Rent vs Buy in Denver: Which Is Right for You?

Home Buying

Rent vs Buy in Denver: Which Is Right for You?

May 06, 2019 | by Reuven Shechter

At A Glance

In the Mile High City of Denver, it may be tricky to know whether you’ll benefit the most from renting or buying a home. While the answer depends on your specific situation, here are some important factors to help make your decision easier.

Rent vs Buy in Denver: Which Is Right for You?

Known for its scenic mountains, cozy nearby ski towns, and laid back attitude, Denver is an incredibly desirable and beautiful city to live in. So, it may come as no surprise that Denver is an expensive place to live — no matter whether you’re looking to buy a home or apartment or rent.

According to Zillow, the median home value in Denver is $426,200. While the median listing price is $484,900, the median selling price is a little less at $415,300. This shows that the Denver market is cooling a bit and homes are selling for about 17% less than their original listing price. While home values have increased 3.7% over the past year, growth is expected to slow to just 2.2% over the next 12 months.

The median rent price in Denver is $2,150 per month, which is also high compared to the national median of $1,675 (but you can also find cheaper places to rent). If you’re living in or looking to relocate to the Denver area, you may wonder whether buying or renting is the best option for you in the long run. And the answer to that question depends on a few factors related to your specific situation.

How Long You Will Stay

Let’s take the median home value of $426,200 and compare it with the median rent price of $2,150 per month. Using these values, and assuming you’ve paid a 20% down payment of $85,000, buying would be cheaper than renting after three years. We can pad this to four years to account for various repairs and maintenance needed on a home you own and costs you pay when you purchase the home.

So, if you’re planning on staying in one place in Denver for four years or more, buying would be a good option for you. The equity you’ll build in your home (that would be going to a landlord if you rented) will also be icing on the cake! Anything less than that and the closing costs of both buying and then reselling your home would probably mean you lose money on the deal.

Your Savings and Income

Even if you want to buy a home in Denver, you may not be able to afford to do so. Since prices of homes in Denver are quite high and lenders may require up to 20% as a down payment, you could be looking at fronting $75,000-$100,000 from your savings on top of your monthly mortgage payment of $1,500-$2,000.

On the other hand, if you were to rent, you’d only need to come up with the amount for your rental deposit — more in the range of $2,000-$3,000.

If you are able to afford a home in Denver, or choose a less expensive area of the city, you still need to consider the additional monthly costs of owning a home. Lucky for you, property taxes in Colorado are some of the lowest in the nation.

As of 2016, the effective property tax rate for single-family homes in Colorado averaged 0.52%, compared to the national average of 1.15% percent, according to ATTOM Data Solutions. Average monthly utilities in Denver will run about $115 per month, but will vary by the size of your home and your thermostat preferences, of course.

You’ll also want to factor in homeowner’s insurance and any Homeowners Association (HOA) fees, and set aside some for maintenance and repairs. Since Colorado is known for snow and ice, plan for at least a few repairs related to harsh winters. The silver lining is that, by purchasing a home, you’ll also be building equity and Denver home values are still likely to increase even though the market has cooled from five years ago. Plus, there’s nothing like having a home of your own and you’ll avoid any future rental rate hikes.

Your Lifestyle

Aside from the math alone, your lifestyle may play a major role in whether you ultimately decide to rent or buy a home in Denver. Denverites can be choosy about which area of the city they prefer to call home, as different parts of town can have a very different feel.

If you have your eye on a particular neighborhood, like Cherry Creek or Washington Park, you may be saving for a long time before you can afford a down payment in the area where the median home value is around $850,000. Instead of purchasing a home here, you may be better off renting an apartment, at least for the time being.

However, if you’re willing to venture a bit outside the city center, like further west near Lakewood, prices of homes get a lot more affordable and you could snag one for around $250,000. With a 20% down payment, this would mean your monthly mortgage payment of $1,000 could be below the price of renting an apartment there, not to mention the equity bonus.

If you’re considering buying a home or apartment in the Denver area, connect with an experienced, local agent for guidance and support throughout the process. They know the nuances of certain neighborhoods in the city and can help determine the best place for you to live. They also know the best time to buy a home in Denver to get the best price.

Clever Partner Agents are also able to offer on-demand showings — sometimes in less than an hour — so you know you won’t miss out on your dream home. Plus, you’re eligible for a $1,000 buyer’s rebate on any home you purchase for more than $150,000.

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