Las Vegas Sun Newsreal estate:
Which is smarter: Buying or renting a home in the Las Vegas Valley?
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A view of residential rooftops near Horizon Ridge Parkway and Gibson Road in Henderson Wednesday, June 1, 2011.
Wednesday
10 October 2012
2 a.m.
The two houses on Tilden Way look almost identical. They share similar colors, layouts and landscaping.
But there's one big difference between them. One is rented, the other is owned.
They shed light on an important question: Is it cheaper to buy or rent a house?
The answer? Buy — though given valley residents’ widespread credit problems, even the cheapest houses are out of reach for many people.
The valley has one of the shortest “breakeven horizons” in the country. It becomes cheaper to buy a house here than to rent it after an average of only 1.7 years, according to the research firm Zillow. San Jose, Calif., has the longest horizon, at 8.3 years.
But the local rental market also is quite strong, as many people who lost their homes during the recession have no other choice but to rent.
Consider the prices of the two houses on Tilden Way, off North Green Valley Parkway in Henderson.
One was bought in August for $165,000. The buyers pay $961.30 a month for their mortgage, homeowners association dues, insurance and property taxes.
A few doors down, a nearly identical house was rented in late March for $1,595 a month — 66 percent higher than what’s owed by the neighbors.
The two-story homes both are 2,352 square feet with three bathrooms and a three-car garage. The rental has four bedrooms; the owned house, five.
Still, while it might be smarter to buy, some people prefer the flexibility of renting, said Robyn Yates, co-owner of the brokerage firm Windermere Prestige Properties in Henderson. Renters can relocate more easily, they don’t pay for repairs, and they’re not burdened by a mortgage.
Plus, not everyone who wants to buy a home can get one. Having a recent foreclosure or bankruptcy on your record, a common problem in Las Vegas, can make it impossible to get a mortgage. It also can make it more expensive to rent, since landlords often require an additional deposit when leasing to people with bad credit.
For Las Vegans with clean finances, writing a monthly rent check will likely be more expensive than paying off a mortgage. And several federally backed mortgages enable buyers to purchase homes with down payments of only a few thousand dollars.
“Financially, it’s better to buy,” Yates said.
And not just in Henderson.
Krystal Sherry, a broker and property manager with Hudson Real Estate, recently sold a three-bedroom, 1,347-square-foot house off El Capitan Way in northwest Las Vegas for $78,000. The buyer pays about $663 a month for the mortgage, insurance and other costs, she said.
The owner plans to rent the house for between $950 and $1,100 a month, Sherry said. A half-mile away, an identical home was leased in late September for $1,000 a month after being on the market for just 23 days.
Near the intersection of West Patrick Lane and South Grand Canyon Drive in southwest Las Vegas, a two-story, four-bedroom, 1,779-square-foot house with a two-car garage was leased in April for $1,200 a month. An identical house in the same neighborhood would likely sell for $122,000, or $870 a month, Tsunami Properties owner Sue Naumann said.
Many apartments rent for well above $870 per month, with far less square footage.
“And they probably wouldn’t have a garage,” Naumann said.
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The problem with buying is the neighborhood. Are you buying in a neighborhood where there are lots of empty homes? Are there lots of foreclosures and are these homes being scooped up by investors willing to rent them to any warm body?
There are lots of things to consider and find out (if that's possible) before trumping "what a great deal you got". Some people could care less that they live on a street where it's all rental properties. They feel they got a "deal" and that's all that matters.
I cringe when I hear people just crunch the rental prices vs. buying prices and scream "what a deal, let's buy". A lot of them will regret their decision and get saddled with a property in a neighborhood in decline (socio-economic, vandalism, increasing crime).
The smartest home to have in Nevada is one with tires on it.
We have come to the end of the spring price rises and prices are now falling. If you did not sell in the summer you missed out on the price high's and will have to know lower your expectations of the price you can achieve. Many investors are now dumping properties because they never realised the short term gains they banked on.
We as a society have been conditioned to buy as much as we can afford, And doing so puts you at a huge disadvantage. Banks and lenders make money on the interest of money loaned so it's in thier best interest to loan as much as they can. Now I hold a realtors lic. and I tell clients all the time to not purchase what they can afford but to purchase 50% to no more than 60% of what they have been deemed to afford. Example if you qualify for $100,000. then purchase a home in the area of $50,000. to $60,000. Sure these homes may not be in the best neighborhood but the more people that do that then the neighborhood becomes better simply because you all have the same goal in mind. Consider this a young married couple each earning on average of $50,000. per year in salary for a gross income of $100,000. could pay the home off within 18 months and also accomplish being some what ressession proof if one were to become unemployed or both for that matter could probably survive just on unemployment payments for a lot longer time because that expense is not there.
Very well written article! At $960/month instead of $1600, seems like a no-brained to buy. Just imagine how much falafel and ice cream you could buy with the savings!!