up with homeownership costs, and renting represents a great value and an attractive alternative to homeownership for many people.

John Huval, Broker Realtor® GRI e-Pro Copyright© 2006