9.23.2010

Housing Buy - Rent calculator

Is It Better to Buy or Rent?

Comment: One of the nicest ones I've seen on the Web

Posted by Jim Peet at 9/23/2010 09:24:00 AM

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4 comments:

  1. Daniel StahlSeptember 23, 2010 at 10:37:00 AM CDT

    Have you posted that before?

    I've seen it before and like it. My only problem in all of these types of calculations is that the home is viewed as an asset. They end up taking into consideration the owner selling their home, which in turn gets added to the final price. To be accurate, I don't think this should be considered, mainly b/c one doesn't usually sell their home and then live no where, which is what it means when you add the sale price for the home owner. One always needs a place to stay, and unless they then start renting (I don't think going from home owner to renting is the norm), you never end up seeing 'that money'.

    At some point I am going to create a huge spreadsheet that is similar to show renting is less expensive. Or, maybe I'll be proved wrong, but from the little work I've done so far, I am fairly convinced renting is immensely cheaper. The problem is, as I have said before, people have been trained to think a home is an asset. And to retrain a person to view it as a liability is incredibly hard.

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  2. Jim PeetSeptember 23, 2010 at 11:43:00 AM CDT

    To Dan: Yes I did post that before - April 21st of this year. I think I posted it back then because my son was thinking about buying the townhouse he was living in. Turns out, he did not and moved into a different rental.

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  3. tobinSeptember 23, 2010 at 4:45:00 PM CDT

    I've had that bookmarked since you posted it last time. :)

    Daniel, I'm not sure I understand your point about a home being a liability. It certainly is for the short-term (longer than normal in today's market), but as long as the property is increasing in value over time, how can it be considered anything but an asset?

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  4. Daniel StahlSeptember 24, 2010 at 10:18:00 AM CDT

    Hi Tobin.
    There are way too many factors to accurately present my view on a blog. But I think there are two parts to it.

    The first, how does a home affect your cash flow? Does it produce income or cause expenses? The typical answer to that is, it is increasing in value. When balanced out, though, that does not mean it is affecting your cash flow positively. This is where a car lands. Generally speaking, a car affects your cash flow negatively because its incomes (if it appreciates) do not outweigh it expenses (repair, operating costs, and depreciation). This is where I think the majority of people will always be in home ownership, home is appreciating, but not faster than their expenses.

    Second part of my idea deals with equity. This, I cannot adequately present on a blog due to all the factors involved. But it starts with creating a balance sheet for your home.

    It's still evolving, so some of it has not been thought out all the way. I think in the end, the point is to flush out exactly why one is buying a home and to fully understand everything one is getting involved with. My idea is not intended to prove home ownership is bad, but that it can be bad if you do it for the wrong reasons. In fact, it can do the exact opposite, prove that home ownership for an individual is a great thing.

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