Owning vs Renting

 

 

Owning should be less expensive than renting

 

Here's a guideline that may change the way you view your seemingly cheap monthly rent. In order for you to see how expensive a home you could afford to buy while having the same approximate monthly cost as your current rent, simply do the following calculation: 

 

Take your monthly rent, multiply by 200 = purchase price of home 

 

Example: $ 750 x 200 = $150,000 

 

So, in the preceding example, if you were paying rent of $750 per month, you would pay approximately the same amount per month to own a $150,000 home (factoring in tax savings). Now your monthly rent doesn't sound quite so cheap compared to the cost of buying a home, does it? 

 

Even more important than the cost today of buying versus renting, what about the cost in the future? As a renter, your rent is fully exposed to increases in the cost of living, also known as inflation. A reasonable expectation for annual increases in your rent is 4 percent per year.