Popular residential real estate website Trulia.com releases a bi-annual rent vs. buy report, and this time they focused on the question “Should Retirees Rent or Buy?”.
To try and answer that question, Trulia looked at median home values and median rent in 100 U.S. cities with the largest share of residents aged 65 and over.
In doing their calculations they assumed that buyers would have a 30-year fixed rate mortgage with a 20% down payment, would be in the 15% tax bracket, and would stay in the home for fifteen years.
What they found was that based on a median home value of $250,019 and a median monthly rent of $3,100, it is 71% cheaper to buy in The Villages than it is to rent.
In fact, The Villages was the retirement city where buying held the biggest advantage over renting.
It is interesting to note though that the rest of the top 10…they’re all in Florida:
But Is It Really True?
Hard to say for sure.
I guess if you use their numbers and assumptions, yes, for sure.
But one issue I have is the figure they’re using for median monthly rent.
My instinct tells me that this number is probably higher than it should be because of seasonality.
We all know that the price of rentals can be as much as 2x higher in the winter months when all the snowbirds are in town, so I’d love to know how they arrived at their figure.
From what I’ve seen and heard, generally a home that is rented out on a yearly basis will have a lower annualized monthly rent than one that is rented monthly or seasonally.
That’s partly because the monthly and seasonal rentals have to account for more frequent move-in/move-out expenses, marketing, and so on.
In any case, whether the right figure is 71%, or 60%, or something else, over the long term buying definitely has its advantages over renting in The Villages.
I do recommend that people rent for a little while…even if its just a few months….before they buy, just to get a feel for the area and make certain its the right place for them.
But renting for the rest of your life is probably not ideal, nor the most cost effective.
To be a full-time renter means you run the risk of having to move every couple of years when the owner decides they are ready to move to The Villages full-time and want you out of their home.
That might be o.k. once or twice but I think it would get tiring after a while.
