Sometimes RENTING is the way to go. If you are moving to (or within) Minneapolis I’ll give you some reasons why you may want to choose RENTING a house or an apartment vs buying one.
I see people juggling this decision about where to live daily. A lot of people WANT to buy, but certain circumstances may mean that renting is actually the best choice, at least for now.
The number one reason people that I speak with most often are looking for a rental is that they are moving to the Minneapolis area from out of state. Not everyone is ready to buy sight unseen (but if you are I have a video about how I help people do that!). In this tight market, if you can possibly avoid having a home sale contingency on your offer you are FAR better off and that means there will be a period of time where you may be without a permanent home and need a place to rent.
A lot of my clients move to Minneapolis because they have been freed from having to work in an office and now work remotely and can live where they choose. This means that they have a LOT of options – that’s both a good thing AND a bad thing. Having the flexibility to explore without committing to a particular neighborhood is a great reason to rent! If this is YOU, let me know – I put together a list of rental options specifically with this in mind, you can email me and I’ll send it to you.
Most often people I work with that are relocating to Minneapolis may be looking for a short term rental to use as a base while they house hunt. I do not work in rentals for several reasons, but I am happy to email you a list of resources that I have recently compiled of places to start your search.
When you don’t have to eliminate any particular area because the commute is too long, it means that you have a lot to choose from and likely want to choose carefully based on what kind of lifestyle you want to live.
Do you want to live downtown in highrise condo overlooking the famous stone arch bridge and the Mississippi River? Taking advantage of easy access to all of the wonderful restaurants, clubs and outdoor spaces?
Or do you see yourself in a quiet suburban neighborhood with a cul de sac and playgrounds for the kids? Is being close to a large park to pursue outdoor activities important to you?
Maybe you want to be convenient to shopping or find a single level floor plan? You may need time to explore and figure out where the things that are most important to you are.
Juggling a move from one part of the country to the other will necessarily have some uncomfortable times – it’s emotionally stressful and often physically a bit uncomfortable too as you adjust to temporary housing and figuring out your way around the cities. Having a home base to operate out of even for a short time can ease that pain.
Another thing to mention – because rentals are in high demand if you need to sublet because you found a permanent place to live you’ll likely have an easy time finding a taker – just make sure that the landlord on your rental is ok with that before you sign.
Not everyone wants to or should be a home owner! Do you need to move often? Buying a home has a lot of associated expenses and they are typically not easily recouped in a short period of time.
If you want and need the flexibility to move without all of the expenses associated with buying or selling a home, then you should definitely rent. Renting can be an option for any type of home or area in the Twin Cities – there are a lot of downtown condos available if you want to be in the heart of it all as well as options reaching out to the single family homes or townhouses in the suburbs. Most single family homes are rented by owner, and not listed with an agent or a property management company.
Another reason to rent is that you are saving up for a downpayment on a home because you DO want to become a homeowner eventually. The rental market in the twin cities is very tight, so this may not be the money saving option that you hope for unless you’re able to split the rent with roommates or somehow find something that will be well under your budget.
Rents vary across the metro area but Average Rents in Minneapolis are:
- Minneapolis studio apartment is $1,297
- Minneapolis 1-bedroom apartment is $1,541
- Minneapolis 2-bedroom apartment is $2,432
- Minneapolis 3-bedroom apartment is $2,960
How much do you need to save in order to buy? Probably not as much as you think! There is a commonly held myth that you need to have 20% of the price of the home for a downpayment. This is just not true. You can get a conventional loan with as little as 3% down. Having more cash saved IS better, because you will want to have a cushion available when making offers in this environment.
If you’ve seen any of my videos this year about how tough of a market it is for buyers, you’ll know that having the option to offer over list or to cover an appraisal gap is going to be very helpful for you in getting an offer accepted. Even if you do not need to use all of your cash for a downpayment, moving into a home naturally leads to you to want to change a few things and make it your own so you should also plan to have some cash on hand in the event that you have something to change or fix. When you own your own home, there is no landlord and if the AC unit or water heater break that is now your problem, so try not to make your budget too tight.
For comparison to rental costs take a look at these estimated numbers by Nerdwallet. $380,000 is the median price of a single family in the Twin Cities as of August 2021. We currently have exceptionally low interest rates if your credit is good – 3%! and even if you have to pay for private mortgage insurance (PMI) because you did not have a 20% down payment you are still in a good position relative to renting IF buying is your preference.
There are some other benefits to buying, including tax benefits and property value appreciation over time, so if you DO buy you’ll likely come out of it better off than when you purchased. People talk about “generational wealth” or having something to pass down to help the next generation and home ownership is a fundamental element of that. The National Association of Realtors said that prices appreciated by 22.9% in the past year – this is the result of a very tight supply of homes. If you had purchased a home last year you actually may have been able to make some money selling it this year, but this is NOT the norm. Prices rise and fall but the overall trend in values is UP. Add this to the fact that you’ve built equity by paying your mortgage down over time and a home could be a spring board to other opportunities.
Another reason you may want to rent – if you do not want to be the one responsible for the maintenance on a house – either by paying someone to fix it or putting on that toolbelt and fixing it yourself, stick to renting and leave the headache to the landlord. The fact of the matter is that houses are nearly constantly in need of something and they are the biggest asset that most people own, so keeping them in good shape is important to your comfort AND your bottom line.
Let me know if you want that list of places to start looking for a rental home, or if you’re wondering about how you can STOP renting and buy your own home – I’m here to help either way.