Buying Properties vs. Renting

I hope you are doing well and I hear it is a great weekend of weather and to buy a new home. So let’s go out and have some fun. 

I have been pushing people to buy homes for the past 30 years and maybe my mind is a bit twisted, but I always see value in purchasing a property. The only thing better than buying one property, is buying two, three, four or more. Interest rates came down a tad again this week and I thought I would show you some numbers on buying a property. I mentioned last week that I had two available rentals and we put them on the market for 5 days and I have 7 renters for the 2 properties. Both of these properties are worth about $700,000.00, and both will rent for $3,495.00. If you were to buy a similar property since mine are not for sale, then you would have the following options:

• FHA 3.5% down - all in payment $4,068.00 including taxes and insurance, but you are paying down 1,257.11 the first month in principal so the true cost is $2,811.00 not including appreciation. 
• With 5% down on a conventional loan, your payment would be $3,782.16 including taxes and insurance, but you are paying down $1,165.00 the first month in principal so the true cost is $2,617.00 not including appreciation. 
• With 10% down on a conventional loan, your payment would be $3,558.49 including taxes and insurance, but you are paying down $1,104.00 the first month in principal so the true cost is $2,454.00 not including appreciation. 
• With 15% down on a conventional loan, your payment would be $3,372.16 including taxes and insurance, but you are paying down $1,043.00 the first month in principal so the true cost is $2,329.00 not including appreciation. 
• With 20% down on a conventional loan, your payment would be $2,998.08 including taxes and insurance, but you are paying down $987.00 the first month in principal so the true cost is $2,011.08 not including appreciation. 

Add 3% appreciation to the above and then you have $21,000.00 annual earnings there, and divide that by 12 = $1,750.00 per month. Subtract that $1,750.00 from the number on the right and that is the true cost of owning a home. Now, do me a favor and compare that to $3,495.00 in rent and tell me why it makes sense to rent! Conversation is over because it makes no sense to rent unless you are somewhere for a very short time.  

Interest rates are still incredibly good! Rates have been below 3.50% 15 months in the past 60 + years. Below 3% - 5 months in the past 2020 years!  

• 30 year conventional loans are in the High 2’s for the most part!  
• 30 year Government Loans (FHA / VA) are in the low and mid 2’s with some high 2’s
• High Balance Loans $548,250.00-822,375.00 are in the high 2’s and low 3’s
• Jumbo loans above $822,375.00 are in the high 2’s to low 3’s. We now have investors back to 15% down!
• Bank statement loans – They are available with 10% down again! No the rates are not in the 3’s, but you can get in the 4’s with good credit and a lot down!
• Stated income loans - I have one bank with 30% down, but everything else has to be perfect!    
• 0 down loans are in the low high 2’s - 660 credit score min right now!
• Private Money lenders – hard Money Loans - 35% down! 
• First time Buyers Tax Credits are back, but on a very limited basis! 20% Tax credit on the interest they pay! Fabulous program! 
• Bridge Loans – are typically 5.99% - 6.99% - But they get you where you need to go! 

Interest rates are subject to change without notice! Above are LA County Loan Limits. 

I will be in and out of the office all weekend and I will be in the office most of the day on Monday. We have two really important events this weekend. The Rams and the Packers and my wife Kelly is celebrating her 39th birthday again! My cell phone is always on if I am not in the office and yes, I do speak during Rams games, but I usually shut the phone off late in the 4th quarter for about 15 minutes. Raider fans will be available all weekend and so will Charger fans! My cell # is 661-714-6258 and my office line is 661-260-2970 xt. 2222. My email works really well and that is [email protected].  Have a happy rest of your week and a wonderful MLK Weekend!