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Rent or Buy a Home?

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Uploaded on Jul 19, 2011

Renting Vs. Buying a Home - as part of the expert series by GeoBeats.

There are gazillions of rent vs. buy calculators on the web, and I would start what they are: Bankrate.com has a good one, just to name one. And but I will let you know what goes into that calculation. Several things. You have to make assumptions about several things which is what makes this a little bit difficult. You have to assume what the Appreciation Rate will be on the home. You do not want to be too optimistic on this. I would say be conservative on most of these numbers.

You want to know what you could earn on the money that you are now gonna put on a down payment. This is called Opportunity Cost. I would be conservative on this. I would use six or seven percent. You want to know what the current interest rate will be on your mortgage and you can get this from a mortgage professional. You also need to take into account things like what are you gonna have to spend on the home once you move in it, like, annual improvement costs, and also what people forget about is once you move into a home you get that nesting instinct if you generally want to fix it up. So, you have got the decoration cost, you have got all kinds of other costs that you would not think of.

You need to add all of these things into a formula and it will spit out whether it makes more sense for you, with considering the tax breaks you will get, which is the mortgage deduction, the property tax deduction, and the amount of money you put down, does it make more sense for you, over the long run, this is not a short term view, over the long run to keep renting your place, or buying a home.

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