Buying still better off than renting in metro Atlanta
With the recent run-up in real estate prices and interest rates, should you buy or rent in metro Atlanta? Well that depends on a number of factors. How much does a typical property costs if you want to buy? How does that compares with the rental costs? What are the property taxes and insurance costs? Using ApexaVision’s free real estate dashboard, let’s take a look of an example of purchasing a single family home in Gwinnett County, part of the metro Atlanta area.
Realtor.com estimate a typical house in this part of metro Atlanta costs $426,000. From what I can tell, this would be the price of a 4-bedroom single family house. Realtor.com also indicate rental costs for a 4-bedroom house in the town of Duluth (part of Gwinnett County, GA) costs around $2400 a month, which sums to $28,560 a year. So if you plan to rent instead of buy, be prepared to shell out almost $29,000 a year for rent.
On the other hand, if you decide to buy, it will costs you $27,783 for the next 12 months, assuming a 6% interest mortgage (as of September 19, 2022). This includes interest payments on your mortgage, property taxes, and insurance. In essence, you will save near $780 a year (around $65 per month) if you buy instead of rent.
Cash flow vs. costs: understanding the difference
However, it is important to understand the $27,783 annual costs do not include your repayment of principal. You will have to pay back part of the principal on your mortgage each month. Again, using the same tool here, you can see in this example, you will have to repay the bank about $4,185 in principal each year (or $350 each month).
This means your cash flow for the next 12 months is $31,968 (or $2,664 per month). This is $4,185 ($350 per month) higher than your economic costs estimate above, and $264 per month higher than what your cash flow would look like if you rent. And remember, that $4,185 of loan repayment per year builds your equity, so it belongs to you. You are just moving money from your bank account into your home equity.
You can run the same analysis using ApexaVision’s free real estate dashboard here. This dashboard allows you to adjust your estimated rental costs, mortgage interest rates, and down payment. You can also choose the zip code for the neighborhood you want to analyze.
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