Renting vs Buying in Boulder: Math that Makes Sense
It's hard to believe it's that time of year when college students start looking for their next rental in Boulder CO. With a limited rental market and high demand, the average rental price in Boulder is $1,972. If you are looking for extra amenities like washer and dryer, proximity to Downtown Boulder or campus, modern finishes, expect to pay on the higher end. Here is a more detailed look:
Apartments Rental Costs:
- Studios: $800 – $1200
- 1 bedroom: $950 – 1800
- 2 bedrooms: $1400—$2700
- 3 bedrooms: $1800 – $3500
- 4 Bedrooms: $2200+
If you have a down payment, plan to stay a few years and are in a strong market where rentals are desirable (like Boulder), buying might be the smarter financial decision. We've crunched some numbers for you so you can see what we're talking about. Take a look below.
Even if you don't know if you'll be living in Boulder more than 3 years, buying might be a better choice. An average rent for a mid-range 2 bedroom condo is approximately $2,200. That is $26,400 in rent for one year. Since you'll likely have a roommate you'll pay half that, $13,200. However, if you owned it and had a roommate the other $13,200 would go toward your mortgage. A 2 bedroom condo in Boulder can sell from anywhere to $1 million plus to about $200,000. For a 2 bedroom condo fit for a couple of college students you can expect to pay around $350,000. If you stay in your home for 3 years, buying is the cheaper option. You will save $9,964, an average of $277/month. See below for a detailed breakdown.
There are important factors to consider. Current interest rates are low, the housing bubble has popped, and buying now means you can get more home for your money. You can see in this chart that rental prices (blue line) are actually exceeding home prices (red line) for the first time in 15 years. There is a larger upfront investment to buying, but even if you choose to leave and rent the condo, the investment will continue to pay off creating a nest egg.
Using our mortgage calculator, you can see with a 20% down payment on a 30 yr loan at 4.5% your monthly payment would be about $1,419.00 on a $350,000 property. Monthly, that's actually cheaper than renting. Now apply your roommate's rent and you are only paying $320 a month, plus you are gaining equity in a housing market that has proven strong. If you decide to move out and rent, your rental fees will cover insurance, taxes and even a rental agency.
Cost of Buying a Home Over Three Years
- Initial Costs—$84,000
- Yearly Costs Over Year 1-3—$64,386
- Lost Opportunity Over Year 1-3—$11,060
- Selling Costs—$286,881
- Total Costs Over Years 1-3—$446,329
- Money received from home sale—$-371,423
- Total Net Cost Years 1-3—$74,906
Average Monthly Costs During Years 1-3—$2,081
Cost of Renting an Apartment Over Three Years
- Initial Costs - $2,200
- Yearly Costs Over Year 1-3 - $81,861
- Lost Opportunity Over Year 1-3 - $3,009
- TOTAL COSTS OVER YEAR 1-3 (-deposit)—$84,870
Average Monthly Costs During Years 1-3 - $2,358
How to Ensure a Renter is Ready to Transition to Homeowner
Buying a house for the first time is a monumental decision. If you're trying to decide if you're ready, consider these three points:
- Is your job stable? If you've been in your job for over a year with a company that's in good financial condition, you may be ready to purchase a home. If you're bouncing from job to job, or your company is in the midst of lay-offs, now may not be the time.
- How strong is your financial health? No credit card debt, a padded savings account, and a control on impulse purchases all point to you achieving the maturity it takes to be a homeowner.
- Do you have a down payment? A small down payment makes it more difficult to get a home mortgage. If you have saved 20% of the home cost, now may be a good time to take the plunge. If not, you might want to sock some more cash away before you purchase.
Moving from renting to buying is exciting, but you need to carefully consider your current finances and work situation before making buying a house for the first time.