So you’re moving to Atlanta (have you seen this guide to living intown vs the suburbs?) and unsure of whether you should rent or buy? The good news is, you’ve picked a very affordable city—in fact, of the top 100 metros, Atlanta ranks as the 60th least expensive metro in the country when it comes to rents and the 45th least expensive metro in the country when it comes to house prices, according to Trulia.
To dig a little deeper:
- For a two bedroom home, rents in Atlanta (the median is $1,250 per month for a two-bedroom) are only $600 per month more than the cheapest city (Wichita), but nearly $2,500 a month cheaper than the most expensive city (San Francisco).
- For a two bedroom home, prices in Atlanta (the median sales price is $230,000 for a two-bedroom) are $134,000 more than the cheapest city (Detroit), but nearly $830,000 cheaper than the most expensive city (San Francisco).
Which is Better Financially: Renting or Buying?
We called in real estate expert Ralph McLaughlin, Trulia’s housing economist, to help us with this one. “Whether it’s better to rent or buy is ultimately dependent upon each household’s circumstance,” explains McLaughlin, noting factors like how much money for a down payment buyers have, their credit rating, tax bracket and how soon they might move.
“Each household needs to take into account their specific situation—even a small change in circumstance could actually make it cheaper to rent,” says McLaughlin.
How Long Will You Stay?
Aside from finances, the single biggest indicator of whether it’s better to rent or buy is how long you plan to stay in the home. As such, Zillow has calculated a breakeven horizon for various neighborhoods through Atlanta by looking at how much it costs to buy a house, and then how much it would cost to rent that exact same house, taking into consideration costs like mortgage insurance, utilities, and maintenance.
Take a look at the breakeven horizon for some of Atlanta’s most popular neighborhoods:
- Metro Atlanta: 1 year
- Downtown: .9 years
- Midtown: 1.1 years
- Buckhead: 1.8 years
- Dunwoody: 1.4 years
- Roswell: 1.1 years
So what does this all mean? Looking at all of Atlanta, a breakeven point of 1 year means that if you plan to stay in your home for more than one year, it is better to buy that home than rent it. In Buckhead, you’ll have to stay longer in order to hit that breakeven horizon—essentially meaning that you should rent in Buckhead if you plan to move again in less than two years.
Likewise, you can use Trulia’s Rent vs Buy tool to test out a few scenarios based on financial circumstances. Let’s assume your target monthly rent is $1,250 (the median list price for a two-bedroom rental in Atlanta) and your target home price is $230,000 (the median price of a two-bedroom home for sale in Atlanta). Let's also assume you are in the 25 percent tax bracket and your mortgage rate is 3.8 percent. Below is listed various amounts of time for staying in the home to see which is more affordable:
- 1 year: Renting is 58 percent cheaper than buying.
- 3 years: Renting is 14 percent cheaper than buying.
- 5 years: Buying is 9 percent cheaper than buying.
- 10 years: Buying is 27 percent cheaper than buying.
- 25 years: Buying is 36 percent cheaper than buying.
Based on these numbers, if you’re planning to move in three years or less, you’d be better off renting, but if you’re planning to stay in the house for five or more years, it’s more economical to buy.
Benefits of Renting vs. Buying:
Life is all about trade-offs, particularly when it comes to real estate. While the benefits of renting include more freedom (no commitment to a mortgage), relatively low transaction costs (no downpayment, commissions, etc.) and fewer expenses overall (including maintenance, repairs and taxes), there are some downsides, says McLaughlin. Namely, “in Atlanta, buying is cheaper than renting.”
Plus, when you buy your home, you’re building wealth in the long-term, especially if your home value appreciates over time, explains McLaughlin.
Similarly, homeowners receive various tax benefits (they can write off interest and mortgage insurance) and have more control over their space as they can make modifications without permission.
Ultimately, buying is a risk, but one that can pay off big time. Just ask people who bought houses in Atlanta in 2011 and 2012, says Josh Green, the editor for Curbed Atlanta. “From Kirkwood, to Inman Park, to Midtown, to Brookhaven, [these homeowners saw] tens of thousands of dollars, if not hundreds of thousands of dollars, in equity. But people who took the gamble on buying homes and condos in the 2005 to 2007 range had been singing a much sadder song until recently, when values finally started climbing back to where they were, prior to the bubble popping.”