A few years back, I wrote a series of articles on the cost of renting vs buying in various neighborhoods around Charlotte. I’m reviving this topic as both home prices and rents have increased. If you would like to see a neighborhood featured, send us a message or post a comment.
The idea behind the Rent vs Buy series is simple: which makes the most sense over at least a 3-5 years of occupancy. In each featured neighborhood, I will compare the same or similar units available for both rent and sale, focusing on using active listings instead of closed units. Also, I won’t be discussing the long-term tax benefits currently available to homeowners since that’s dependent on one’s own tax bracket.
For purchases, all of the terms will be the same: 30 year fixed rate mortgage at an interest rate of 4% and requiring a down payment of 10%. The mortgage interest rate of 4% is the prevailing average of rates at this time according to BankRate(dot)com. Some are higher, some are lower but 4% is about average.
Rent vs Buy: Uptown 1 Bedroom Apartment / Condo
The 1 bedroom condo the entry-level into Uptown living. Most range in size from 500-900 sq ft and are in buildings that feature amenities like secure parking, pools and fitness centers. For our comparison, we will use our listing at 525 E. 6th St #104 in Court 6 as the purchase and I’ll compare it to other similar units available for rent around Uptown.
The Court 6 unit is convenient to the Gold Line Street Car, First Ward Park and features over 900 heated square feet of living space. That’s unusually large for a 1 bedroom unit in Uptown. Similarly sized 1 bedroom units rent for $1500+ in Royal Court, the Avenue, and The Vue (over $1,800).
This condo will only set its new owner back $1,481 a month including the property taxes, insurance and HOA fees. That may not sound like much of a savings into you include the principal that is being paid down every month. After 3 years of renting, if the rent didn’t increase, you will walk away with nothing except your security deposit back. After 3 years of owning the unit, the mortgage balance would be $194,590.
Assuming the unit didn’t appreciate in value as the market continued to improve and no additional principal payments were made, 3 years of home ownership would result in over $40,000 in equity in the property. After 5 years, that figure rises to nearly $50,000.