OWNING VERSUS RENTING
How does owning a house improve my net worth more than renting?
Owning a house may improve your net worth in more ways than if you are renting a home because, if you own a large appreciating capital asset, even if you borrowed a portion of the sale price to own it, you benefit from the appreciation of the house over time,
An advantage of renting a home is not having to deal with house maintenance or coming up with a down payment, but you also don't get a tax break and you accrue no equity in the house.
even after factoring in inflation, interest payments, tax deductions, etc. The more expensive the house you can afford to purchase, the higher the amount of dollar equity you eventually get to use when computing your networth. Simply put, a $100,000 home appreciating 10% generates $10,000 of equity, while a $500,000 home that appreciates 10% generates $50,000 in equity. When you rent, you have no investment and no appreciating asset.
What are some important factors when I decide to rent instead of owning my own home?
When you are evaluating whether to buy or to rent, you should consider a few important variables. According to real estate editors at The New York Times, you should consider how much and how fast real estate purchase prices and rental prices are increasing or decreasing, and for how long you plan to stay in the house. According to The New York Times rent calculator, assuming such factors as your income and deductions available to purchase a house (such as deduction of mortgage loan interest), a nominal 2% annual house price increases, and nominal 3% annual rent increases, if you plan to stay in the house for five years or longer, you should make the investment and purchase the house. If you decrease the time to four years or less, you should rent.
What other assumptions does the rent versus own calculator make that we should consider?
When you try to evaluate renting versus owning, you also should factor in such items as real property taxes you might have to pay each year if you purchase the house, homeowner's insurance, moving costs, rental deposits, and rental insurance.
