Is it better to rent or buy? Of course as a Realtor, it is in my personal interest to convince you to BUY versus rent. That will bring me money in my pocket. However, I want lifetime clients, not a one time customer. To do that, I must genuinely out of the best interest of my client, and sometimes I advise them to RENT.
The question of BUY versus RENT is a highly personal one, with the answer differing from one person to the next. Your personal case will be vastly different from your neighbor’s, just like in other aspects of your life.
Some general factors to consider:
- How long you’ll live in the home: This varies depending on the market, but in general, the longer you’re in the home, the better, because your costs are spread out over time.
- The cost of housing in your area: In most cases, people rent because houses are just too expensive, but it all depends on the market in your area. If renting is extremely costly in your area, it might be more affordable to buy a home.
- The opportunity cost of your taxes and insurance: What kind of long-term return could you get if you invested this money instead, in the stock market, a CD, or even a “high interest” savings account?
- The opportunity cost of your down payment: Similarly, how much of a return could you get if you invested that lump sum instead?
Some reasons for BUYING are:
- When you pay off your home, it’s yours. You eliminate the expense of housing once you’ve paid it off.
- If the home appreciates more than you’ve paid in mortgage, interest, taxes, and maintenance over time, you’ve earned a return, or you break even.
- Tax credits help offset some of the cost of home ownership.
Some reasons for RENTING are:
- When you own your house, but you pay quite a bit in interest and taxes.
- Renting isn’t throwing money away—you get a place to live.
- Buying has an opportunity cost—the amount you can invest and earn on the down payment, taxes, insurance payments, and interest.
- You don’t have to pay for repairs, maintenance, or other issues that come up.
So how do you decide?
The best decision tool I have found is this NYTimes Buy versus Rent Calculator. This tool, if you answer accurately, will let you know whether you should rent or buy. But like in other major life decisions, we do not always make the most analytically correct decision. Either way, I will respect your decision and will not bring this up during our consultation.