Everybody knows that if you’re only intending to stay somewhere a short time, it makes more sense to rent. There’s no reason to purchase a home if you’re taking a 1 year job assignment, or if you’re just wrapping up your MBA degree, right?
But what is the right time to consider purchasing a home instead of renting? In short, it depends on the area. In areas like Los Angeles, sky-high real estate prices are a serious commitment for short-term stays. Most residents would need to stay put for 5 years to justify purchasing a home in these markets.
Locally, however, towns like Ardmore, Media, and West Chester paint a different story.
Ardmore, Media, and West Chester are among three incredibly popular towns for rentals and homeowners alike. Many young professionals flock to these towns for their blend between urban and suburban conveniences. These towns have an active dining, shopping and nightlife scene but maintain suburban niceties like great school districts, easy-to-find parking, and privacy.
Those considering a move to these areas must wonder – does it make more sense to rent or buy when moving to towns like Ardmore, Media, and West Chester? Unlike New York and Los Angeles, the breakeven horizon for these local towns is just two years. What does this mean? If you plan to stay in Ardmore, Media or West Chester for more than two years, it makes more sense to buy a home rather than rent.
How can this be? Let’s take a look at the figures:
- The average rental price in Ardmore is $1,856.
- The average rental price in Media is $2,005.
- The average rental price in West Chester is $1,690.
The huge benefit to buying is that you receive the full benefit of appreciation, even when you are investing a small amount. For instance, if you were to invest $50,000 into the stock market and receive a terrific 10% return, you’ve just realized a $5,000 gain. If you were to invest that same $50,000 into real estate, however, you can purchase a home worth $250,000 or more. If this home were to appreciate even a more modest 5%, you’ve now realized a $12,500 gain.
Put simply, each dollar invested into real estate works harder for you because you gain appreciation from the entire asset, not just the down payment.
In addition to this, homeowners receive the huge tax benefit of deducting mortgage interest. In the initial years of homeownership, the interest deduction is most beneficial.
Another incidental benefit is that a mortgage acts as a forced savings plan, whereas paying rent each month is strictly an expense.
In total, a recent Trulia study estimates that buying a home is 33.1% cheaper than renting – even for those moving every 7 years.
If you have any questions or would like to learn more about renting or buying in Ardmore, Media or West Chester, please give Ryan a call today at (610)-955-9248.
Source: Zillow’s Breakeven Horizon