Dallas Native Voice | Own vs Rent

Mary Beth H:                      Hi. This is Mary Beth Harrison with Dallas Native Voice, and I’m sitting here with one of our good friends, Jason Browning with Academy Mortgage. And here’s what I want to talk about today, buying versus renting. So, many of our clients come to us, they’ve been renting all this time, and let’s talk about that. What can they get for the same rent? How does that even work?

Jason Browning:               Okay, that’s a very good question, and we get that a lot as well. When they come to us from you guys and they say, hey, I’m spending this amount of money per month. What is that going to equate to in a mortgage for me?

Mary Beth H:                      And that’s good, because I, for me, I have no idea what my car costs, I just want to know what the payments are. And it’s kind of that way with a house. I can’t comprehend what 300,000 is. It doesn’t even compute to me.

Jason Browning:               Right.

Mary Beth H:                      But take it down into some payments, now I can understand it.

Jason Browning:               Absolutely right.

Mary Beth H:                      Kind of a silly way to buy a house, but that’s how I think most of us work.

Jason Browning:               Absolutely.

Mary Beth H:                      So, how does that look?

Jason Browning:               So, that’s a great segue there. So, let’s just take this zip code here, 75204.

Mary Beth H:                      Okay.

Jason Browning:               So, we look at that at about a $300,000 loan.

Mary Beth H:                      Okay.

Jason Browning:               Okay? That’s going to equate to about a $2000 a month rent of an apartment versus about $2200 worth of mortgage.

Mary Beth H:                      Yes.

Jason Browning:               So, you’re looking at a $200 difference there, but you’re also talking about home ownership and then appreciation-

Mary Beth H:                      Right.

Jason Browning:               … And some of the benefits that come along with that as well.

Mary Beth H:                      So, you’re telling me if I’m paying $2000 in rent right now, I can get a home for $300,000, and my payment, now I want everything, principal, interest, taxes, insurance, everything-

Jason Browning:               Right.

Mary Beth H:                      … Is going to be…

Jason Browning:               I’ve got this as a 10% down payment, with mortgage insurance and with a potential home owner’s association.

Mary Beth H:                      So, you’ve got it at the worst case scenario?

Jason Browning:               Yes, ma’am.

Mary Beth H:                      Okay.

Jason Browning:               At 2,241.

Mary Beth H:                      Wow. So, for 241 more dollars I could own something?

Jason Browning:               That is correct.

Mary Beth H:                      And I heard you talk about appreciation. So, appreciation of the home I’ve bought?

Jason Browning:               Yes ma’am.

Mary Beth H:                      Okay. So, I buy it at 300,000 and say I want to sell it five years from now.

Jason Browning:               Right.

Mary Beth H:                      So, how did you come about your appreciation on that?

Jason Browning:               Right. So, what we’ve done is I’ve looked back at some historical data-

Mary Beth H:                      Right.

Jason Browning:               … That gives us the ebbs and flows of the market, even after meltdowns and so forth.

Mary Beth H:                      Right.

Jason Browning:               Let’s just say two percent appreciation. And let’s even go a little bit longer than that-

Mary Beth H:                      Okay.

Jason Browning:               … Let’s say like nine years.

Mary Beth H:                      Okay.

Jason Browning:               So, on nine years appreciation, say right around two percent, that’s going to put the value of the home somewhere right around 350,000 or so.

Mary Beth H:                      Okay. So, they just made $50,000 in nine years.

Jason Browning:               That is correct.

Mary Beth H:                      I don’t know where you’re earning that even on stocks and bonds and mutual funds at this point. And I think your two percent’s really low because year-over-year over the last 10 years appreciation in Dallas has been more of a six to eight percent. We’re a very steady appreciating city, we’ve never done this, we’ve never really bottomed. We just have this real steady… So, even if you upped that by four percent, that’s-

Jason Browning:               It’s going to double that.

Mary Beth H:                      Yeah, you’re going to double your numbers. So, now that home’s worth a 100,000 more-

Jason Browning:               Right.

Mary Beth H:                      … Than what you bought it at. Wow, that’s-

Jason Browning:               And that’s not even considering the amount of equity you now have from the payments you’ve been making as well.

Mary Beth H:                      Absolutely. Yeah, the interest deductions and all of that, the taxes and all of that. So, take the same scenario now on the rent, how much is it going to go up over that same period?

Jason Browning:               Absolutely. Your rent at that same timeframe would go from that 1,995 or $2,000 to almost 2,600.

Mary Beth H:                      Wow. And yet your payments staying the same.

Jason Browning:               Right.

Mary Beth H:                      So you’re-

Jason Browning:               No ownership, no equity.

Mary Beth H:                      Right.

Jason Browning:               No appreciation.

Mary Beth H:                      You just get to… Matter of fact you’re paying your landlord’s mortgage is actually what you’re doing.

Jason Browning:               Yes.

Mary Beth H:                      So, I’m sure he writes you a thank you note every year saying, thank you so much for paying my-

Jason Browning:               And here’s your upped rent as well.

Mary Beth H:                      Exactly, exactly. All right. Well that’s really great information. And so if you’re out there renting and you’re thinking that maybe you want to think about buying then give Jason a call and we can look into that, see what your credit is and what you can afford and how that would work for you. And you know as I tell all my first time home buyers, because these typically are first time home buyers, this is not your last house.

Jason Browning:               Right.

Mary Beth H:                      So, use this one as a stepping stone to go to the next one. So, even if you stay in this first house say three to five years, the appreciation is such that you use that appreciation to purchase your next home. So, that’s how we look at it here for our buyers and help them move up in their size, their price, their jobs get better, everything, size of family and all of that.

Mary Beth H:                      So, thanks so much for listening. You can find us on all social media [inaudible 00:04:40] or you can come to our DallasNative.com site and find everything you want to know about that.

 

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