Generic Data Mixed With Non-Industry Author = Waste of Reading Time

Generic Data Mixed With Non-Industry Author = Waste of Reading Time
BY: Nicholas A. Dunlap, CPM

An article in today’s Orange County Register touts rising rents in the multifamily sector as the reason that there are more and more buyers entering into the single family residential for sale market.  For those of us working in the multifamily industry, the correlation is not quite there.  With year-over-year increases in rent at  3% to 5% on average last year and another 3% + budgeted for 2013, renting is still more affordable than buying in Orange County…And here’s why:

2 Bed/2 Bath in Santa Ana/South Coast Metro area rents for $1,495.
The asking price on a 2 Bed/2 Bath condominium in this same area starts at $350,000.

To qualify for an FHA Loan, a buyer must put down 3% or $10,500.  Thus, the buyer will need a loan in the amount of $339,500.  At 4% interest, fixed and amortized over 30 years, the monthly mortgage payment will be $1,620.82.  So monthly, it is approximately $126 more expensive to own, considering Mortgage Vs. Rent.  But once we consider costs such as insurance: $1,000 to $2,000 per year, property taxes at around $3,500 per year and then HOA dues at approximately $3,000 per year, the true monthly cost is now: $708 per month plus $1,620.82, resulting in a total of $2,329.15 per month.  Of course, this results in an increased monthly housing expense of $834.15.

The media loves to paint landlords in a negative light or dismiss them as money-grubbers who skimp on expenses and ignore tenant concerns.  The truth in the matter is that while there are in fact some bad apples who may behave as such, many landlords provide a very affordable source of housing, one that can in fact enable tenants to build and amass savings of their own until they are able to purchase a property of their own so that they can receive the FOUR BENEFITS .