My best friend recently went under contract on his first property which means he’s no longer renting. This made me very excited, but it also gave me an idea.
So today, I decided to talk to you about the differences between buying and renting specifically in Fort Collins, Colorado.
Pro of renting #1 Flexibility
One of the biggest pros of renting is flexibility. Signing a year-long lease compared to a 30-year mortgage sounds pretty attractive, I have to admit. You have the liberty of moving to your next stop after a short period of time.
Pros of renting #2 No Maintenance Costs
Your garbage disposal went out? Maybe your mirror broke? Nothing to worry about when you’re renting a property. Those are all expenses that the landlord’s going to have to take.
Renting Vs Buying in Fort Collins
So that we’re comparing apples to apples, let’s look at a three-bedroom single-family house.
In Fort Collins, the rental rate for that house would be about $1,875 – $2,000 (around $675 per bedroom). On the buying side, the median sales price of a three-bedroom, single-family house was $415,000 in 2020.
We’re going to look at a three-bedroom single-family house for rent at $1,900. When you buy, you have to pay for private mortgage insurance and some additional expenses such as taxes and insurance. Your monthly mortgage rate is going to be about $2,200.
So we’re looking at about a $275 or $285 difference in year one renting vs owning.
But what do those numbers mean? Where does your mortgage go? I suggest you watch my YouTube video below to learn more about mortgage expenses. There I talk about all hidden costs and expenses you should know about before buying in Fort Collins.
So what does that look like in year five renting versus buying in Fort Collins? After five years of renting your total all-in dollars are going to be about $121,000 while you’re going to be at about $128,000 for owning.
That’s going to be $7,000 less for you to rent in Fort Collins than own. But that’s not the end of the story. You’re going to have about $175,000 worth of equity in that three-bedroom house that you’ve bought in Fort Collins, considering principal pay down and a 5% appreciation annually. Make sure you take that into consideration. It’s important because although you might save $7,000 over five years, you’re missing out on $175,000.
And what about forced equity? That’s when you come in and you take something old and make it new. If you’re renting and you decide to replace the carpet, or paint the walls, all of that equity is going to the owner. But if the median house price is $415,000, and you buy it for $325,000 because there’s substantial work, every dollar that you invest in it will ultimately increase its price.
The last benefit of owning is being able to take the sale proceeds and move them into the next house. So you could buy an entry-level, to begin with knowing that it’s going to be three to four years before you buy your next house, so you’re going to be able to take that chunk of change and roll it in.
So there you have it, the differences between buying and renting and Fort Collins, Colorado. If you have any questions or doubts, feel free to reach out, or watch my full video on YouTube. I’d love to talk to you!
Also, if you’re looking at relocating or moving to Fort Collins, send me a text. I’d love to work with you!