On average, renting in Tampa today would likely cost around $654 less than buying a home (as we’ll see when we crunch the numbers below). But the lower monthly cost doesn’t necessarily mean that renting makes more financial sense than buying.

Let’s take an honest look at renting vs. buying in Tampa’s current housing market to help you decide which is the better option for you.

Comparing the Upfront Cost of Renting vs. Buying in Tampa

A new lease typically requires first month's rent, last month’s rent, and a security deposit equal to one month’s rent. At the current average rental rate of $2,013, this would come to $6,039.

The upfront cost of buying is a little more complicated because the down payment is flexible, depending on your credit score, loan type, and financial goals. Military buyers may qualify for 0% down VA loans, while some buyers put down 20% or more with a conventional loan. There are also closing costs to consider, which tend to total around 3% of the purchase price.

On an average Tampa home at the median price point of $433,000, your down payment could be anywhere from $0 to $86,600 (or more if you have the cash available and want lower monthly payments), and your closing costs would be around $12,990.

Comparing the Ongoing Cost of Renting vs. Buying in Tampa

With renting, it’s simple; you pay the rental rate in your lease every month through the lease term: $2,013 on average. No need to consider separate expenses for maintenance costs, property taxes, insurance premiums, or homeowner’s association (HOA) dues.

For homebuyers, your ongoing costs will depend on the terms of your loan. In general, the higher your down payment, the lower your monthly payment. For reference, with good credit, you might qualify for a 30-year mortgage with a fixed interest rate of 6.5%. With a 20% down payment and average property taxes and insurance premiums, your monthly payment would come to $2,540. On top of this, you need to plan for maintenance expenses. A budget of 5% of the mortgage payment is a widely used estimate, which would bring the total monthly investment of homeownership to $2,667.

Comparing the Possible Financial Outcomes of Renting vs. Buying in Tampa

Here’s where it gets interesting!

Rents generally increase with each lease renewal. So, 10 years from now, you will have paid a total of $264,501 (assuming a 2% per year rent increase). And that money is just gone; renting doesn’t build equity like homeownership.

With a fixed-rate mortgage, your principal and interest don’t change, but your property taxes and insurance premiums could increase. Assuming a starting monthly payment of $2,484, with a 2.5% annual tax increase and 6% annual insurance increase, you would have paid a total of $426,758 over 10 years of homeownership (including the down payment, closing costs, and monthly payments). 

But wait…

If you assume market appreciation of 4% per year, the home would be worth $641,000 at the end of those 10 years. Plus, your loan balance is likely down to around $292,000 after 10 years of payments. This means you have earned around $350,000 in home equity, which brings the unrecovered investment down to $76,758…saving you $187,743 compared to renting!

As a homeowner, you can sell to cash out your equity, borrow against that equity, or continue letting it grow over time.

Don’t Homeowners Also Get Tax Deductions?

Taxpayers who itemize deductions can benefit even more from buying than renting. But because many taxpayers take the standard deduction rather than itemize, we are not factoring tax savings into the calculations.   

How to Get Personalized Guidance

Buying isn’t the right move for everyone. But if you can afford to buy, and you plan to own the home for several years, homeownership can be the foundation for a stable financial future.

Whether you’re ready to start your home search today or you simply want to explore your options for the future, the De Costa Realty team is here to help! We are happy to discuss your goals and crunch the numbers based on your unique situation. Contact us today for a professional consultation.