> To the second question, buying a house rather than renting it generally increases your options by about a hundredfold -- many, many more houses are available for sale than for rent. And while property tax can be painful, it's generally substantially cheaper than what you'd pay in rent on the equivalent property. So you get to save a lot more of your income, or at least apply it to paying down your mortgage.
It also reduces your options, in the sense that your mobility may be drastically reduced.
To me, though, the main advantage of home ownership is the promise of one day not having a rent or mortgage payment at all. That's one of the main steps towards retirement.
Financially, though, the fair comparison is whether the capital invested in a house generates more rental income (from yourself) than what the capital would make in equity, after accounting for property taxes, insurance, and upkeep.
Most calculations I see suggest it's pretty much a toss up at that point, and which you choose should depend on factors like preference for mobility or stability.
Re:The house I was born in sold for $4000
by dennisgorelik on Tuesday May 28, 2013 @02:45AM
(#5778537)
It actually depends on location.
Buy/Rent ratio is much higher in Bay Area and NYC than in Arizona/Texas/Florida/Kansas/...
So in Bay Area it's generally better to rent, while in mid-America it's better to own.
Exactly. It's fairly entertaining to play with this model: http://www.nytimes.com/interactive/business/buy-rent-calcula...;
Basically almost anything in the bay area is not going to be profitable, in the south bay for sure.
1. Why do you choose to live in a house rather than an apartment?
2. Why do you choose to own that house, rather than rent it?
To the first question, a house often provides a much higher quality of life than an apartment. You might get a backyard garden, or a workbench, a guest room, an office, a full kitchen, etc... and, you can drill all the holes you want, paint it your favorite color, and so on.
To the second question, buying a house rather than renting it generally increases your options by about a hundredfold -- many, many more houses are available for sale than for rent. And while property tax can be painful, it's generally substantially cheaper than what you'd pay in rent on the equivalent property. So you get to save a lot more of your income, or at least apply it to paying down your mortgage.