THE BOLD TRUTH:

Rent sucks and I know what you can do about it.

Okay, you might expect a Real Estate Agent to have a post with that title, but I'm going to surprise the doubters by hauling out a spreadsheet and proving it with numbers. Rent is not your best option...really.

The fact is that if you have moderately decent credit you can qualify for 100 percent financing. The more you have for a down payment, the better your interest rates and the lower your payments, but even so, you can make it.

The first thing to remember is that you have to live somewhere. When you buy, you place your cost of housing forevermore under your own control. Inflation means nothing to the housing costs of someone who's already bought. Rising rents means nothing - unless you've bought an investment property to rent out, also. We are currently facing a period wherein rents are rising precipitously. Why? Low vacancy rates (2.4% in Utah), and many landlords facing adjustable rate mortgages that are going to adjust upwards. It doesn't matter that your landlord has been nice up to now. They were banking on selling for a profit and right now, they can't. When the monthly outlay goes up, they're going to raise the rent. They will get it, too. If you won't pay it, someone else will.

Once you have bought, you step off of that one way escalator of rising rents. Rents increase at a yearly rate about comparable to inflation in most cases, and rents never drop. I have never heard of a rent decrease except in areas that were so far gone they might as well have been war zones.

So buying stops your situation from getting worse. What about making your situation better? First off, you need to observe that with rising rents, your situation will always get worse until you do buy. But buying really does make your situation better. Not immediately; there's always a hit for buying, and it always costs money to sell. But within a couple of years the average person will be above any reasonable return they can earn any other way, and the reason is leverage.

Fact one: you always need a place to live, and the options are to rent or to buy. Renting typically requires less cash flow, but returns nothing. Once you have bought, all that lovely appreciation belongs to you and nobody else but. Let's look at an actual scenario for Utah.

I looked at one particular property earlier today with an asking price of $220,000. We're going to leave aside the issue that with the market as it is, $205,000 would be a really terrific offer, and use that $220,000 asking price. The most comparable rental in the area is $1700 per month. With sellers outnumbering buyers 36 to 1 right now, it's an idiotic seller who isn't willing to pay your closing costs. Your payment on your mortgage is $1381.43. Call it $1382.00 with rounding. I'm going to assume you're married, which means you get a $10200 standard deduction on your federal taxes for 2008. Furthermore, property taxes are about $929 per year or $78 per month and homeowner's insurance costs about $25 per month for an HO-3 policy, the best there is. Total cost of housing: $1485 per month. This might be higher than your current rent (or less in Vernal). But $400 of that goes straight into your own pocket, in the form of principal you're paying off from month one.   Does your Landlord pay you back each month for rent? Nope.

As a renter (or new homebuyer at this point) you will need to remember that your home will appreciate or gain value. In Utah our home value usually doubles every 8-10 years on average. That is excellent news for you, the new homebuyer. The home you purchased for $220,000 today will increase in value $190-230,000 on average. That means your home could be worth $450,000 in time. Does your landlord double down your payment for rent? At best he'll fix that leaky faucet you've complained about.

Now the real estate market doesn't always earn nice smooth returns like this. Neither does the stock market, or anything except maybe bank CDs or the money market, at a fraction of the return illustrated here. It takes about three years to come out ahead on a real estate investment. There are always the twenty percent per year markets, but those don't happen very often and never predictably. We have seen that market in many areas of the State. What I'm talking about here is making money in the slightly below average market years also. Note that you'll still make twenty percent in the years the market does. Sometimes you get lucky. But "time in" is so much more important than timing that they don't even play in the same league.

You don't have to be a genius, you don't have to have perfect credit, and you don't have to make a mint. You do have to pick a home that you can afford to make the payments on. The sooner you make the choice to accept them, the better off you will be.

If you're ready to ditch the landlord and start purchasing call me today. I can help you get qualified and approved to take the next step into home ownership.

Call me today.  I promise to save you from your next rent payment.

Kyle Ashworth- 435-790-2544
Email- kyle@kyleashworth.com

You can also contact my lender Ben Kaufman by calling 1-866-373-4700 or by completing an application now.