23
Jul
Is it better to rent or buy in a sour economy?
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First a note on the media delivering the economic news: The media believes it’s their mission to convey only bad news, which is what they assume the public wants. Whether to buy or rent is a personal decision. Each approach has its own list of bad news and good news. Following is a brief summary of each.
| Rental Good | Ownership Good |
| No down payment necessary | Appreciation possibility |
| No real estate taxes to pay | Equity build-up |
| No fix-up or insurance costs | Tax deductions |
| No fixing costs | Privacy |
| No sales expense | More living space |
| More flexible | Can invest in customizing |
| Rental Bad | Ownership Bad |
| No appreciation | Down payment required |
| No equity built-up | Can lose principle |
| No tax deductions | Due diligence expenses |
| Rental increases possible | Real estate tax costs |
| Less living space | Fix up and insurance costs |
| No private backyard | High sales cost |
| Can’t customize | Less flexible |
NetGain believes that a better quality of life can be achieved through increasing net worth. The path to increasing net worth comes from having an improving balance sheet, and having a strong balance sheet comes from owning assets, not renting them. Therefore good news and bad news aside, NetGain has a bias toward ownership.
RE: “a better quality of life can be achieved through increasing net worth.” How true, but if the equivalent domicile can be rented for substantially less than the occupancy cost of owning, one’s net worth can go up faster by renting than owning.
You omitted that point in your analysis.
July 23rd, 2008 at 2:24 pmThank you for your good comment. This is particularly true if the additional funds can be channeled into investments with greater ROI.
July 24th, 2008 at 5:51 am