Thursday, November 15, 2007

Response to a friend asking whether to rent or buy

Why you might want to rent:

•keeps you more mobile. So you can take a job in a different part of the country, for example.
•keeps you more flexible. Maybe now you want roommates. Then in a year you have a girlfriend and want to live with her. Then the next year you want to live by yourself. Say your income triples. In all of these instances you'll want to be flexible to be able to adjust your housing needs. Much easier renting rather than owning.
•fewer hidden costs. Owning has lots of costs you don't see if you rent. Property tax, insurance, yard maintenance, etc.

And the big one
•cheaper (sometimes). The prices for houses got so inflated that you could simply rent much more house for your buck than you would get buying. Even accounting for the tax break, in many markets it just made more sense to rent. Also, when you rent you don't have the risk of housing depreciating, and the fundamentals, despite recent drops, still suggest a further negative outlook in housing prices.

You may want to rent if you find a deal, if your market offers a better rents vs. prices equation, or if you know you will stay put for a half-decade or more.

Still, I understand this isn't a rational choice sometimes. I'm currently helping someone I'm (very) close to find a place to buy, despite knowing it will give him less house for the dollar than renting. Sometimes people just want to own their house.

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