Comments on: Buy vs. Rent

By: Amy Easterday

Amy Easterday — Thu, 03 May 2007 02:11:06 +0000

If you’re planning on staying in the area, think about it in terms of investment… rather than putting your money into rent, which you can get no return on in the future, put it into a condo/house. We bought our condo in a new development, Reunion (by DIA), and we’re predicting a good return on it when we’re ready to sell or rent it out.

By: Anonymous

Anonymous — Wed, 02 May 2007 04:49:12 +0000

I really wish more people would use these calculators…. too many people think that owning a house is the path to big $$$. The average real estate rate of return post-WWII in the US is 1% after inflation, and most of the recent runup is only since 1995. Of course, certain housing markets heat up and the like, but the same is true with, say, certain sectors of the stock market.

Not to mention that renters like myself pay to subsidize already well-off home owners via mortgage interest deduction and capital gains exclusions, which just arbitrarily inflate house prices and thus ultimately the rent that renters pay as well.

Of course this only works out if people are diligent about saving and investing money that they would otherwise be shoveling blindly into a house.

By: Anonymous

Anonymous — Mon, 23 Apr 2007 19:32:46 +0000

Somebody gave me the wise advice that, in the end, I should buy a place if I really wanted to own a place, but to rent otherwise. So far, I agree. As long as you’re good about putting aside money to invest, the investment is never going to have a big impact on your life. But being tied to a place for a certain amount of time has a huge impact.

By: Simon

Simon — Mon, 23 Apr 2007 05:45:11 +0000

Ah, OK.

My current house costs about 10% more in mortgage payments than my apartment did. However, I moved to a new area right before house prices started to go up. Even so, my mortgage would probably only be 25% more than my rent if I had moved in this year.

By: Eric Faller

Eric Faller — Sun, 22 Apr 2007 18:26:21 +0000

Yes – the graphs take that into account and assume that you sell the at the end for the market price when comparing how much money you would have. And yes, it assumes that you invest all the money you save by renting.

Probably the reason it comes out like this is that I plugged in Seattle numbers, where buying is about twice as expensive as renting ($350000 for a small condo). If we plugged in Colorado-style numbers where maybe buying costs about the same as renting, it might come out completely differently.

By: Simon

Simon — Sun, 22 Apr 2007 17:11:19 +0000

I’m not sure if I agree with the graphs for one reason: equity. Do they take that into account? In your last graph, after 30 years of paying the mortgage, the buyer owns a house outright. Is that counted?

Doesn’t the last graph also assume that you invest all money that you save when renting?

For me, my mortgage was barely any more than I was paying in rent when I first got it, so probably by now I am paying less for my mortgage than I was for rent. I was finding it hard to justify paying out a certain amount every month, never to see any return on that money.