We would like to know why it is that to rent a home it will cost you $1200 or more but if you had the ability to buy it your mortgage maybe half that?

Asked by Stephanie Reed, Chicago, IL Thu May 16, 2013

We do not plan to rent for long maybe a year but probably less.

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19
Sari Levy, Agent, Addison, IL
Thu May 16, 2013
The rent/buy economics have totally flipped in the last couple of years. It's all about supply and demand. A lot of people can't buy because they need the flexibility of renting or they don't have the financial means to buy (e.g. down payment). Therefore, rents have gone up. But now prices of homes are rising so buying will become more expensive.
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1 vote
Laurie Chris…, Agent, Oak Park, IL
Thu May 16, 2013
The payment estimates on this site do not take into account any property taxes or insurance, which significantly adds to the monthly payment. However, in many areas right now it is cheaper to own than it is to rent. Property values and interest rates have fallen quite a bit over the last several years, and homeownership is the most affordable it has been in decades. Rents are going up because many people have lost their homes due to foreclosure, and many other would-be buyers are delaying their purchase due to the economy, job market, student & consumer debt, etc, creating more demand for rental properties. I'm happy to recommend some mortgage lenders if you'd like to explore the loan & down payment options as well as down payment/closing cost assistance that may be available to you. Best of luck!
1 vote
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Thank you for your response Laurie, issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Carl Ben Wit…, Agent, Upper Montclair, NJ
Tue May 21, 2013
Check it out. http://www.trulia.com/property/3117035170-1020-W-Cullerton-S…

20% down, under 1200 month possible. Looks pretty good to me.
0 votes
Joe Schiller, Agent, Chicago, IL
Fri May 17, 2013
because landlords are smarter than everyone else
0 votes
Suzanne Hami…, Agent, Orland Park, IL
Fri May 17, 2013
Buying is always cheaper than renting. The landlord has to make money on their investment. That's why keeping your credit up is so important, so you can be a buyer not a renter and save and build equity, etc.
0 votes
Bill J Delig…, Agent, Naperville, IL
Fri May 17, 2013
In 2013 it is HARDER to borrow money than it was 4-5 yrs ago. Many previous owners either sold their home via a Short Sale of lost it to Foreclosure. These people need to live somewhere and therefore are renting. Add in the regular group of renters, and you have HIGH demand for rentals, therefore higher prices.

If you qualify for a loan, now is the time to borrow money.
0 votes
Curly Sue, , Texas
Fri May 17, 2013
I doubt the mortgage would be half that - with taxes & insurance - but renting is more expensive than buying. Wouldn't you think it should be?
0 votes
Ivan Sagel, Agent, Chicago, IL
Fri May 17, 2013
Stephanie,

There is a little more to the equation, but it is better to be a landlord than a tenant.

Best regards,

Ivan Sagel
312.515.7823
ivan@atproperties.com
http://www.atproperties.com/agents/IvanSagel
0 votes
Edith Karoli…, Agent, Winnetka, IL
Fri May 17, 2013
I think your numbers are off in a big way....
The rent for the home owner is usually only covering part of the homeowners expenses, repairs, empty months with no rent, and insurance and taxes.... and the homeowners and the rental market is always based on supply and demand in each of the market areas...

Those who cannot buy, because they do not have a reasonable enough down payment available or
credit issues etc. their only choice is to rent!

But when looking at how much it will cost a buyer to own a property, that is very different from paying
rent, as all other expenses to insure, maintain, repair, and pay the mortgage all needs to be added, in rents often water or electricity or landscaping is included, when you become the homeowner it is all
out of YOUR pocket, as well as all the repairs!!!

So careful with the numbers!!!!!!!

Sincerely yours,
Edith YourRealtor4Life & Chicago and Northern Illinois Expert

Working always in the very BEST interest of her clients, Buyers, Sellers and Investors alike....
And always with a SMILE 
Covering for @Properties the city of Chicago, all N and NW suburbs, the fine homes on the
North Shore, and many of the W and SW suburbs, and with her trusted Partner Agents all of
the US and worldwide properties. Edith speaks French, German, some Spanish and other.....
@Properties Brokerage, 30 Green Bay Road, Winnetka, Illinois 60093
EdithSellsHomes@gmail.com
Check out my website at htttp://tinyurl.com/YourRealtor4Life
HAVE THE MOST WONDERFUL DAY :)
0 votes
Geoff Ommen, Agent, Barrington, IL
Fri May 17, 2013
The real math is fairly easy to break down. For this example, lets use a $150,000 home with 3% down. Generally speaking, people that are renting and then looking to buy are not making large down payments when they buy. 3% or 5% down are the most popular minimums today. All these numbers are estimates, but they will be a good ballpark. In this imaginary purchase, this would be your true costs.

