On one side of the street, the home at 2711 Middle Neck Road currently is for sale for $229,000. Across from it, 2714 Middle Neck Road recently rented for $1,795 per month.
So which home offers the better value?
By nearly any measure, it’s the home that’s for sale.
Both properties feature colonial architecture, three bedrooms, two-and-a-half bathrooms, a storage building and a fenced-in yard. The properties have almost identical floor plans and were built within a year of one another.
But the biggest difference is the demand for the two properties. While the for-sale home has been on the market since last July, the rental property recently was snapped up in only 14 days.
Ask almost anyone who’s moved to the area over the last three years and they’ll tell you that the rental market here is searing hot. The cost of renting residential property in greater Odenton has increased by 25 percent or more during that time, while the price of purchasing those same residential units has dropped by nearly the same amount.
From a financial perspective, direct comparison of the two Middle Neck Road properties clearly illustrates this trend. While the rental townhouse will cost the tenant $1,795 per month, today’s rock bottom sale prices and historically low interest rates mean that the Middle Neck home for sale can be had for $410 per month less than the rental. And perhaps even less than that.
Numbers provided by Primary Residential Mortgage (PRM) of Millersville show that a 5 percent-down conventional loan with no mortgage insurance will result in a monthly principal, interest, taxes and insurance (PITI) payment of $1,385 for 2711 Middle Neck Road. Moreover, the interest rate on the loan is 4.125 percent, a number that PRM Mortgage Officer Greg Carll says is conservative, and probably can be lowered for many buyers.
“Although the mortgage industry has experienced significant and much-needed reform, there are still some fantastic financing options available for well-qualified buyers,” Carll said. “It’s paramount that you walk through the homebuying process with someone you can trust and will take the time to explain your options to you.”
For buyers of 2711 Middle Neck who prefer a lower down payment, Carll says PRM can offer a 30-year fixed FHA loan, requiring a 3.5 percent down payment ($8,015), yielding a monthly PITI payment of $1,621. The 3.875 percent interest rate on this loan also is a conservative figure, Carll noted, and might be lowered for many buyers.
Of course, as most homeowners know, the effective amount of these mortgage payments can be even lower, given that most homeowners can deduct the cost of mortgage interest and property taxes from their annual income tax bills.
Plus, it’s important to remember that rental tenants never see their rent money again, while homeowners making monthly mortgage payments continue to build equity in their properties -- notwithstanding the loss of equity that can occur when housing markets tumble, as they have in recent years.
The sum of these factors means that in the current Piney Orchard housing market, buying a home similar to the Middle Neck Road properties makes much more financial sense than renting. While the level of savings may not be as dramatic in every case or every section of Odenton, a firm trend of increased value for local homebuyers has been established and should stay in place for a while.
For more information on the advantages of buying vs. renting residential properties, contact Greg Carll of Primary Residential Mortgage (410) 215-4163 or Jerry Kline of Keller Williams Flagship Realty.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).
