Page 13 - Boca Club News - July '21

Boca Club News, Page 13
Legal:

Revisiting Renting Versus Buying 2021

By Michael J Posner, Esq., a partner Even though mortgage rates remain historically low, they of over 13% in one year. Sales volume has doubled in one
in Ward, Damon, Posner, Pheterson have ticked up at least half a percent and look to climb even year and homes only stay on the market for about 50 – 60
& Bleau, P.L. a mid-sized real estate more in the near future as inflation rears its ugly head. Also, days. Many homes sell for above listing price, and the more
and business-oriented law firm the inflated sales market shows no signs of abating, and is desirable homes often see multiple offers within just days
serving all of South Florida, with not clear if additional inventory will reverse the trend of of listing.
three offices in Palm Beach County. higher prices or simply stabilize future increases. At the same time, mortgage rates have drifted up about
They specialize in real estate law and There is a very funny video on YouTube which describes twenty-five to fifty basis points. Those with the best credit
can assist sellers and purchaser with the five stages of homebuying in the summer of 2021 scores (740+) can still get below three percent on a thirty-
closing and financing of residential (https://tinyurl.com/3ajecwuu). At one point in the video, year fixed rate loan with a twenty percent down payment.
and commercial real estate including 1031 Exchanges. the wife tells her husband that the fridge does not work, These are still historic lows for interest rates. Fifteen-year
They can be reached at (561) 594-1452 or at mjposner@ and he replies, “Just call the landlord and he will …” mortgage rates are at least fifty to seventy-five basis points
warddamon.com. before the new homeowner realizes that it is all now their less, as low as 2.125% with no points. The monthly payment
responsibility. difference can be substantial, though, at over $750 a month
As prices continue to rise, the issue of whether it is now According to realtor.com, the median sold home price in on our hypothetical $402,000 house.
better to rent than to purchase has come to the forefront. Palm Beach County is now $402,000, which is an increase With these low rates, prospective buyers who currently
rent are often wowed by a monthly mortgage payment of
only $1,334, which is often far less than the rent they are
now paying. There is also a strong cultural bias towards
home ownership, part of the “American Dream.” However,
recent surveys have shown that many new buyers regret
homeownership. According to bankrate.com, sixty-four
percent of millennials regret buying their present house. The
low housing supply, high and competitive demand and the
competition from cash investors means many buyers have
Stylish Modern Atmosphere Make Reservations happy hour to rush to make offers and decisions, including waiving
every Day 3 - 6 pm financing and inspection contingencies just to buy a house.
In analyzing whether buying or renting is a better choice,

and Mon. - Thurs. we have to make certain assumptions about the market,
all Day at Bar Only prices and availability. The median priced home at $402,000
will likely be for a three-bedroom, two bath single family
Lunch SpeciaLS home with 2,000 square feet under air and a two-car garage.
Rental prices vary substantially for similar properties due
every Day to location. Using realtor.com to search, it appears that a
typical home similar to our hypothetical purchase would rent
starting at 9 for between $2,500 and $3,000 a month. Using an average
$
of $2,750 we can now compare the cost of ownership versus
the cost of renting over a period of five years.
Upfront costs are a substantial bar to home ownership.
A twenty percent down payment means at least $80,400
applied to purchase the home, plus at least another $5,600 in
closing costs (inspection fees, survey, state mortgage taxes,
lender’s fees, settlement fees and lender title insurance).
A renter only needs to pay first, last and security, or
$8,250. Assuming the renter has the $86,000 necessary to
buy a home, they can leave the $77,750 invested and earn
income. A renter also has no maintenance costs. Forbes
recommends setting aside four percent of a used home’s
purchase price to cover such repairs in the first five years
of ownership. The estimated cost difference per month is
as follows:
Own Rent
Monthly Payment $1,334 $2,750
Monthly Taxes 250
Monthly Insurance 333
Monthly HOA Fee 100
Pest/Lawn Care 100
Monthly Repairs (est.) 268
Investment Income Loss 260

Total Monthly Cost $2,645 $2,750

Based on these figures, the monthly difference between
Do you know a family member, renting and owning is almost a wash. At the end of five
friend or a neighbor in need of years, the homeowner will have spent $158,700, while the
Home Health Care? renter, facing annual rental increases of three percent, will
have paid $175,109, or nearly $16,409 more. In addition,
the homeowner will have reduced the original $321,600
loan to $285,261, gaining $36,339 in equity.
Based on this scenario, it still appears that buying is
better than renting based on current market conditions.
Home Health Aides / Certified Nursing Assistants / Registered Nurses to assist you with: However, renting still has some advantages over buying.
Homeowners are often trapped in their homes, unable to
• Personal Care • Companionship • Respite Care • Alzheimers & Dementia Care move or sell quickly, or forced to become landlords if they
• Medication Management • Transportation • Meal Preparation have to move. Homeowners can have a financial crisis if a
• Light Housekeeping • Grocery Shopping • Post Surgery Care major expense occurs, such as a new roof (which can run
$15-45,000 depending on roof style).
Some communities can be hit with large special
Complimentary In-Home Consultation assessments that can run $5,000 due over one or two years.
Finally, while the current value trend is up, some worry
Care provided in the comfort of your Home, Hospital, or Facility that we might be in a bubble, with prices falling as supply
increases. That, coupled with higher interest rates, can make
We accept All Long Term Care Insurance Policies and Private Pay – Affordable Rates that $402,000 home with 2.874% mortgage into a $350,000
home with a 5% mortgage much harder to sell. Overall,
Family owned and operated. Boca Resident for 30+ years and Boca Pointe Members. buyers should not rush to buy, should carefully budget for
the future, and should not eschew renting if that makes the
CALL TODAY: 561.740.8667 most financial and personal sense.

www.auracalshc.com
Florida Licensed and Insured NR# 30211558, NR# 30211706