Mortgage $600
Mortgage Insurance $150
Taxes $400
Landscaping $50
Property Insurance $75
Total $1275

When I am working with a rent to own client, I use this math (but more accurate to the property of course) to help determine the rent. Then when the buyer takes over the property on their own, there is no "sticker shock". Your rent payment and your ownership payment are virtually the same. The bonus is you get tax relief once you buy.

Geoff Ommen
Broker Baird & Warner
847-271-2622
geoff.ommen@bairdwarner.com
http://www.geoffgetsit.com
0 votes
Bill Eckler, Agent, Venice, FL
Fri May 17, 2013
Stephanie,

Ownership definitely has its advantages but I'd recommend reworking the numbers and considering all of the expenses included in ownership: taxes, insurance, maintenance costs, HOA fees, etc. Believing ownership is half the cost of renting will likely take on an entirely different perspective.

Respectfully,

Bill
0 votes
Annette Law…, Agent, Palm Harbor, FL
Fri May 17, 2013
Sari really shed some light on your situation.
Those seeking shelter have just a few options. When options are limited, consumer choice does not have a compelling influence on prices. Those investor types wanting to rent their real estate know what choices you have and will price to optimize their investment in that property. That is what free enterprise is all about. The most aggregious and predatory of these options are the lease/option or Rent to own.
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If you had purchased 2 or 3 years ago when real estate professional were jumping up and down yelling, "Prices will NEVER be lower!" you would indeed be one of those investor types optmizing their investment income.
-
Now, you need to hear again those real estate professionals who are saying, "IT's less expensive to own than rent." You may find it beneficial to position yourself to purchase a home as soon as you are fully qualified. However, getting the real facts (real facts DO NOT EXIST ON AGGREGATE REAL ESTSTE WEBSITES LIKE ZILLOW AND TRULIA) will prove crucial in your decision making process. Until then, 'Why?" can only be answered with, "Because "they" can charge whatever the market will allow."

Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
0 votes
Carl Ben Wit…, Agent, Upper Montclair, NJ
Fri May 17, 2013
I believe that you will find that the cost factor of the rental is roughly all but 1 to 10% of the rent charged. Operating expenses for a rental are taxes, repairs and sometimes water, garbage, homeowner's fees, a vacancy factor for missed rent months, and building insurance. Add to the value of money which might be the interest on a loan to buy the property. Sometimes heat is included in rent and if so is not equivelant to cost of buying, but might be wasted by tenant since there is no incentive to conserve. As others have said, the market dictates the rents, "supply and demand", supported by dollars and cents. Buying you have a chance to build equity; renting there is no chance. But a home for 1200 month? Buy 225K, put 10% down (22,500) borrow 202,500. Figure $4 per 1000 borrowed per month, $810. Add taxes, 200 month, add insurance 100 month, equats $1,110 month. Is your credit score good enough to get the best rate, under 4%? What can you buy for 225,000? Where is it? How are the schools?
0 votes
Philip Sencer, Agent, Chicago, IL
Fri May 17, 2013
I find it hard to believe that any mortgage can be $600/mo if it includes taxes, but it is true that it can cast about the same to own as to rent.
0 votes
Thomas Kossn…, Agent, Chicago, IL
Thu May 16, 2013
Mathematics works in strange ways, doesn't it. It depends upon different factors. Your best bet is to sit down before you are ready and speak with a mortgage provider. Whether it be a bank or a mortgage broker. They can better break down costs and payments for you. Then you will have a clearer picture. You will of course also want to get pre approved before you begin your home search.
0 votes
Matt Laricy, Agent, Chicago, IL
Thu May 16, 2013
The sales is typically cheaper, but if you can't buy, your only option is to rent.
0 votes
JIM Michaels, Agent, Chicago, IL
Thu May 16, 2013
email the property in question and I will break it down
0 votes
Pete Burke, Agent, Schaumburg, IL
Thu May 16, 2013
The price of real estate in the sale and rental markets, as we all know from the last 5 years, is based on supply of property and the demand. for that property. Home sale prices plunged because there was no demand for the available homes. If renters are willing to pay a given rent, that is the market, The same rules apply in the sale market. With that kind of price difference maybe you should consider purchasing.
0 votes
The issue is when you may not be in a position to buy financially but you are working diligently towards it. Your family desperately needs a place to live and you cannot see paying $900 to $1200 for an apartment. There is a house the is $120k perfect for my family but of course the seller just wants to sell out right. If he did want to rent it would be for $1200 or more, I get it but it is not right. Again thank you for the reply, it is appreciated.
Flag Thu May 16, 2013
Santiago Ken…, Agent, Chicago, IL
Thu May 16, 2013
Plus taxes and insurance ..trulia calculation no include insurance and no taxes
0 votes
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