Yet another reason to keep on renting
Posted
Mar 13 2008, 04:05 PM
by
Karen Datko
Rating:
We have a friend who is determined to buy a home, and this causes us to worry. Are prices going to drop where she lives (they haven't -- yet) after she buys? Renting is cheaper than buying in her city. Is she better off continuing to rent and investing the difference?
Thus, posts on this subject intrigue us. One we recommend is Pinching Copper's "Why we rent," one of the top picks in the recent Carnival of Personal Finance.
Of course, there are plenty of good arguments on both sides of the issue. Seb at Pinching Copper makes an interesting case by comparing what it costs to buy vs. rent a home with the same floor plan in each of three different major markets.
In each case, Seb assumes a 20% down payment. The first example is a three-bedroom, 2.5-bathroom townhome in an Orlando, Fla., development. The monthly cost to buy, including property taxes and insurance, is $1,296. Rent is $999. Seb asks, "So, do you want to put down nearly $40,000 and then spend another $1,300 a month for 30 years, or would you prefer spending $1,000 a month for a lease?"
For a McMansion in Phoenix, the monthly cost to own is $2,525. "So you can either spend a little over $2,500 a month after putting more than $60,000 down, or you can rent the exact same home for $1,500 a month. It's your call," he writes.
In the third example, a townhome near Minneapolis, the cost of rent is about $70 more than the cost to buy. "The Minneapolis example just goes to show that not all housing markets are unaffordable," he writes, adding, "However, in a lot of markets this isn't the case."
