Rent vs Owning a Home

  • Rent vs. Owning

    We are now considering the housing portion of our budget.  You have heard me say several times that it is financially better to own rather than to rent a home, so now we will compare renting vs owning and make our own decision.

    First open THIS site.  We will enter our information in that site.

    Let's look at a typical place to rent.  Open THIS link and find the cost per month to rent a two bedroom unit (you will have to scroll down a bit).  Put the monthly cost in the blank marked Monthly rent payment.  Leave the additional fees, renters insurance, and annual rate increases section blank. 

    Now let's find a house price.  Click HERE and enter 14208 (this is BAVPA's zipcode, so we will look for houses near here) in the upper right search window.  Pick out a house you would live that costs in the range of $50,000 to $70,000 and enter its cost in the box marked: Purchase price of home.  Put this number again in the box marked Amount of loan.  Leave the Annual appreciation rate at 5% (this is a typical rate).  Click HERE and find the average 30 year fixed interest rate on the chart for November 2013 (the December 2013 rate is not out yet) and put it in the box marked Annual interest rate.  Since we are not accounting for renters insurance, we will not account for homeowners insurance, so leave that blank.  In the box marked Annual property taxes, enter the number 1500.  Also enter 1500 in the box marked: Annual maintenance cost.  Lastly, change the last box marked: Assumed annual inflation rate to 3% instead of 3.5%.

    Now click; submit and look at the information.  KEEP THIS RESULTS PAGE WITH THE BLUE BAR GRAPH OPEN!

    But wait, we are not done!

    In 30 years the renter will own nothing, while the home owner will actually own the house.  So now its 30 years later, let's sell the house!

    To sell it we have to find out what it will be worth in 30 years and for that we need an inflation calculator.  Click HERE for one.  You will have to scroll down a bit.  Where it says: Choose today's dollar amount enter the price of the house you picked.  Where it says: Select the inflation percentage enter 3%.  Where it says: Choose the number of years enter 30 years and hit calculate.  Now look at the dollar amount in the section marked result.


    Recheck the total cost of owning a home for 30 years on the first page (It's the number on top of the blue bar graph on the "own" side).  That's how much owning cost you over 30 years.  Subtract how much you will get for your house in 30 years (That's the number after inflation).


    After subtracting these numbers, how much does it really cost to own a house for 30 years?  So which is better, renting or owning?  Record the final numbers on the sheet you have and turn it in as you leave.