by Rich Rodenburg, Nebraska Home Sales Realtor
Many Lincoln residents rent their apartments, while most of us own our homes. According to the 2014 Census, the percentage of Nebraskans owning our homes is about 65%. In Lincoln, that number is a bit lower due to a younger more mobile population.
What makes the most sense? To buy or to rent? It depends on a few factors.
Common economics comes into play on many fronts. A home that was built or purchased about 50 years ago has appreciated by a factor of 10 (figuring 5% appreciation). A home purchased for $20,000 in 1967 is now worth about $200,000. In another 50 years at that rate, that same home might be worth $2,000,000. Long ago paid in full.
Rent goes up about the same 5% rate per year. A house that rented for $200/month in 1967, rents for $2,000 today, and will rent for $20,000 in 2067.
If you are not planning on owning a home for five years or more, it may make sense to rent according to some. But, we have sold homes purchased only a couple years prior where the seller has turned a profit, especially if sweat equity improvements are added to the property.
When renting, you can’t improve your living space. Most lease agreements will not allow any modifications to the home (some won’t even allow you to use a nail to hang something). Pets are often prohibited, or you pay extra. You could be turned out with a 30-day notice. When you own your home you can improve, modify, plant a tree, and call it your own.
A recent article by RIS Media calculated that in Nebraska, for the same $1300 that a $150,000 home can be rented, you could be paying down a property in the $200 thousands. Local lender, Deb Melichar with Charter West, calculates that a $150,000 home can be purchased (with 20% down, and including property tax and insurance) for about $950/month.
Especially with today’s low interest rates, you might be much better off to buy than to rent.
Enjoy the freedom and security of living in your own nicer home, and have equity to show for it in the future. Maybe millions.