Most renters in Little Rock are waiting for mortgage rates to drop before they consider buying, but that wait may be costing them more than they realize, according to Jerry Larkowski, Managing Broker at ESQ. Realty Group, LLC. Larkowski, a dual-licensed attorney and broker, argues that every dollar of rent goes to the landlord, building no equity for the tenant.
"When you rent, you're basically paying 100 percent interest every month. You are building up no equity. You are not paying down any principal," Larkowski said. A mortgage payment splits between interest and principal, with some of every payment reducing what you owe, and the home may appreciate over time. In contrast, rent payments provide no asset at the end of five or twenty years—just the total of every check written.
Larkowski points out that if a landlord pays $1,100 a month on their mortgage and charges $1,500 in rent, the tenant is covering that note and generating cash flow for the owner. "You're already buying a house," he says. "You're buying it for your landlord."
Renters often compare current interest rates, around mid-to-high sixes, to the 3.5% rates some buyers secured a few years ago. However, Larkowski notes that the person who bought at 3.5% also bought a house, while the person waiting does not own anything. His rule: buy when prices are low and interest rates are high. "You can never change the price you pay for a house. You can always change the interest rate," he said. If rates fall, you can refinance; if they stay the same, you made a reasonable decision; if they rise, you came out ahead.
The Little Rock market currently offers more inventory and less pressure, with quality single-family homes available at price points where a mortgage payment is competitive with many rents. Arkansas has some of the lowest property taxes in the country, keeping monthly ownership costs lower than expected. A fixed mortgage payment also stays the same over time, unlike rent, which can increase at the landlord's discretion.
For more information on available properties, visit the ESQ. Realty Group active listings page. ESQ. Realty Group, LLC is a full-service real estate brokerage serving Little Rock and Hot Springs, Arkansas, led by Managing Broker Jerry Larkowski. Learn more at esqbrokers.com.
