Is it better to buy or rent a home in Fort Collins?

Recent articles in CNN, Zillow, and other national news sources have been reporting on the all-time affordability of housing right now as well as the fact that in most metropolitan areas it is better to buy vs. rent right now.  Since Fort Collins thankfully is not a major metropolitan area I am going to run through a basic comparison between renting and buying using the New York Times Rent vs. Buy Calculator.

Cost of Renting a 3 bedroom home?

I’m using the assumption that current rental rates are typically around $1,300/month for your typical 3 bedroom, 2 bath home in Fort Collins.  Based on the assumption that rent does not increase(which is the current scenari0), the yearly cost of renting would be $15,600 and the cost of renting for 3 years would be $46,800.

Cost of Buying a 3 bedroom home and then selling after 3 years

This calculation is much more complicated but again, using the New York Times calculator, here are the numbers I came up with.  My assumptions are a 30 year loan, 3.75% record low interest rate, 5% down payment, a 6% selling cost at sale, and a 2% average yearly appreciation(historic Fort Collins levels are actually higher).  I’m also using a purchase price of $220,000 which is probably pretty close to the same thing that you can rent in Fort Collins for $1,300/month right now.    Based on these numbers, after only 3 years, you would have saved yourself $93/year in housing costs.  After 5 years, you would have saved yourself a total of over $15,000 and over $3,000/year.  And of course, the longer you stay in your home, the better the numbers get.

Reasons you may not want to buy

Even with renting being better than buying in most situations right now, there are still some reasons you may not want to buy.  Here are a few I can think of.

  • You are unsure of your short term commitment to the area.  This is a no brainer, if you are uncertain of where you will be next year, it does not make sense to buy since short term flexibility is probably your greatest need right now.
  • You are willing to live with roomates.  If you split the cost of renting up, it probably makes sense to keep things simple and not buy.  A 4-500/month rent payment ends up being a lot better than 1,300/month.  The caveat is that for the opportunist’ among us, there is also the opportunity to buy a home and then rent to your other roommates…but that’s probably for another post.
  • You just don’t want the added responsibility of maintenance and upkeep.  I hate to break it to you, but owning a home requires some love & care.  If would rather think about something else at all costs, then I’d think twice about buying.  It won’t matter how much of a deal you get if you aren’t willing to care for your investment.

Has the national real estate market really hit bottom?