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Tale of Two Neighbors I own the left house, my neighbor rents the right house.
Which is best?
The debate on renting vs. owning is as old as dinosaurs, but the most important thing is that you do your own research and crunch your own numbers for your own unique situation.
Let's dive in..
Let's dive in..
Both houses are nearly identical.
My house costs me $866/mo for mortgage, taxes, and insurance for $10,392 per year.
My neighbor pays $1,650/mo for rent, costing $19,800 per year.
Difference of $9,408 per year in owning's favor.
Score: Own 1 / Rent 0
My house costs me $866/mo for mortgage, taxes, and insurance for $10,392 per year.
My neighbor pays $1,650/mo for rent, costing $19,800 per year.
Difference of $9,408 per year in owning's favor.
Score: Own 1 / Rent 0
How about repairs?
In the 5 years I've lived here, I've spent ~$16k in various repairs and remodels.
My neighbor? $0
Score: Own 1 / Rent 1
In the 5 years I've lived here, I've spent ~$16k in various repairs and remodels.
My neighbor? $0
Score: Own 1 / Rent 1
5 Year total:
Owning: $67,960 ($52k mortgage + $16k repairs)
Renting: $99,000
Score: Own 2 / Rent 1
Owning: $67,960 ($52k mortgage + $16k repairs)
Renting: $99,000
Score: Own 2 / Rent 1
Equity Built:
According to the always perfect @Zillow zestimates, my house has appreciated ~$60k in 5 years.
Thru paying down my mortgage, plus appreciation, my equity in the house is ~$110,000.
Renting? $0 equity
Score: Own 3 / Rent 1
According to the always perfect @Zillow zestimates, my house has appreciated ~$60k in 5 years.
Thru paying down my mortgage, plus appreciation, my equity in the house is ~$110,000.
Renting? $0 equity
Score: Own 3 / Rent 1
Opportunity Cost of my down payment?
I put $30,000 down 5 years ago. If I rented, and invested that in $SWPPX instead (which earned ~12.8%/yr), I'd have ~$60k today so I cost myself $30k.
But is that a cost though?
$110k > $60k
Score: Own 4 / Rent 1
I put $30,000 down 5 years ago. If I rented, and invested that in $SWPPX instead (which earned ~12.8%/yr), I'd have ~$60k today so I cost myself $30k.
But is that a cost though?
$110k > $60k
Score: Own 4 / Rent 1
Cash Flow/Investing
Owning free'd up ~$518 each month
Investing that (which I did) at the 12.8% return average (which was actual in my go-to fund) = $56k
(that alone grows to ~$750k by 65, but who's counting)
Rent: $0
Score: Own 5 / Rent 1
Owning free'd up ~$518 each month
Investing that (which I did) at the 12.8% return average (which was actual in my go-to fund) = $56k
(that alone grows to ~$750k by 65, but who's counting)
Rent: $0
Score: Own 5 / Rent 1
Let's summarize...
- $110k in equity built
- $56k in index fund investing solely thru reduced monthly expenses
- No landlord
- A place you call home where you can do what you want to the house
Not a very difficult decision to me..
- $110k in equity built
- $56k in index fund investing solely thru reduced monthly expenses
- No landlord
- A place you call home where you can do what you want to the house
Not a very difficult decision to me..
This is just one example of millions, but...
If you like your location, plan to be there for a minimum of 5 years, and don't buy too much house...
It's going to be really difficult to convince me that renting is a better choice.
If you like your location, plan to be there for a minimum of 5 years, and don't buy too much house...
It's going to be really difficult to convince me that renting is a better choice.
Tell me what side you fall on and why?
Renter or Owning
Renter or Owning
