5 ms·

Is It Better to Rent or Buy?

4 points by tdurden 9y ago

misnamed 9y ago
This calculator has been around for a while, but they keep improving it and I recommend it all the time. Have to be really really careful with inputs, though - like: don't just accept their projections for a portfolio's growth, as it will depend heavily on your stock/bond ratio, etc...
ljsocal 9y ago
Important factors that this calculator doesn't (and can't) account for: Lifestyle: having owned and rented, hands-down renting is far easier. No weekend trips to Home Depot, no emergency $500 plumbing bills, zero time or attention devoted to care & feeding of house, etc. Standards: the requirements for the house you're willing to rent are far looser than if you are "betting the ranch" on a house, neighborhood, school district, etc. Flexibility: renting allows for far more flexibility and geographic mobility. If you need/want to move, give notice, arrange mover and you're off. The process of prepping for, selling and moving from an owned home is much harder, more complex and expensive (especially if the market happens to be soft)
jaclaz 9y ago
It seems to me like an exercise in futility (with all due respect). It has too many parameters projected over a very long time (I mean if you are going to consider buying a house it means that you are planning some stability over a long stretch of time, like 20 years or more, and anyway very few people can afford to buy a house with a shorter than 20 years mortgage covering 50%-60% or more of the price). You are asked to project for (as said at least 20 years) the inflation rate, the appreciation of the house value, the increase in rents, the investment return rate. While the first three can - maybe - be roughly hypothized (in a "stable" country with a "stable" economy), the latter is highly variable, you may also lose money in investment, or as well you could have an unpredictable very high growth rate. The much simpler rule of thumb of 3% of house value is much faster (still in the 20+ years duration hypothesis). If you can pay for rent less than 3% of current value of the house, then rent, otherwise (if you can afford it) buy.

4 points by tdurden 9y ago

This calculator has been around for a while, but they keep improving it and I recommend it all the time. Have to be really really careful with inputs, though - like: don't just accept their projections for a portfolio's growth, as it will depend heavily on your stock/bond ratio, etc...

ljsocal 9y ago

Important factors that this calculator doesn't (and can't) account for: Lifestyle: having owned and rented, hands-down renting is far easier. No weekend trips to Home Depot, no emergency $500 plumbing bills, zero time or attention devoted to care & feeding of house, etc. Standards: the requirements for the house you're willing to rent are far looser than if you are "betting the ranch" on a house, neighborhood, school district, etc. Flexibility: renting allows for far more flexibility and geographic mobility. If you need/want to move, give notice, arrange mover and you're off. The process of prepping for, selling and moving from an owned home is much harder, more complex and expensive (especially if the market happens to be soft)

jaclaz 9y ago

It seems to me like an exercise in futility (with all due respect). It has too many parameters projected over a very long time (I mean if you are going to consider buying a house it means that you are planning some stability over a long stretch of time, like 20 years or more, and anyway very few people can afford to buy a house with a shorter than 20 years mortgage covering 50%-60% or more of the price). You are asked to project for (as said at least 20 years) the inflation rate, the appreciation of the house value, the increase in rents, the investment return rate. While the first three can - maybe - be roughly hypothized (in a "stable" country with a "stable" economy), the latter is highly variable, you may also lose money in investment, or as well you could have an unpredictable very high growth rate. The much simpler rule of thumb of 3% of house value is much faster (still in the 20+ years duration hypothesis). If you can pay for rent less than 3% of current value of the house, then rent, otherwise (if you can afford it) buy.