Hi agents, if rent payment is the same or less than a mortgage payment of a similar property, what does this indicate for the market?

Asked by GARCIA KINCAID GROUP, Orange, CA Sat Jan 5, 2013

This morning I received a phone call from a distressed client (buyer), she informed me that her husband (a google software engineer who is a numbers person), told her that if rent payments are less than or the same as a mortgage payment (including any HOA fees), than it was not a good time to buy. I of course went over some basics in the value of home ownership...but I would love to hear your input!

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Kawain Payne’s answer
Kawain Payne, Agent, Seal Beach, CA
Sat Feb 9, 2013
Hello Heather,

I would tell them this:

Whether you rent or buy, you will be paying a mortgage. The question is will you be paying your own mortgage or paying the mortgage of your landlord.

Plus, at the end of a year of paying rent you will see no benefit from the monies you have paid out all year. However, you will see a tax benefit at the end of the year for monies you have paid out during the year for mortgage interest and property taxes.

When renting you pay the mortgage and part, if not all of the property taxes for your landlord, and they get the tax benefits. Does that sound fair or even smart?????

Kawain Payne, Realtor
1 vote
Matthew Hust…, Agent, Mission Viejo, CA
Sat Jan 5, 2013
Heather, Have your clients contact their CPA or tax accountant to discuss their income and the potential tax benefits of home ownership so that they can make an informed decision. Pride of ownership and the ability to improve the property over time to suite their needs are generally inherent benefits as well but with mortgage interest rates at a historic low are indicators that should help. Have them speak to a lender so they understand what they qualify for. Sounds like an intelligent client who needs to be educated on what the right steps are so you can assist them best! Good luck.
0 votes
Yes, I agree, thank you Matt!
Flag Sat Jan 5, 2013
Melchor, REA…, Agent, Orange, CA
Sat Jan 5, 2013
Hello Heather,

That's great that your client's husband tried to figure out all of the reasons (numbers) on why "it is not a good time to buy." Please advise him that regardless of his conclusion, wouldn't he rather have his own home than to be renting.


Melchor Perez
0 votes
Yes, Thank you Melchor! You are right!
Flag Sat Jan 5, 2013
Melissa Chel…, Agent, Orange, CA
Sat Jan 5, 2013
If you want a cut and dry answer- A mortgage payment is an investment that grows each month, a rental payment is a sunk cost each month. Therefore, it's always a good time to buy so long as you can afford to make your payments!
0 votes
I agree Melissa! Thanks!
Flag Sat Jan 5, 2013
"A mortgage payment is an investment that GROWS each month"?
Tell that to the people who bought in 2005 and 2006, or those who are under water and struggling!
Generalizations are slippery slopes online.
Flag Sat Jan 5, 2013
Lori Hanson, Agent, Aliso Viejo, CA
Sat Jan 5, 2013
Are they buying this to live in or is this going to be an investment property? If they are looking at it for an investment well, rents are going up, if they are looking to live in it, well same thing applies, rents are going up.
0 votes
Mahesh Patel, Agent, Anaheim Hills, CA
Sat Jan 5, 2013
check thier motivation to buy.. when they do not want to buy, or not quite ready to buy or not confident to buy,all kinds of questions can come up and may not make sense.

Right now the interest at under 3.50%, prices are down 25% approx from the peak price( at least in OC), prices started going up already,, if that does excite them to buy, maybe he should rent and you can find another buyer that is going to buy now and ready to put several good offers to get a house...

0 votes
Thank you Mahesh!
Flag Sat Jan 5, 2013
Ron Thomas, Agent, Fresno, CA
Sat Jan 5, 2013
For one thing, a small sample does not a conclusion make.
Secondly, both the RENTS and the Mortgage payment are arbitrary numbers.
Third; I use 1.25 as a factor to show reanters how much they can spend on a mortgage.
fourthly; I gave up listening to amateur's opinions, especially about statistics.
0 votes
Yes, thank you Ron!
Flag Sat Jan 5, 2013
Debra (Debbi…, Agent, Livingston, NJ
Sat Jan 5, 2013
If he is a "numbers" person, then did he factor in the NET cost of owning versus renting?

Did he factor in any tax benefits (write offs ) for interest and property taxes?.........

Did he also factor in upkeep/maintenance on a home one owns? - you don't pay for a new roof or furnace when you rent!

I think his statement is rather broad.............you'd also have to factor in what you would do with the (assuming you have it) down payent money if you didn't invest it in a home............what interest would it generate - and how might it grow as compared to investing it in a purchase?

Landlords can raise rent every year , or decide not to rent if it is an owned property (yes, I know - taxes go up, too), but moving is expensive........so that potential cost should at least be considered when looking at the whole picture.

My point is......there are too many variables, imo, to give such a cut and dry answer!!

happy new year!
0 votes
Thank you Debra, perhaps will all "variables" involved is why I had a hard time with this question...Thank you so much for your answer!
Flag Sat Jan 5, 2013
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