July 10, 2024

This paid piece is sponsored by Pendar Properties.

What used to be a right of passage — buying your first home — might be worth rethinking when you consider the current market.

“There’s this belief that you’re not a real grownup until you own your own home,” said Ann Fiorita, a financial adviser at Waddell & Reed. “But the truth is that homeownership, especially today, isn’t a prerequisite to adulthood, nor is it maybe even the smartest financial move you can make.”

Fiorita suggests considering your motivation as a prospective homeowner.

“Is it to improve your quality of life, and can you afford it? Then great, go for it,” she said. “But if you’re doing it because you think it’s what you should do or because someone told your renting is throwing away money, you should consider what’s really the better option — financially and emotionally.”

The math might surprise you.

For instance, if you’re looking to buy a home in Sioux Falls for $340,000 with 20 percent down and a mortgage rate of 7 percent in a 30-year fixed mortgage, your estimated monthly payment with property taxes and home insurance will be $2,429.

Let’s say you take that $2,429 and rent a comparable apartment in downtown Sioux Falls. The Clark Lofts, for example, offers a spacious two-bedroom, two-bath mass-timber loft in an amazing downtown setting for essentially the same amount as that mortgage. Decide that a studio or one-bedroom is sufficient for now, and you’ll save even more while still having access to indoor-outdoor community space, a state-of-the-art fitness center and even grocery shopping on the first floor of your building.

Then let’s say you take the money you would have used for your down payment and invest it instead. Using the average annual rate of return of 8 percent, you’ll actually come out money ahead if you live in the apartment for seven years or less.

“In many life scenarios, the math now shows at this time you’re better off renting,” Fiorita said. “It used to be the starter home made the most sense, but not necessarily anymore. Renting allows you to find the ‘forever’ home eventually while putting your money to work through investing in the meantime.”

The approach is increasingly common and worth considering, said Anne Haber, co-owner of Pendar Properties, which has multiple downtown lofts available to lease.

“There is absolutely a case to be made for renting right now, and in addition to the financial side of it, there’s a downtown lifestyle and luxury living waiting for you that you’d never find in most single-family homes, especially starter and even move-up homes,” she said.

“We also increasingly find empty-nesters and retirees absolutely love downtown living. They can take long trips, host friends in our common areas and visit all the amazing restaurants and entertainment downtown without worrying about home maintenance or driving.”

Other life situations that make sense for renters include those who are new to town, switching to a remote job or going through a life change such as divorce.

“Renting allows you to figure out your next steps or get to know a community without making a big financial decision you might regret,” Fiorita said.

Plus, you’ll avoid the headaches of homeownership. Lawn care? No longer something you need to fit in your schedule. The HVAC needs repair or replacement? Water or roof damage? It’s all taken care of by your property owner.

“We take these issues seriously,” Haber said. “You’ll find your property manager is extremely responsive and ensures we take care of these occasional maintenance needs so you don’t have to.”

And, don’t forget about taking a break in homeownership to become a renter. That starter home you’re living in now could fetch considerably more than you spent. Invest your proceeds, enjoy maintenance-free and fun downtown living, and then look for your dream home with the money you’ve saved and invested.

“There are so many reasons to consider a move downtown, and we have never had more options available to meet your living situation,” Haber said. “The Clark Lofts are available right now, and The Dakota Flats are opening in July. We’d love to help you discover the many benefits that are waiting when you reimagine what it’s like to rent.”

To learn more about living opportunities with Pendar Properties, click here.

Securities and advisory services offered through LPL Financial, a registered investment adviser. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.