Renting vs. Buying.

One of our members is a renter in a metropolitan area, and he is not sure whether he should consider home ownership. He's been doing a little research into a cost/benefit analysis of renting vs. buying. One of the things he came across was this rent or buy calculator. The problem with these sorts of calculators is they don't take into account the whole picture.

We would like to find that break-even point where ownership makes financial sense. This led us to try and assemble something quickly in Excel. Perhaps if we parse the numerical side, that would allow us to weigh against the emotional aspects of the decision, such as location, size, amenities, etc.

After talking it out, our member ended up concluding that renting really makes more sense where he's at, given what he could expect to get for about the same cost as he is paying in rent. This is pretty common for city living.

The rough calculation you get is that one should expect spent about 1% the total value of the house per month. So $1000 a month gets you a $100,000 house over the course of 30 years. It might be worth spending the extra money if you feel like you can get some extra return when you sell the house, sort of house as investment. Next week we are going to try to decide if it is better to throw extra money into an investment or make the house as the investment. We will try to weigh in the size and quality of the place, too. Good luck to us.

Profit.