Bottom line is, even If you’re paying $1,000 a month for rent, you will pay $60,000 over the next five years with nothing lasting to show for it. You could be enjoying the same benefits of occupancy while building equity in your own property. Get in touch for a free consultation, and I’ll show you how.
Please share or tag a friend! (Because friends don’t let friends rent). Have them call me for their own RENT vs OWN analysis.
According to recent studies, rents have increased dramatically in recent years (see chart). Vacancy rates are low, and the growth in renter households is high. This means that landlords have greater pricing power when setting rents.
The average rate of house price appreciation over the past 20 years has been over 3% per year. In the past five years, house price appreciation in many markets for starter homes has been even greater. At 3% annual house price appreciation, a $10,000 down payment on a $200,000 house could grow to $40,000 over a five-year time period. That growth could be money that you would have lost by not owning a home. Click here to view house price trends in your local market.
In many cases, mortgage interest and property taxes could be tax deductible. Assume you pay $1,500/month in mortgage interest and property taxes, and you’re in a 25% income tax bracket. This would translate into approx. $250/month in tax savings if you itemize your tax deductions. In other words, your after-tax payment could be $250/month less if you buy vs. rent because rent payments are not tax deductible. Please consult with a qualified tax advisor for specific advice pertaining to your situation. For more information on the tax deductibility of mortgage interest, please reference IRS Publication 936.
*Our rent vs. buy calculator methodology compared the total cost of renting with the total cost of buying by looking at much more than a rent check or mortgage payment (including opportunity cost, tax breaks, and more) .
To calculate the cost of renting, we started with the monthly rent and added renter’s insurance and a refundable security deposit.
To calculate the cost of buying, we started with the purchase price and calculate the initial down payment and buyer closing costs; the monthly mortgage payment and other recurring costs like maintenance, property taxes, and insurance; income tax deductions for mortgage interest and property taxes; and the final mortgage payment, sales proceeds, and seller closing costs.
Finally, we used a net present value (NPV) calculation to compare the total costs over time of renting versus buying, and to account for opportunity cost of money.
Disclaimer:
This calculator is provided for educational and informational purposes only. It relies on assumptions and information provided by you regarding your goals, expectations and financial situation. All figures are hypothetical and may not be accurate indicators of historical or current performance. This calculator does not take into account individual circumstances and should not be relied upon in any way as the sole source of information.
Home-ownership is as affordable or in many cases more affordable than renting than ever before:
• Your wealth will increase as you gain more equity in your home.
• Gain tax advantages with your mortgage interest.
• Monthly payments are stable with a fixed rate loan where rent can increase each year.
Contact me if you’d like me to run a buy vs. rent analysis for your specific scenario!
Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX AND INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.
