Are You Still Renting? STAHHP!

Attention Charleston friends! 

I know I talk a lot about why you should buy a home (if you can). Surely, part of it is because I’m in the business of buying and selling home. But I also talk about it because I have become very entrenched in personal and business finances in the last few years. I know finances are boring as hell, but they’re important. I try to mitigate that boredom by pretending that it’s some kind of big, long table-top game. It’s basically a series of battles that ultimately will win or lose the retirement and financial freedom wars. So, that’s one reason I harp on the benefits of buying NOW as opposed to renting. Everybody knows that renting isn’t nearly as financially sound as buying. Everybody also knows that it’s hard as hell to buy a house when you’re young. However, we need to be realistic with our expectations when it comes to houses to purchase. It’s time that we seriously start considering moving outside of the city in anticipation of our families and financial well-being. Living downtown or in a desirable part of town is great, but most of us realistically can not afford it and it’s going to keep getting harder. 

Renting really is just giving money to someone else so they can pay the mortgage while they wait for the property to cash-flow at 100% with no more mortgage. I know that we HAVE to rent in order to have shelter. I also know that anyone who has had consistent employment for 2 years or longer and has decent credit with no outstanding financial issues can buy a reasonable home and the mortgage is usually cheaper than the rent they were previously paying. Many mortgages only need 3.5-5% down and the rates are staggeringly low right now. The other MAJOR benefit of buying a home (aside from saving a bit, in most instances) is that buying a house is basically a forced savings account. You HAVE to pay the mortgage or they will take the house away. Therefore, most people try their damnedest to pay the mortgage. Every payment you make goes towards the equity of the home (aside from the interest, insurance and taxes). When you have significant equity in the home, it is no longer a liability but an asset that you own. Owning and controlling assets is what makes you wealthy. Don’t you want to be wealthy?! 

The reason that I’m even writing this post is because a recent Post & Courier article was released that discusses Charleston’s last quarter hike in both rental rates and landlord’s increase in gross rents. The article is entitled "Charleston-area home rental rate jump 11th highest in U.S. last quarter,” by Warren L. Wise. The article explains that the last quarter in 2015 saw a 10.6% increase in rents and an 8.9% gross yield increase in investor’s pockets Charleston area. That 10.6% increase is literally a 10.6% increase in rent prices from the previous year’s 4th quarter. The 8.9% gross yield increase is an 8.9% increase in income that landlord’s in the Charleston area saw from the previous year’s 4th quarter. Of course, that gross income decreases once expenses are reduced, but it’s a direct reflection that investor’s in the area are raising prices for a variety of reasons. 

Let me sidebar here for a moment. I myself am a real estate investor. I do not necessarily think that these rental rate increases are Mr. Burns level evil. Housing is a business like any other. When demand increases, supply typically shrinks, which will lead to premium pricing. It’s just business. And people are paying it- begrudgingly, sure, but they’re doing it. If you asked your employer for a 10.6% raise and they complied, would you think twice? I do not think it’s wise business to raise the rental price of a unit by 10.6% every lease term unless the property is experience significant improvements, but I’m the kind of guy that would rather keep the same tenants for years by offering them a fair rate. Regardless, these folks are doing it and people are remaining their tenants. To be fair, landlords do get a bad wrap. There are a lot of bad landlords and many of them are giant, faceless corporate entities that do not care about their tenants. However, many of us are individual operators that bust our asses to provide comfortable and affordable housing. Any most of these kinds of investors have had to sacrifice a lot in order to purchase their portfolios in the first place.

Anyway, I do not expect rent prices to plateau any time soon. As we continue to win awards and attract more folks, we will continue to see more increases and less inventory. There is a lot of construction going on, but not enough to quell the demand. I work with people all the time who are moving to the South to retire for various reasons. Even though Charleston is expensive for the South, it is not very expensive for the National averages. These folks moving from other areas have the finances to afford these homes that we can no longer afford because the cost of living is lower here than wherever they came from. In these cases, we don’t stand a chance. And these transplants (I’m a transplant. WV!) are going to continue to move here because Charleston is a cool place and those of us that live here have contributed to that for years.

What I suggest is that, if you’re still renting and you’re unhappy with the product and price, you consider buying sooner than later. If you’ve been considering doing so, you should contact a mortgage provider to talk about your options. There is no obligation and it does not cost you a dime to have them discuss your situation and tell you what you may be able to afford. My preferred lender will ask you to just submit an online form and wait a couple of days until she can compile your data. These rental prices are going to continue to increase. I assure you. And the longer you wait, the thinner our inventory will be, which will make your home purchase even more expensive and competitive. And consider living a little way outside of your preferred neighborhood. As young people, most of us do not have the wealth to live in the preferred parts of town and it’s unrealistic of us to even feel as though we deserve to own in the center of town. We need to remember that we have to work to build wealth just like every generation before us. I say this because I own two homes in rough neighborhoods simply because I could afford them. I have lived in each as I did the renovations and they are both rentals now. Rachel and I want to live near town, but we can’t afford to. We’re in the process of moving further away from our desired area because it’s the nicest and safest thing that we can afford in Charleston County. But, it’s a great house, it’s in a gated community, we will have a community pool and it will only cost us about $950 per month. All that and it still only takes us 15 minutes to drive downtown. 

I’m done now. I legitimately love this city and I’m worried that we’re stretching it thin, but people have thought that about Charleston for years. We should just be happy that we live in a city that people are flocking to. We young people should also start to prepare ourselves for the rest of our lives. I know for sure that I work too damn hard every day to do this for the rest of my life. I want to retire some day. I want to be financially free so I can do whatever I want all day. The easiest way to do that for most people is to purchase their first home. It’s the easiest way to start building wealth.

If you or anyone you know is interested in buying or selling, please feel free to reach out to me. I work diligently to get my clients what they want. Referrals are the way to my heart. Even if it isn’t the right time for you to buy, there is no harm in speaking to a lender to see what steps you need to take in order to do so. I can always send you a list of properties that are on the market at this very moment so you can see what the market has to offer you. I also wrote an eBook about how to buy a house. I'm more than happy to send you that in PDF format or you can buy it for .99! It's listed at the top of the books section to the right!

Thank you for letting me rant,

Troy Gandee

Realtor & Real Estate Investor