Thinking About Renting Versus Buying

by BlueWater Realty of Pine Island, Inc 07/07/2019

There are several ways to think about renting versus buying. Conventional wisdom might say that buying, and therefore owning, a home is always better. However, your situation may be different. Before you jump in the buying pool, consider how the costs might stack up for you.

How to think about housing

Say that you are moving to a new city and cannot decide if you should rent or buy. Think about this scenario:

If a home is on the market for rent for $1500, or $18000 per year and that fits your monthly budget, but an identical house in the same neighborhood is for sale for $400,000. Do you rent or do you buy?

  • If you buy a house, you will make a down payment. For ease of calculation, you put down $100,000.
  • Also, you must take out a mortgage for the remaining $300,000 for thirty years fixed.
  • For simplicity, assume you get your mortgage for six percent.
  • Every month you pay your mortgage bill of about $1800, and it includes both interest and principal. Using an amortization calculator, you will see that for the first year about $1500 per month goes toward interest and roughly $300 goes to pay down the mortgage. While these change year over year where the amount toward interest goes down and the amount toward principal goes up, it stays around the $1500 interest to $300 principal for the first several years, so it works for our comparison.

In our comparison, during the first year, you will pay $18,000 for rent, and you will also pay $18,000 in mortgage payments. Now is when the calculations get trickier.Potentially, you will have savings on your income taxes for the interest paid. The way that works is that you subtract the amount of the interest paid from your entire gross income. After all your other deductions, you may end up with a few thousand less in taxes due. So, for this year that might be (hypothetically) $3000. That means your annual home cost is now down to $15,000. However, you also had to pay property taxes. To be conservative, calculate that at 1% or $4000. That puts you at $19,000. You also had to pay homeowners insurance. A conservative number for that is about $200 per month or $2400 per year. Your costs now equal $21,400.

One more calculation to consider is that the $100,00 you put in as a down payment you would still have as an investment if you rented. If you just kept it in a savings account with a 2% return, you would have an annual income of $2000.

So, for this year, as a renter, your effective outgo would be $16,000 compared to $21,400 for you as an owner. These numbers do not account for any maintenance, repair, or upkeep expenditures you have as an owner.

In this scenario, dollar for dollar, owning might not be your best choice. However, dollars are not the only reason to buy. Talk to your real estate professional about the intangibles of home ownership, before you decide.

About the Author
Author

BlueWater Realty of Pine Island, Inc

Phil Gilles Direct: 239-425-5423 Email: [email protected] Donna Gilles Direct: 239-425-5426 Email: [email protected] Donna and Phil Gilles are two of the most respected Pine Island Florida Real Estate Agents. Their dependability, honesty and integrity are truly a "cut above” in the real estate profession. Having vacationed in Southwest Florida for several years and owning on Pine Island for eleven years, Donna and Phil could no longer resist the magnetism of Pine Island and moved to the island in 1998. Donna and Phil started BlueWater Realty of Pine Island on September 11, 2002, realizing Pine Island was in need of a real estate family that was a step above the mass marketers that dominate the real estate profession. Donna and Phil are both members of the Realtor Association of Fort Myers and the Beach, the Florida Association of Realtors, the National Association of Realtors, the Multiple Listing Service, and the Pine Island Chamber of Commerce. Donna and Phil’s in depth real estate training include investment management, brokerage, marketing high-end homes, real estate law, ethics and practice. Both Donna and Phil achieved the Graduate Realtor Institute designation in 2006. If your immediate future requires counseling in the purchase or sale of real estate, please contact Donna or Phil. They are professionals who will work hard for you to help achieve your real estate goals. The professional GRI (Graduate Realtor® Institute) designated real estate team at BlueWater Realty of Pine Island specializes in assisting prospective Pine Island residents in locating and purchasing their "piece of paradise” in Bokeelia, Pineland, St. James City and Matlacha. BlueWater Realty of Pine Island also provides a "no hassle, no cost” listing service for customers who wish to sell their Pine Island properties. Let the team at BlueWater Realty of Pine Island provide you with the best professional assistance available when selling or buying Pine Island real estate. Contact us at 239-283-7500 for more details. Pine Island, Florida is a short distance from Cape Coral and Fort Myers, Florida, however, our lifestyles and quality of life are worlds apart. Our four-way stop at Pine Island Center is an invitation to turn north toward Bokeelia and Pineland or south to St. James City. Whichever direction you turn, you will experience an atmosphere that exists in few Florida communities. Instead of high rises, asphalt and concrete, you will find low density development with the accent being on preservation and nature – not development. Residents of Pine Island revel in the extraordinary wildlife that inhabits our island, including sea birds of all varieties and colors, manatees, dolphin and other wildlife of all species. Pine Island offers some of the best fishing and boating in Florida. Boat to a secluded beach on Cayo Costa or island hop to the many eateries offering abundant seafood varieties. Fishing opportunities are endless. Inshore fisheries include snook, redfish, trout and world-class tarpon fishing, which has made our waters famous. Offshore fishing for grouper and snapper are excellent with many natural and artificial reefs. There is no better time than right now to purchase your "piece of paradise” on Pine Island. Interest rates are near an all-time low and prices are approximately 40% lower than they were just five years ago. The GRI (Graduate Realtor® Institute) designated Realtors® at BlueWater Realty of Pine Island can make a difference. When you see the letters GRI after an agent’s name, you can count on receiving the knowledge and guidance to ensure a smooth real estate transaction. In short, you can count on getting the best service available from a real estate professional. We want to be your Pine Island Realtor®. Call 239-283-7500 today. When it comes to finding a peaceful community in southwest Florida, Pine Island stands out as a leading place to find a second home, vacation spot or quiet place to retire to after long days in the Florida sun. Although Pine Island is actually the largest island on the Gulf Coast, it is a casual and laid-back place and the perfect spot for secondary homes. If you ever decide Pine Island is the right place for you, you have four beautiful neighborhoods to choose from. Whether you are looking for a gorgeous beachfront home, or a location inland, you will find everything you are looking for and more on this island, including a close-knit community, still active during the day before letting the night drift in and close down the island. Getting to and from the island is simple and the island itself is only an hour away from the Southwest Florida International Airport. Better yet, because the economy of Pine Island thrives on local fishing, it is a great spot for anglers to spend the day fishing or newcomers to begin fishing and develop a new passion. The island is also the ideal spot for relaxing activities like kayaking, hiking, and boating, among others. Visitors and residents alike will quickly find the island is a quiet community where the nightlife dies down by the end of the evening. You will be able to have fun without having to worry about noisy visitors keeping you up all night. Rest and relaxation comes at a premium these days, but Pine Island affords residents the opportunity to comfortably enjoy life. The residents here are just as diverse as the activities you can take part in. Artists, musicians, business professionals, retired attorneys, teachers and snowbirds all call Pine Island home. Even raising a family provides you an opportunity to raise children in a diverse environment with culture and life thriving around them. Still, this tiny part of Florida brings something unique to Pine Island livinganyone who visits it. As Pine Island was described in an article in Coastal Living Magazine, "A slice of Old Florida ‘country’ still thrives on this lush, green isle.” These are just a few of the perks of living on Pine Island. We hope to continually update our blog with community news, real estate updates and information regarding Southwest Florida and Pine Island, as well