Rent vs Buy

The great debate: Rent vs Buy a Home

You may be wondering is buying right for you. Here is a comparison chart that may help you consider both sides.

Buy
Rent
  • You plan to stay in one general location for an extended time
  • Your rent is as high as a mortgage payment (PITI) for a similar or better home
  • You have a family and kids in school
  • You can afford a home large enough to have a roommate renting from you benefiting YOUR home equity growth
  • Tax Deductions
  • Affordable mortgage interest rates
  • You want a place for your family to call home
  • Nice homes are available in your price range
  • You are buying in an area with rising prices

  • You get relocated a lot for work or school
  • You travel a lot AND have no handyman skills
  • You are new to the state/area and not sure where you’d like to be
  • Your credit is bad and/or you have zero downpayment
  • Homes you can afford have high maintenance costs or in poor condition
  • There are rentals that have all the amenities you desire without long leases




Renting vs Buying a Home In the News:

August 8, 2016 –Trulia’s latest Rent vs. Buy Report explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

January 25, 2016 – Buy or rent? Zillow CEO shares real estate tips


September 22, 2015 -According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, home ownership is a better way to produce wealth, on average, than renting.


View a Buying vs Renting Calculator from Realtor.org (Assuming you will not have a roommate renting from you.)

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Purchasing a Personal Home vs Rental Property

What a home to be an investment?To ensure you purchase the best real estate, you need to know what qualities make for a good investment property.Related: Where to Buy Real Estate for Higher Value…

Effective After Tax Rate.

This is important for helping people fully understand the huge value of home ownership.

Let’s use a calculation of an average appreciation of a home at 4.5%

If the client has a mortgage of 3% and is in a 24% Income Tax Bracket: Take 100-24 (24 being the Income tax bracket) = 76.

76 x .003 = 2.28. The Effective after tax rate is then 2.28%.

Deeper drill down of this example: If I own a $400,000 valued home and it is appreciating at 4.5%, then next year it would be valued at $418,000.

4.5 – 2.28 = 2.22 If we then take the $400,000 x 2.22% it is a $8,880 net gain. That is a gain of $740 per month!

Of course there are other costs associated with owning a home like property taxes & insurance but we all need shelter! Also keep in mind that while one is making a payment, the principal balance is going down and there is additional equity gained.

Bottom line is that homeownership is a great way to build wealth and there are many studies that can show that.