It’s Cheaper To Own A Minneapolis Duplex Than Rent
There was a story in the Wall Street Journal yesterday that confirmed something I’ve known for a while. Renters have lost their edge on homeowners.
In other words, in many places, it suddenly is much more cost effective to own than rent.
The last few years, this hasn’t been the case. As prices of Minneapolis and St Paul duplexes soared, the difference between average monthly mortgage and rent payments grew. More and more potential buyers became priced out of the market, and increasing numbers of owners lost their homes to foreclosure, vacancy rates declined.
According to Newport Beach, Calif. based real estate consultants Green Street Advisors, over the last 18 years, after-tax mortgage payments have averaged 26 percent more than rent payments. At the height of the housing market, this jumped in some places to 66 percent more.
By the end of last year, however, average monthly rent in the biggest 50 metropolitan areas in the nation was $1045. After tax mortgage payments, meanwhile, were $1300, assuming interest rates of 5.5 percent on a 30-year fixed note.
Most of the first time buyers I’m working with today are in fact finding they can actually own a duplex for about what they’re paying in rent.
I can think of one south Minneapolis property on the market right now that achieves exactly that. It’s in decent shape and a sought-after neighborhood.
It would require a down payment of $5500-6000. Total monthly payments would be between $1400 and $1500/month; a figure which includes all expenses. After the tenant pays rent, however, the owner would be responsible for just $500-$600 in rent a month for her half.
And that’s not factoring in that the government will pay a first time home buyer $8000 for buying the property, or the tax savings associated with home ownership. Remember, the tax credit can be used on 2008 returns, so the money could immediately be used for repairs or to reciprocate the gift of a down payment.
Let me know if you’d like to see it.