At the time this article went to publication, there were 18 two-bedroom condos available for sale and 29 two-bedroom units available for rent in Turlock and Modesto. These condos had one to two full baths. Some of the units had garages but most had carports. Sale prices ranged from $140,000 to $217,000. The average price was $195,361 and the median was at $195,000. The rental prices in Modesto ranged from $1095 to $1695 per month. In Turlock, prices ranged from $895 to $1395 per month. 47 two-bedroom units, whether for sale or rent, are obviously not enough inventory to meet the housing needs in these two communities. While conducting a market study of available rentals, it became apparent that buying is a better option than renting. Here is why.
Rentals in the same areas as condos for sale were at $1400 -$1500 per month on average. For sale condos were listed at approximately $155,000 to $195,000. Normally, there is no negotiation in rental prices. Very rarely can one negotiate the price of a rental. Rental rate negotiation is successful when one is dealing directly with the home owner and is sometimes offering to take care of certain things around the property. Whereas when a property is listed for sale, the price is always negotiated. This example assumes price of a condo was negotiated and an offer was accepted at $185,000 and the buyer sought a conventional loan. With a 10% down payment on a 30-year loan with an interest rate of 4.375 % and APR of 4.605, the mortgage principle payment would be $831 per month. FHA loans require as low as 3.5% down payment. There are also down payment assistance programs for those that don’t have 10% saved.
Note, lower down payment amount means higher interest rate and principle. Taxes for the above example would be approximately $193 and Principle Mortgage Insurance would be $57 per month. Home Owner Association fees of $274 and home owner insurance of $50 per month would bring the total payment to $1405 per month. This amount is lower than the rentals on the market. Not to mention the equity built in the property. Of course, cost of ownership is higher. If something breaks in a home that one owns, then one is responsible. But if renting, tenants can call the property management company or the owner and submit repair requests. If you are considering moving, perhaps it is time to speak to a mortgage lender first.
For additional tips with these and other issues, please contact us at New Bridge Management.