A recent article in the Austin American Statesman had an article on this topic concluding that it is better to rent than buy as renting is more affordable. I agree with the article in part, especially during the short term. However, the article failed to mention equity buildup and any appreciation that can occur with ownership. That stated, you decide.
All the data cited in the article comes from ATTOM data solutions which starts the article with a statement that even though rents have risen greatly in the last four years it is still more affordable than owning a home in 90% of all counties; that’s incredible.
Rule of thumb is that housing costs shouldn’t be more than 30% of income. In nearly three-quarters of markets with populations of at least 1 million, the share of average local wages consumed by rent is at least 10 percentage points lower than the portion required for homeownership.
According to Rob Barber, the CEO of ATTOM, the data shows that it is still more affordable to rent vs. buying. ATTOM analyzed rents, home prices, local wages, and mortgage rates, figuring mortgage payments based on a 20% down payment. Since the Federal Reserve began hiking interest rates in early 2022, the average 30-year mortgage has skyrocketed, though it has fallen somewhat since peaking at almost 8% in early November 2023.
So, what does that mean for us investors in residential rental real estate? To me we investors are benefiting from the best of both worlds. Generally, we have experienced rising rents or steady rents, and increased value of the real estate generating increased equity.
By the way that increased equity is not taxable. But what if you need some cash? Consider refinancing the loan or take out a second loan and pull out the cash you need, all tax free as the proceeds from loans are not taxable – at least yet. As always, consult with your legal and financial advisors before making investment decisions.
For more information about owning Austin area residential investment real estate contact one of our licensed REALTOR property managers.