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Rent vs. Buying

1/7/2013

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The decision to rent vs buy concerning your home can get very complicated because there are a lot of variables that go into it.  Owning a home is one of the best ways to build wealth and supply a basic need of life all in one step.  But if you’re a gypsy who feels suffocated by the idea that you can’t just pack up and leave then owning a home may always be a bad idea.  There are 2 quick variables to focus on though: time and cash flow comparison.

Depending upon how hot your local real estate market is, it normally takes at least 3 years for a home owner to recoup their transaction costs.  Meaning you don’t make any money unless you own it for at least 3 year (closing fees, commissions, etc.).  In a hot market you can do it 6 months, but you run the risk of a crash.  When comparing cash flows from owning vs. buying, use common sense.  How much are you spending on rent?  Can you get a home for how much you’re paying in rent?  If so, look at what you gain in principle payment and potential capital gains from price appreciation.  Here is a great website that walks you through the entire process…

http://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx

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    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

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