(205) 677-TIME (8463)
I have reviewed hundreds of closing settlement
statements (known as a HUD-1) and utilize actual
numbers to help compare core data for your benefit.
Let’s look at this from a renter’s
point of view first. When you move in to a rental
property, you typically have to put up money for
• Refundable deposit to the Landlord
• Refundable deposit to utility companies
• Non-refundable processing fees
• Renter’s insurance
• And of course, your pro-rated rent
Factoring in the rent for a 12 month lease at
$975.00 per month and renter’s insurance
at $25 per month and you’re paying one grand
a month that you won’t ever see again.
Over a year’s period of time, you’ve
spent $12,000. This doesn’t count, of course,
utility bills, phone bills, and other expenses
you might have whether you own or rent.
Now, let’s compare this to the most common
loan type: FHA - loans insured by the Federal
Housing Authority. These loans require a minimum
of 3.5% of the purchase price as a down payment.
Home price? $200,000. Interest rate and terms
assumption? 4.75% for 30 years. You’re looking
at a $1,007 per month payment. Your insurance
and taxes are going to be estimated here and can
vary greatly. We’ll use Shelby County –
Alabama’s average for this price of home
and assume a $975 per year insurance and $1,100
per year property tax.
Escrowed into the payment and you’re now
at a $1,180 per month payment. (Escrow means that
your lender will hold a portion of the taxes and
insurance for you throughout the year and make
your property tax and insurance payments for you
Remember the $12,000 you spent in our example
above for renting? Let’s compare now to
the first 12 months of owning.
• Interest paid: $9,103
• Closing costs paid: $5,790 (Call me for
a breakdown of these charges.)
• Insurance: $975
• Taxes: $1,100
Now, you might receive some of the interest back
in the form of a tax deduction. Let’s say
it’s 25%. That estimate puts you at $2,275.
So the estimated adjusted total is $14,692 for
the first year. Don’t forget that you’ll
have additional costs when you go to sell your
home whether you use a real estate agent or not.
And another note, I didn't figure any costs of
home and lawn maintenance here - or the cost to
a home owner association...
All the math and estimates might seem confusing,
but it’s pretty clear once you begin to
plug in the actual numbers as you move forward
with a purchase or a lease. If you want some help
as you make a decision whether to rent or buy,
let me know and I’ll walk with you through
it quickly and easily. I like to use two columns
on a simple sheet of paper to identify all the
fees and costs for both options. Let me know the
property you’re considering to purchase
or rent and we can remove many of the hypothetical
I routinely tell my buyer clients that in most
cases, it’s best to rent if you’re
only planning on living in the area for a year
or two. Unless you snap up a property well below
market value, it’s tough to recoup the costs
of home ownership in a year or two. Let me share
the facts and the estimates with you for each
property you’re considering purchasing or
renting so you can plan for the future armed with
the best knowledge available.
Paul A DeCarlo, SFR
RE/MAX Southern Homes
filled out AFTER speaking with Paul DeCarlo!)
Application (PDF) (NOTE BELOW BEFORE
YOU FILL THIS OUT!)
RE/MAX Southern Homes and Paul DeCarlo, are not
providing any property management services for
this property or Landlord or Tenant. All payments
and checks to be delivered to Landlord or Tenant
as stated in the Lease Agreement made solely between
Landlord and Tenant.
related questions and other issues regarding the
Lease Agreement are to be handled exclusively
between and by Landlord and Tenant. Landlord is
advised to perform credit checks and background
checks deemed appropriate or necessary by Landlord.
Landlord and Tenant agree to defend, indemnify
and hold harmless RE/MAX Southern Homes and Paul
DeCarlo, against and from any claims, suits, damages,
losses or other costs or expenses (including court
costs and attorney’s fees) relating to,
arising out of or in connection with any actual
or alleged inaccurate or incomplete information,
unlawful restrictions or violations, or any disagreements
arising from the terms or lack thereof associated
with the Lease Agreement by Landlord or Tenant.