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Rents Are On The Rise

rent-vs-own Every week, I hear from listeners who are considering becoming first-time homeowners. This has been true every since I started broadcasting. But lately it seems more and more are considering it because renting no longer makes sound financial sense. In both Denver and Colorado Springs, the cost of renting continues to climb while the cost of homeownership has remained relatively stable. This is causing many current renters to reevaluate their financial situations and to finally understand what I have been preaching for years: Most people are far better off owning their home than renting.

Ever since long-term, fixed-rate financing became widely available in the 1930s, it has made better financial sense to own a home rather than rent. Historically, a mortgage was only slightly more expensive than renting, and the simple act of paying off a mortgage left the homeowner with more equity rather than giving away their monthly rent to a landlord. Starting about five years ago, renting no longer had this advantage over homeownership; the cost of a mortgage has been lower than the cost of renting, thanks to historically low interest rates, a depressed housing market, and the Great Recession that greatly increased the number of renters.

Although interest rates and the price of homes have increased since then, both are still extremely low by historical standards. And although they have increased slightly, the cost of renting has increased even faster. While tighter lending standards may be partially to blame, the larger culprit is cultural. People are starting families later in life, are choosing to spend more time in school, and just aren’t as enamored by the dream of homeownership as past generations were. Various factors are pushing people to accept renting rather than owning.

To see the effect this is having, consider the rental markets in both Denver and Colorado Springs. In Denver, the average cost of renting is $1,300 per month. In Colorado Springs, it’s $879 per month. This is practically highway robbery, except that these renters are willingly paying these exorbitant rates! Too few people understand the benefits of building equity and owning a home, and therefore don’t even know what they’re forfeiting by continuing to rent.

Since these people are content with throwing their money away, I have found it enormously beneficial to put myself in a position to catch it. I now own four rental properties that already have positive net cash-flow; that is, they collect more in rents than it costs to service the mortgage and property taxes—all because the cost of renting is higher than the cost of owning. I am not only making money each month but also building equity in these properties so that in 20-30 years, I’ll own over $1 million in real estate outright without it costing me a thing.

This approach to wealth creation is not a secret. It’s out there and available for anyone to take advantage of—but too few are interested in doing so! For my part, I am working hard to educate my listeners on the benefits of homeownership and to provide tangible resources to help them become homeowners themselves. That’s why I host regular educational seminars on the process of becoming a homeowner, with the next one on May 19th, 2015. I encourage anyone interested in becoming a homeowner to inquire directly with me and begin their journey to owning a home as soon as possible.

5-9-15 Rents Are On The Rise

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About Jay Garvens

Standing at the intersection of our local real estate market and the nationwide financial industry, Jay Garvens gives you the complete picture of every story affecting today's mortgage market! From personal finances to the political decisions moving markets, tune in for a weekend dose of straight talk from Colorado's most candid mortgage industry commentator! Honest, unbiased, and always unpredictable, Jay explores every facet of today's mortgage industry with an approach that's refreshingly blunt and enormously entertaining!

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