To rent or to buy is one of the most personal choices and biggest financial decisions you can make. While a lot of factors go into that decision – drawing on the expertise of trusted local realtors such the agents at Helen Adams Realty who have been in the market and the business for almost 50 years, is one of the best investments you can make.
Is CLT a buy or rent kind of city?
According to Helen Adams REALTOR® Michelle Weeks, Randolph Office “We are a strong ‘buy city’, especially in the suburbs. Renting seems to be more evident in SouthEnd, Plaza Midwood and NoDa, which usually draws college graduates and younger clientele who are not yet positioned to buy. We have seen an uptick in investors in Charlotte so that only proves that to buy now is important.”
REALTOR® Peggy Leo-Gallo, Ballantyne Office agrees saying “Charlotte is a buying city but it’s pretty close – 163,519 or 47% of the households in Charlotte, NC are renter-occupied while 182,425 or 53% are owner-occupied.”
Renting a pad can give you options
In many cases renting may mean lower utility bills, access to amenities (think: community pool, gym, dog park), and flexibility of where you live and when you can leave.
“You need a place to live, and if you aren’t sure where you want to be, renting gives you the option to be flexible, you don’t have to wait for the market to appreciate, you don’t have to pay back a loan. Renting may give you the opportunity to save a larger amount of money in order to invest in income producing assets,” says Peggy.
From leaky hot water heaters to bursting pipes, and broken fans knowing that you don’t have to foot the bill for the repairs may also make renting right for you. Also consider that you don’t have to pay homeowner’s insurance and there is usually no large down payment required or extensive credit history checks.
But it can also mean more restrictions about what you can and can’t do to your home (Hello, landlord)… and in many cases you can forget Fido.
So on that note, lets go beyond the standard pros and cons – what are some of the misconceptions about renting?
REALTOR® Rachel Mangiapane, of Helen Adam’s Lake Norman Office says “Many people weighing the decision to rent or buy consider the numbers today and convince themselves that renting is cheaper, and an equal substitute for buying.”
However, Rachel explains that your monthly payment looks different when compared over time. “For example, a monthly rental of $2000/month is indeed less expensive compared to a mortgage payment of $2300. But rental prices have only gone down one year out of the last 50. The other 49 years rent prices have increased. A mortgage payment of $2300 is more expensive in year one, but will likely be less expensive than the rental payment several years later.”
“Looking over an even longer stretch, according to Bloomberg, a wealth disparity forms for renters vs homeowners. Renters in the highest income quartile with an income of $110,400 have an average net wealth of $334,100 while homeowners in the highest income quartile with an income of $137,700 have a net wealth of $1,300,000. Owning real estate is a lucrative investment,” Rachel says.
But just because you want to buy doesn’t mean you can afford it… right?
“First, consult with a real estate agent to discuss your goals and to be connected with a lender to get pre-approved. Assessing your home affordability is not just about the percentage of take-home pay, but an understanding of your finances and future goals. Always ensure that your home buying decision aligns with your overall financial well-being,” says Michelle.
For many want-to-be homeowners the downpayment is the big scary monster haunting their dreams. But to the rescue is your realtor with ghostbusting information to cut that down payment down to size.
REALTOR® Alicia McAllister, Fort Mill Office says “After someone has made the decision to stop renting and become a homeowner, the question I hear most often is how do I get a down payment? My answer includes doing one or more of the following:
● Gift money can be used for a down payment! So, it’s time to start calling grandparents, parents and other family members and asking for money that can be used for this purpose.
● Look at properties that qualify for a USDA loan. These are $0 down.
● Look into loan programs and government assistance programs that can get qualified home buyers into a home for zero dollar down payment.”
Six benefits of buying versus renting in CLT
Alicia says the top six reasons are:
1. Invest in yourself! Pay your own mortgage, not someone else’s.
2. As rent continues to go up, a mortgage payment will remain constant. (In some cases, it can be less expensive to make a monthly mortgage payment than rent!)
3. Excellent investment. (Think of it as a giant savings account that pays out in the long term. Renters don’t get anything back when they move out.)
4. Gain equity overtime. (Charlotte is the #1 real estate market in the US. Since the demand/desire to move to Charlotte is high, then property values will also continue to rise.)
5. Receive tax deduction on mortgage interest payments. (Of course, these deductions are not available to renters.).
6. Control your own space. (Modify the inside of your home as you please. No landlord approval required.)
So, when does buying start paying off?
Finally, the kind of taxes you want to talk about. “It is always best to consult an accountant to make sure you are maximizing all of the possible tax benefits that are available based on your individual circumstances. However, several significant tax advantages of home ownership include: mortgage interest deduction, property tax deductions and home office expenses. Also, as your home appreciates and you sell at a gain, you can keep many of those profits which is an awesome vehicle to grow your wealth,” says Rachel.
But what about interest rates right now?
Current interest rate percentages are in the mid 8s with projections for rates to drop into the mid 5s or low 6s in 2024.
Rachel says “While the rate today seems steep, Charlotte is also expected to appreciate 5% next year. So, while people are reluctant to buy currently with higher rates, there is opportunity. Fewer buyers are competing for homes which gives buyers more options and leverage. Once rates do come down a bit, more buyers will enter the market to compete for homes that are more expensive. This projected appreciation will offset the savings from the lower interest rate. Conversely, the person who buys now, even with the higher rate will have the potential opportunity down the road to refinance to a lower rate – all while enjoying the appreciation and tax benefits.”
Michelle encourages her clients to “Marry the house, date the rate. Rates have increased consistently for the last few years but all factors point to the rate coming down significantly. Best advice is to buy now and then refinance when rates go down.”
Rachel sums it up “The only bad part about Charlotte… land is finite! As time marches on, more people are learning how great this city is and as a result, real estate in Charlotte continues to appreciate rapidly. Supply cannot keep up with demand! Those who own property in Charlotte are enjoying that appreciation, while those who rent are helping their landlords to enjoy that appreciation. Put more succinctly, as Mark Twain once said, “Buy land, they’re not making it anymore.”
Ultimately you have to do what is right for you, but one of the most informed ways to come to that decision starts with a real estate agent and making a plan with them by your side.
