This is an important number. When you buy a house there are a lot of upfront costs with the closing. However, if you were looking at renting the same home it would be more expensive on a monthly basis but without the upfront cost- although there is usually a security deposit and last month’s rent. A recent article from Zillow show that the U.S. Breakeven Horizon was 1.9 years.
Here at Sage Leaf Group we wanted to know what Idaho Falls breakeven point is for the area. This isn’t as scientific as taking 100’s of samples but we compiled three samples: a 2-bedroom apartment (rent) vs a 2-bedroom condo (own), a 3-bedroom house (rent) vs a 3-bedroom house (own), and a 5-bedroom house (rent) vs a 5-bedroom house (own). The compiled results will at least give us a better picture of how we stand here in Idaho Falls.
I used the median home for sale in each of those categories and included items that I don’t believe Zillow included. It appears that buying makes the most sense for those who would look at a 2-bedroom home- they break even according to our calculations at 28 months. Whereas the 3 bedroom and 5 bedroom homes break even at 51 months. In either case the longer you plan to be in a place the better payoff you will have. The average 2-bedroom house purchaser after selling home in seven years will net 26k after paying REALTOR fees, the average 3 bedroom 31k, and the average 5 bedroom 52k.
If you are interested in some of the tools, we use to run these calculations reach out to us. 208.252.6446.
Disclaimer- each home would need to be separately evaluated to truly understand whether the above information would hold true- we are happy to provide tools and information to help you make the best decision for your particular case. The assumptions used were 5% down payment, an interest rate of 4.5% for 30 years, rental price inflation of 1%, an income tax rate of 15%, annual home appreciation of 2%, 1% of the home’s value for maintenance, and a property tax rate of 1%.