I have a steal on rent. Right now I am paying $400 per month. I knew the landlord so he cut me a good deal. However, most people in this neighborhood pay more like $600-$800 per person per month. In a 4 bedroom house that is easily $2400-$3200 per month. Mortgage payments might be less than that.
People around the country are making similar discoveries. People are finding that buying a house or condo costs less per month than renting. It is important to note that this is on a cash flow basis only, buying is almost always a better decision in the long run for net worth and investing.
If you were wondering how this works, I am glad you are here. That is exactly what I was planning to tell you.
So, lets say you pick an average neighborhood in Denver, Colorado, my hometown. Lets say average rents are $600-$800, as described above. Now lets say you can buy a house for $200,000. At current rates, if you put 20% down, your monthly payment might be as low as $1,050 per month. If you live with a roommate at only $500 per month, you are making money.
Let’s look at this through another lens. If you live about 15 minutes down the road, you can find a great downtown apartment for $1200 per month. Condos in the same neighborhood start below $200,000. At the same rates, you can see the $200 cash flow savings per month.
If you are starting to think entrepreneurial, I am in a neighborhood near a campus with many renters. You can buy a $200,000 house with 4 bedrooms and charge $600 per room per month. After your mortgage payment, you are making $1200 per month in profit. Given there are other costs of owning the home, you get the idea of how this works.
Someone I know used that logic when he bought a house. He lived in it with three other roommates for a couple of years. They were each paying him $500 plus their share of utilities. Based on the price of nearby houses, he was not making a lot, but his rent was free. He has since moved out and rents the extra room for $500, ensuring a monthly profit of at least $500. At the end, he is also building equity in the house on the renter’s dime.
So, if you are looking to move sometime in the near future, it might be a good idea to look at buying too. You could save money, or make money, in the long run.
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