Should You Buy or Rent?

Top real estate agent, Lisa Treu and Brian Mudd, WJNO host, shares the advantages of buying versus renting in Palm Beach County. There are many examples of buyers taking advantage of the opportunity in Palm Beach County. Buying is a good decision for many renters to take advantage of the lower interest rates, job stability and options to buyers. 

To listen to the show, click here. 

Real Estate and Wealth

There's a huge disconnect between this understanding of wealth and reality. Remember the studies all show that 83% of all wealth at retirement is coming from real estate. That means a lot of people are really missing out with an intentional strategy, and I just believe that everything works better with the right strategy and some planning. Of course, starting early helps with that whole compounding result that you get with any type of investment.

We see that the average millennial, once they engage in traditional family formation, you settle down, you plan to have a family. We do see that a house becomes a priority. Before that, maybe not as much, though there is the desire. But many millennials, especially since they're waiting later to settle down, to get married, really should be considering real estate. What are some of those circumstances where people might not realize what they're missing out on because they're continuing to rent when they haven't yet settled down?

I think many millennials think that they can't buy real estate. I know many that have purchased homes before they got married or before they had a family. Kind of those trigger points in the past, those milestone moments in our lives that caused somebody to say, "Okay, I need to get my first property, my first home." What we're seeing with people that are in that millennial age group that are buying, many of them are buying maybe a transitional property or a property that can be rented when they are ready to buy that single-family home. So a condo that allows rentals or a townhome that allows rentals that will positive cashflow. It is really just, I believe, lack of knowledge about how easy this process has become is what's keeping the rest of them from considering whether it makes sense.

Well, yeah, absolutely. Plus, if you think about it from the "lifestyle" standpoint, if you go ahead and purchase, you're also setting yourself up for maybe more success as you're transitioning into that relationship. It's a lot to get married and then to find a place and to figure all those details out. If you're already settled in and you have the ability to grow from there, that takes a lot of pressure off of that entire transition in one's life.

How many people can afford a home?

There are approximately 400,000 that are renting right now in Palm Beach County. I'm not the believer of "everybody should be a homeowner". I'm just not. There are people that are going to be moving in a year. There are people that are not financially secure in their job. And those people should stay renting to be flexible with their movement and their budget. However, one-quarter of all the people renting, think about that. 110,000 people in Palm Beach County not only can but should be buying a home. They can afford it. They have enough money saved. They have the credit that they need. They have a stable job, they have the reserves, they should be a homeowner.

All the studies say that it leads to a better quality of life. It's not just about where you're living, it's about the lifestyle, the connections to the community. And imagine, I mean, if you've been renting for a while, you know you can't do anything to the property. Whatever it is, you can design it to fit your desires and your lifestyle and it just makes sense to consider am I one of the one in four that can afford a home?

Yeah. Not to mention you have no control, no control over rent rate increases. No control over what might happen if the owner decides they want to sell the property, all these different things that can totally uproot our lives without any real advanced notice. So what is it, you've been working in real estate now going back to the late-80's, what is it about this age group today that may be different than prior generations?

Well, one of the interesting things that people are really surprised at is many of them are skipping what we would call normally your first home. Many of them have great incomes and they've saved money. They lived at home and they kept all of their income and saved it and accrued it. And now they're skipping what we would've considered as somebody their age.

Lisa Treu:

The starter home into their next home. And some of them are even skipping to their dream home. And with today's interest rates and their job security, they're able to do that. And it's quite fascinating to see kind of that change in the way they think.

If we're already taking a look at that next step in terms of home, could that be some of the "disconnect" here? That maybe the expectations have risen too high. And some of these people you're talking about that should be buying right now, they're waiting because maybe they feel like it has to be something that isn't a starter home when that would be appropriate?

I think that our conversations with our "first time home buyers" is that your first home doesn't have to be your dream home. It's a transitional home to help you achieve your goals. Finding may be something that needs a little bit of work, and because of that it's dramatically reduced, you can come in and put in the modern touches, put in ... Make it like the HGTV type of a product, and then take that, first of all, equity just by living there. And then secondly, your sweat equity, your reward for making it better, and then taking all that money with you to your next property. That's a really amazing way to do that and to start building wealth faster.

And recently we saw the latest numbers. We've talked about this for some time. If you're going to be in a place for three years or more, it pretty much is a no brainer. Last I saw, 3.4 years is the no brainer point in the Palm Beaches. So that very much remains the case today.

It does. And it's been fun to see the opportunities that some of our buyers have purchased this year that wouldn't have been possible last year. We just had a closing yesterday. Somebody bought their second home and bought it substantially less than appraised value. We were able to get them an amazing property that they are so excited to spend winter in, and we're doing that time and time and time again because we're putting the right strategy together to help our clients find the right property and negotiate that right deal.

When do I start the process if I am renting?

Okay, so now we're thinking about making that transition. Okay, real estate versus renting, how is it that we should enter that process? In other words, how much planning on the front end should take place?

I get a lot of calls from people that say, "My lease is renewing at the end of the month. I want to buy a house." It can happen. However, some associations mandate 30 days. So we at least need 30 days. And it becomes much more stressful than it needs to be.

One of the things that I would say is if you are considering doing this and you are 90 days out from your lease renewal, that's a really good time to start the process, to get preapproved, to sit down and do a consultation with us, to start looking at the right properties and formulating a deal. At about 45 days, we really need to kind of be serious about finding that right match. And it's okay, by the way, and we do this all the time, to go out on the first day and find your dream home.

I mean, we statistically are finding our client's dream homes. And Brian, one of the things about this is many of these buyers have been looking for a year with another agent. With no success.

And we go out after doing a very thorough consultation, find them their dream home after three, four, or five homes. Because we know the inventory. We understand the lifestyle. And most importantly, we listen to what they want. And sometimes we can get them the concept of what they want. They just don't really know what that looks like and we can redirect them and ask them, "Have you considered this?" And often it's that out of the box thinking that helps us kind of clarify really what they want. They just don't know. Especially if you're not from here, it's really hard to come down and say beyond how many bedrooms, baths, and price you want, what kind of lifestyle's important.

With mortgage rates where they are and home values, having been somewhat steady, not really on the dramatic increase over the past year, are we seeing opportunities at the entry-level for people that are renting right now to be able to buy and to save money every month?

Oh, 100%. the one thing I will tell you is that people are buying investment properties at really record amounts for a reason. Because the ROI is there. They're able to charge more and more. Because think about it. We have over a million people living in Palm Beach County, 400,000 of those are renters. And as people continue to move down, they're going to have more and more rental demands, which means that prices on rent, of what we're paying as a tenant, are going to increase. So there is no doubt that being able to lock in what your payment's going to be with a fixed rate, plus establishing a homestead on your primary property so that your taxes are locked in. Because remember, landlords don't get that benefit. And so when taxes go up for a landlord the rent rates go up. The landlord is going to keep their profit in most cases. And so it gives you a chance to really kind of lock-in those things and make ... It's a better financial decision than renting all day long.

What's the Next Step?

It absolutely is. And so if you're in this situation, if your kids are, if you know someone, make sure that they're aware of the opportunities. And the Treu's, they're always ready to help. Again, if you're not already there,, or call (561) 972-8326, that's (561) 972-8326.