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To Rent or Buy That Is The Question

Buy or rent? That seems to be the age old question doesn't it? Conventional wisdom says renting is a waste of money...but is that right?

In the long term it is almost always cheaper to buy...but it may take years for that to be the case. It is important to remember buying a home is not really an investment, as home values do not go up uniformly. By the time you run the numbers with all the costs of a mortgage, taxes, insurance, inflation and repairs...people are not really gaining a huge sum if any true gain at all.

So why buy? There are lots of reasons. If you are planning on living in the same areas for years or want to provide stability for your kids buying is attractive.

What about renting? In the short term renting is almost always better as you usually pay less out each year in the terms of outgoing cash flow. This allows you to save more, and gives you more flexibility to relocate for work or jump on another opportunity.

How do you decide if you should buy or rent? Well first of all never let a lender, a realtor, or a well meaning friend or family member decide that for you. Make sure that you don't spend more than 30% of after tax money on your rent or mortgage. Then run the numbers...pretty simple really...just use the price-to-rent ratio (take the median home price and divide by 12 months median rent). If the number is 15 or above it is better to rent in your area right now...if is 14 or below it is probably better to buy right now.

Bottom line it boils down to how much you are going to pay out monthly and the length of time you will live in a particular area.

You can use a rent vs buy calculator like the one from smartasset to find out how long it will take to make buying less expensive in your area.

If you need further help figuring out what is objectively better for your circumstances reach out and we can help you look at all the angles. All our contact info is in our bio.

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