Buy vs Rent

Is It Better to Buy or Rent?

Don’t be BLIND and think you’re not paying a mortgage when you rent, because YOU ARE PAYING A MORTGAGE. The question you should be asking is “WHOSE MORTGAGE ARE YOU PAYING?” Are you paying YOURS or your LANDLORD’S?

1) Consider your Lifestyle

For some people, buying their home makes the most sense, and for others, renting is best. To determine which is right for you, you first need to determine whether you can afford to buy. Then you need to consider other factors, including the time you’ll stay in your new home, the home’s prospects for appreciation and taxes. Just answer the following questions and we’ll advise you on what seems best for you.

Visit this site to help you determine your lifestyle: http://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx

2) Consider what makes sense Financially

Whether renting is better than buying depends on many factors, particularly how fast prices and rents rise and how long you stay in your home. Compare the costs of buying and renting a home in the calculator below. Go to this site to help you determine if the numbers work for you:

BUY vs RENT Calculator Tool

Click the advanced settings button to change inputs such as your rate of return on investments, condo/common fees and your tax bracket.

Below is a very CONSERVATIVE SAMPLE that I ran.  It’s a $400,000 house (3bed 2bath) that would normally rent for about $1,800 a month if not more.  And as you can see, it is more expensive to rent than to own starting on the 7th year!!!

And if you play around with the numbers a bit more, you will find that renting will become more expensive sooner than 7 years as the purchase price of the house decreases from $400,000 example that we used.  I can even show you some properties where it’s actually cheaper to own NOW than to continue to rent.

If you have any questions on how to use this awesome tool, please call or email me.  I’d be happy to go over some numbers with you.

buy vs rent

buy vs rent - buy settings

rent vs buy - rent settings - long beach homes for sale

rent vs own - other settings - long beach homes for sale

own vs rent - year by year analysis

Methodology The calculator keeps a running tally of the most common expenses of owning and renting. It also takes into account something known as lost opportunity costs — for example, the return you could have earned by investing your money instead of spending it on a down payment. The calculator assumes that the profit you would have made in your investments would be taxed as long-term capital gains and adjusts the bottom line accordingly. The calculator tabulates lost opportunity costs for all parts of the buying and renting scenarios.

Buying Purchase costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and typical closing costs. Yearly costs are recurring monthly or yearly expenses. These include mortgage payments, condo fees (or other community living fees), renovation costs, maintenance costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller. Lost opportunity costs are tracked for the initial purchase costs and for the yearly costs. The former will give you an idea of how much you could have made if you had invested the down payment instead of buying your home. Selling costs are the costs you incur when you go to the closing for the home you are selling. This includes the broker’s commission and other fees, as well as the remaining principal balance that you pay to your mortgage bank. “Proceeds from home sale” is the money that you receive from the person who is buying your home. This amount is equal to the value of the home that year and is shown as a negative number since it is not something that you spend money on, but rather, it is money you receive. If your cumulative buying total is negative, it actually means you have done very well: you made enough of a profit that it not only covered the cost of your home, but also all of your yearly operating expenses.

Renting Initial costs are the rent security deposit and, if applicable, the broker’s fee. Yearly costs are the monthly rent and the cost of renter’s insurance. Lost opportunity costs are calculated each year for both your initial costs and your yearly costs. Leaving your rental is equal to the rent security deposit, typically returned to a renter at the end of a lease.

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