The roommate factor looms large as a millennial strategy against choosing to buy or rent a house.
Renting versus owning is an age-old argument between homeowners and renters. And renters are dominating the dollars saved with a new solution or “hack.” They are splitting rent with a roommate. At first glance, it is a mystery.
Trulia reports, “Since we started keeping track in 2012, it’s been a better deal to buy than rent in America’s largest housing markets – and for much of that time it hasn’t been close.”
Palm State Mortgage notes that perhaps a large number of millennials know this secret hack of taking on a roommate to reduce the rent.
One thing is for sure, the roommate hack allows many millennials to defeat high rental payments. Shared rent is only half the expense of full rent on each wage-maker in a home, no matter how where you live.
At this point, you might want to review Last Week’s Blog, Part One of our coverage on renting vs. buying.
As promised, Palm State continues with the fascinating question of renting versus owning your own home. We are giving special attention to the roommate factor.
Geography is the Deciding Factor
So, who is doing better? Consumer “X” who buys a starter house, or consumer “Y” who “adopts” or “takes on” a roommate. Together, they can rent a nicer apartment or condominium than either could afford alone?
Whether the millennials have calculated the roommate strategy or simply drifted into a lucky trend, geography is a primary factor.
If you and your roommate are responsible people, Trulia believes you can save a lot of expenses by sharing the rent for a while, as opposed to buying a house. But, this is true only in certain areas of the country.
Geography, Plus Roommate, Plus Expensive Housing Market Might Equal Savings
In San Jose or Austin, houses are among the most expensive in the US. Here, you will discover it is more affordable to rent than buying. However, this only holds true if you have a roommate.
In fact, Trulia reports you will save 21.9 percent because you split the rent instead of buying a starter home in such areas.
Not only do you save on the monthly payments, but you do not have any of the traditional expenses or emergency repair expenses that come with home-ownership.
Palm State Reports on Trulia’s Rent vs. Buy Report–
The Trulia Rent vs. Own Report traditionally “assumes that a single income earner or household is weighing the option between paying the full rent for a typical housing unit and buying an average priced home.” However, this no longer holds true. With so many roommate situations among millennials, Trulia has adapted the data to reflect the roommate factor or “hack.”
Statistics show that at least 20% of millennials have a roommate.
Introducing a Unique Calculator from Trulia
If you’d like to check out the Roommate Hack in your area, you can utilize Trulia’s nifty Rent vs. Buy Calculator at the Trulia Website.
This is a unique calculator because other calculators do not allow for the roommate factor or the financial magic of shared rent.
By the way, the truth of the matter is that most renters who don’t have families, have a roommate. We even think that Trulia’s estimate of 20% is low. Palm State Mortgage Company believes this makes a lot of calculators invalid. Plus, the roommate Situation-or “hack” as it is called by “uber modern people,” presents some tricky financial and personal problems. A clear financial picture can help with the critical part. It is crucial to keep that roommate and retain the 50-50 split on the rent.
Taking The Roommate Hack Or Taking The Plunge
For the most part this calculator is comparing first time or starter home shoppers with renters who have roommates. In the Trulia Renting vs. Owning Calculator, the company made some basic assumptions.
1.They assumed buyers would have to take out a 30 year fixed rate loan. (Palm State says, before you commit to renting, realize the big picture. Really good roommates might be able to pay on a house at a 15 year fixed rate, if both roommates have good incomes. Then sell the home with a nice profit.)
2.Plus, the calculator specifies a 20 % down payment. (We can offer you options if you consider buying instead of renting.)
3.We do agree with Trulia in the assumption that the decision to buy a starter home means both people involved must plan to remain in the same home for 7 years.
Once you understand these assumptions, Palm State Mortgage notes, you and your roommate can visually and virtually, just scout around the country with the Trulia charts. With the calculator, you can see in what location you could live better owning than renting.
Here’s How Renting With A Roommate Compares To Buying A Starter Home:
For example, in San Francisco and San Jose, the savings from sharing a rental compared to buying include a dazzling 16.5% and 21.9%, respectively.
But in many areas like Austin or Sacramento, it won’t make much difference in your basic payments whether you rent or buy. Renting might be just a little bit cheaper.
· Renting in Detroit gives roommates a 57 % savings over buying a starter home.
· However, in West Palm Beach, FL. Your best economic move is buying a starter home. You would save 52.2 % compared to renting.
So, check out the Trulia calculator and make a plan that makes economic sense to you and your family. Or be sure it makes sense to you and your roommate, or you, on your own.
Just remember to calculate the geography and the housing market with the help of handy data-makers like Trulia’s Rent vs. Buy Calculator. But keep the big picture in mind.