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You’re Making Your Landlord Rich

David Cross

Content Editor

235 articles, 24 comments

California Renters Pay More Than Buyers

It’s expensive to rent–really expensive. More than you think.

With spring coming and a number of staffers at the Movoto Headquarters soliciting for help schlepping cardboard boxes and floppy futons into new apartments and homes, we started thinking about what it would cost to do away with paper-thin walls and inattentive landlords.

What we found was in 8 of California’s 11 most prominent metro areas, renters on average spend $480 more per month for their units than homeowners in similar homes.

 

Sticker Shock

To come up with the number we examined the estimated monthly cost of owning a 3-bedroom, single-family residence compared to the average monthly rent of apartment units in an area.

We found that versus buying a home:

Everything being equal, if the average we came up with holds steady, in five years you’re looking at an estimated $28,800 difference.

When we said rent is expensive, we meant it.

Even so this doesn’t factor in one of the most non-monetary setbacks: The ill will that comes from corralling co-workers up three flights of stairs, year after year.

For Math Enthusiasts Only

To complete the cost analysis, we compared the average monthly mortgage cost and associated taxes of a 3-bedroom, single-family residence to the average monthly cost of renting an apartment. Information on the average monthly rent cost was provided by real estate data and analytic firm Altos Research, which offers the largest housing and apartment rental database in the United States.

The analysis assumed a 35 percent marginal income tax rate,  a 1.5 percent property tax rate, a 20% down payment and a mortgage interest rate of 4%. The analysis only compared the current cost of renting to the current monthly cost of buying and does not include the benefit of avoiding future rent increases or gaining property appreciation over the ownership period.

Rent or buy? Buy!
by: Movoto

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Who is Movoto Real Estate, you might ask? Movoto is a national online real estate brokerage. Our blog has been recognized for its unique approach to city-based research by major news organizations around the world such as Forbes, CBS News, and The New York Times.

posted on: May 2, 2012
23 views, 2 comments

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2 Comments

  1. Beth M

    The comparison cost only considers mortgage, taxes, and the deductions you get on income taxes? But ownership also includes insurance (and flood insurance in many parts of the bay area), repairs and maintenence. I’d say all of that adds up to ~28K over 5 years. There are many factors to consider in renting vs. buying, but in this market, it seems the cost is actually pretty equal for many areas.

  2. AG

    So you compared the cost of a house to the cost an apartment? How does that work?

    Unless you’ve done something more comprehensive than the NY Times calculator you aren’t helping.

    Also, in California, if your landlord bought the house 15 years ago, your effective rent can be lower than the taxes you would have to pay to buy a house – average taxes are WAY different than taxes of recently purchased houses.

 

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