Saturday, January 12, 2013

RENT VS BUY: Macro Rent-vs.-Buy Decision Fraught With Micro Decisions

The timeless rent-vs.-buy decision comes in a host of variations.

  • There are factors that go beyondaffordability.
  • There are cost differences bylocation.
  • For those who plan to move into a newly built home, there's abuying a new home-vs.-rentingscenario.
  • The rent-vs.-buy decision can get really quirky, including renting to cover a home with an underwater mortgage.However, to help level the playing field in any of a host of rent-vs.-buy scenarios, there are basics to consider.
    While the information may appear to be self-serving, coming from, the online listings service for apartment communities offers an informative infographic to lay the groundwork for beginning to make a choice.
    For starters, let's look at just some the pros and cons.
    Renting pros
    Rent an apartment and you've got the flexibility to move when you decide, and on fairly short notice.
    That leaves your with more money available to invest, perhaps in some holding expected to do better than a 2 to 3 percent return that's expected on home values next year.
    What's more, your time is also free from maintenance, landscaping chores and other upkeep, except those necessary for your own furnishings.
    Renting cons
    Of course, while you are socking your money away in stocks or bonds in a market that could crash any day, you won't have the benefit of new equity accumulation from today's recovering owner-occupied housing market.
    And you may not be suited for close-in, higher-density apartment living, sharing parking, hallways and common area features.
    Home ownership pros
    With homeownership, provided you buy a single family home, you'll get more privacy, perhaps a quieter home.
    More importantly, you are likely to enjoy increased equity in your home that will add to your personal wealth, help you build a nest egg and give you a source of liquid cash should the need arise.
    There are also nearly a dozen tax shelter benefits that come with a shelter you own, from the mortgage interest, mortgage insurance and property tax deduction to the grand- daddy benefit of them all - a tax exclusion on certain capital gains.
    Home ownership cons
    Of course, you won't be able to call the super to take care of your property. That's your job.
    Until you have some equity gain, you may actually have less access to cash. Not only will you have a mortgage payment, but also homeowner's insurance, property tax payments and the cost of upkeep.
    You could face unexpected costs if you don't pay a premium for earthquake or flood insurance in certain areas if disaster strikes.
    You get the idea. This isn't just a dollar and cents decision.
    If you'll be moving soon, renting could be a better deal. If you'll be around longer, say five to seven years, buying wins.
    It's tough to get into a mortgage for less than 20 percent down and even low down payment home loans force you to come up with some kind of down payment. That requires planning and saving. has many more conditions you must begin to consider before the rent-vs.-buy decision is a done deal.
    Check out the infographic below. Mouse over and click to get cozy with the kinds of decisions - within the rent-vs.-buy decision - that you'll have to make before settling on one or the other.
    Should You Rent or Buy
    See more infographics.

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