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To Rent or Buy in LA? 2017-01-21T11:28:00-08:00

To Rent or Buy in LA?

by Shawn Carvin, Senior Mortgage Banker

Whether to rent or buy is big decision. Aside from the financial implications for you and your family, the housing market is constantly changing. That’s why it’s important to weigh all the variables before jumping from renting to buying a home.

Affordability and the rent or buy decision

rent or buy los angeles - torrance home loans right start mortgageNaturally, the primary concern when it comes to renting vs. buying is affordability. The costs of home ownership, on average, are less than the costs associated with renting when evaluated over the long run. But the upfront costs can be significant and maintenance costs are somewhat unpredictable, leading some people to conclude that they can’t afford to buy a home.

It is true that the monthly mortgage payment doesn’t cover the cost to replace a water heater, fix a leaking roof,  or any of the other inevitable maintenance and repair costs of a home. This leads many tenants to conclude that renting is more affordable, as the landlord bears the equivalent maintenance costs for a rental unit. However, those expenses are baked into the monthly rent payment. So in effect, renters are paying for maintenance and repairs – whether they are needed or not, and regardless if the landlord actually makes them. We’ve all lived in some apartments like that!

Owning a home as an investment

For some people, owning a home as an investment doesn’t inspire the confidence it once did. While home values here in the Los Angeles area are strong, many would-be buyers are still leery about home ownership in the wake of the economic downturn. But with the median home selling price exceeding $600,000 and continuing to rise, standing on the sidelines for even a few months can cost prospective buyers tens of thousands of dollars.

Another factor is the amortization schedules of mortgages. The realization that so much of the first several years of mortgage payments go towards paying off interest makes some people feel like paying the mortgage isn’t an investment at all. But when compared to renting, the payments on a fixed-rate mortgage will remain the same for 15 to 30 years until the house is owned free and clear, with only property taxes, insurance, and upkeep to worry about. In contrast, renters will have paid and will continue to pay rent to a landlord, and over that 15- to 30-year period, monthly rent will likely to continue to increase.

Life and career

There are times in life when taking on a mortgage and being tied to one place simply don’t make sense. A young single person with a developing career may not want to buy a home and then be saddled with the additional costs to close when selling a home after a short time in order to move on to the next career opportunity. On the other hand, a young couple who have steady jobs and have found a great neighborhood in which to raise their children might want to consider putting down roots there and buying a home.  All things considered, it doesn’t make much sense to buy a home if you know you won’t be staying in one place for long.   

The importance of location

And as the saying goes, location is everything. Property values are on the rise here in the Los Angeles area, so purchasing a home is no small financial undertaking. But Los Angeles is one of the worst areas of the country for renters. And monthly rents are rising even faster than home prices—up 17% from last year.  If you have a steady job in LA and you’re renting, it just might be time to consider buying a home and making location work in your favor by owning a piece of one of the hottest real estate markets in the country.

Contact Torrance home lender Shawn Carvin today for a free consultation and to discuss whether renting or buying a home makes financial sense for you. Shawn is a licensed California mortgage professional with nearly 30 years experience in the financial services industry, half of that focused on mortgage lending. Shawn works with clients throughout the greater Los Angeles area including Torrance, the Palos Verdes Peninsula, the Beach Cities, other South Bay communities, and beyond.