Should I Rent or Should I Buy?

rentorbuyAs the (modified) Clash song goes:

I am so worried I could cry
Should I rent or should I buy?
Most people say just buy the place
But in the end it’s just some space
So you got to tell me why
Should I rent or should I buy?

It’s always buy, buy,  buy
But I just ask myself why
One day is fine, then the roof leaks
And I’m not a handy geek

Should I leave and say goodbye

Should I rent or should I buy?

Should I rent or should I buy now?
Should I rent or should I buy now?
If I buy there could be trouble
Could there be a housing bubble?
So come on and please advise

Should I rent or should I buy?

Alas the late Joe Strummer (no relation) is rolling over in his grave with my adaptation of the Clash song, but the question is surely valid:

Is it better to rent or buy?

The answer is not so simple. Basically, it depends. Historically the prevailing wisdom was that real estate was an “investment” which appreciates. How’s that working for those of you who bought a home 10 years ago? Obviously there are ups and downs in real estate, but the real estate crash in the Great Recession has changed the “givens”. Appreciation could happen, but it is surely not a given.

The second historical wisdom is that the deductibility of interest payments and real estate taxes makes owing smarter financially. Maybe so, but the tax laws might be changing. And my advice to all—do the math in your case. General directional truisms are nice, your circumstances are more important. There was an excellent calculator in a New York Times article, Is it Better to Rent or Buy, that would allow you to do the math in your circumstances.

Conceptually however in fairness to both sides of the argument, there are some macro issues that are worthy of thinking about:

Reasons to own

1. You intend on staying in a location for many years

2. You’re handy and like home improvement projects

3. Tax advantages mentioned above (perhaps)

4. Psychological advantages of ownership (if that’s important to you)

5. Ability to be “mortgage free” at some point (again if that’s important to you)

Reasons to rent

1. Unsure whether you will remain in area more than a couple of years

2. You are planning a family but not sure when and size

3. Uninterested in home decorating or home improvement jobs

4. Don’t really care emotionally whether you rent or own

5. Have cash, but not sure you want to tie it up in down payment.

In today’s world Millennials are less apt to jump to ownership at the first possible moment. And long-time home owners are understandably questioning whether ownership was really worth it after all.

Should you rent or should you buy? In the end… depends.

More Strumings

Leave a Reply