Rent vs Buy in Denver>Question Details

judy, Other/Just Looking in Elizabeth, CO

What do I need to consider in determining?

Asked by judy, Elizabeth, CO Tue Jun 24, 2008

whether to rent or buy in the northwest Denver market right now?

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What an excellent question!

Personally, I wanted to buy a house as soon as we could, and have lived in our own house ever since, in 3 different states. I didn't like renting, because we weren't allowed to do so many things we wanted to do, and because we didn't have the huge tax benefit that owning provides.

I have a one-page explanation and comparison of the monetary aspects of renting vs. buying that I'll send you if you want!

But I always suggest people start by thinking about how much they can afford. Then, contact an agent and see some homes in the price range that allows. Some agents won't show you homes until you're pre-qualified, but I will (in the interest of education. I believe knowledge is power).

I wonder if you're renting now? The reason I ask is that I have a couple of rental houses in Westminster and what I'm hearing is that rents are going up, and it's hard to find a place in decent shape. That's another thing - if you get a fixed loan, your payments can't be arbitrarily raised every year like a landlord can do (if taxes or insurance go up, your payment will increase slightly).

There are a lot of other things to consider, too - like how long you plan to stay put? But I'd prefer to chat as we're out looking at homes, so let me know if you're up for that!
0 votes Thank Flag Link Wed Jun 25, 2008
I would agree that loan qualification and approval are the most important factors in determining whether you should rent or purchase, no matter what geographic area you're considering. It is usually possible to get the seller of the property you purchase to pay for your closing costs which are usually 2-3% of the purchase price. It may also be possible to get the seller to help you with the downpayment or pay all of it. FHA loans, which are the easiest to qualify for and usually have the lowest rates, require 3% down, but they do allow sellers to pay that for you. However, when you're asking sellers to cover some costs for you, you are usually required to make it worthwhile for them by offering them a good purchase price. Another thing to consider is the tax benefit of owning as opposed to renting. It's a bit lengthy to explain here, but because of the tax benefits of home owning, you are able to increase your exemptions so that less tax is taken out of your paycheck, giving you more money to make your mortgage payments. It is often said that a $1200 mortgage payment is equal to $1,000 rent payment when you consider the tax break you'll get. This really just illustrates the benefit, because the actual amount of your decreased tax witholdings depends upon the amount of your mortgage payment and your property tax. This tax break results from the fact that all the interest you pay in your mortgage payment, which is about 90% of the payment or more, and all of your property tax is deductible. Many people are suspicious of this practice, but it's only because they aren't aware of it. It's completely legitimate and approved by the IRS. Essentially, what you're doing is trading a good-sized tax return in the spring for having more in your paycheck each month. It's your money whichever way you want to receive it. Are you aware that as a buyer, it costs you nothing to be represented by a Buyer's Agent/Realtor? When they work with you to purchase a property, they are compensated for their efforts by the seller of the home you purchase. In working with a Buyer's Agent, you can be assured that your interests are represented and that you have access to all the knowledge/experience a Realtor has of the buying process, including the inspection, the appraisal, etc.
If you're considering purchasing in Northwest Denver, it's important that you choose an agent who is experienced in working with vintage properties. Their knowledge will be essential in helping you assess the suitability of a property you may be considering.
0 votes Thank Flag Link Tue Jun 24, 2008
Parts of NW Denver are really pretty hot right now (Highlands comes to mind) but there are many, many factors to consider (your financial position first and foremost). After determining whether or not buying now makes sense, can you really afford the down payment, closing costs and the cost of financing, then you can look at neighborhoods to determine if values are good and increasing.
I"d be more than happy to help with all of these and other aspects of your decision making process.
Feel free to contact me if I can be of any assistance, even if just to discuss what you want to accomplish.
Chuck Strauss
Keller Williams DTC
720-318-7598
CStrauss@kw.com
0 votes Thank Flag Link Tue Jun 24, 2008
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