Many renters in Little Rock are waiting for mortgage rates to drop before buying a home, but according to Jerry Larkowski, Managing Broker at ESQ. Realty Group, LLC, that wait may be costing them more than they realize. Larkowski, a dual-licensed attorney and broker, argues that every dollar of rent goes to the landlord with no equity building for the tenant.
“When you rent, you’re basically paying 100 percent interest every month,” Larkowski said. “You are building up no equity. You are not paying down any principal.” In contrast, a mortgage payment splits between interest and principal, with some portion reducing what is owed, and the home may appreciate over time.
Larkowski illustrated the point: 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 said. “You’re buying it for your landlord.”
Renters often compare current mortgage rates, in the mid-to-high sixes, to the 3.5 percent rates available a few years ago. But Larkowski notes that the person who bought at 3.5 percent also owns a house, while the person waiting does not. He advises buying when prices are low and interest rates are high, because “You can never change the price you pay for a house. You can always change the interest rate.” If rates fall, homeowners can refinance; if rates rise, those who bought earlier benefit.
In the Little Rock market, inventory has been sitting longer than before, indicating softer demand and more choices for buyers. Quality single-family homes are available at price points where a mortgage payment is competitive with rent. Arkansas has some of the lowest property taxes in the country, keeping monthly ownership costs lower than expected. A fixed mortgage payment also remains stable, unlike rent which can increase over time.
For renters considering buying, the key question is whether their current monthly payment builds any asset for them. More information on available properties is on 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 Jerry Larkowski. Learn more at esqbrokers.com.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
