Rent Versus Buy – Do The Math!
Buy or Rent? It is a fantastic question and one often asked by first time home buyers. It also creates a lot of discussion and sometimes debate. So why is this such a tough question to answer? Because there are many variables that will define the home purchase investment. The biggest is location which can often determine the price of a home. In some areas like in the Minneapolis/St. Paul metro where we are blessed with very affordable real estate, an entry level home can be purchased for roughly $150,000 to $200,000 but in other large metropolitan areas, starter homes can be double this amount. This makes it more attractive, and affordable to rent.
But even in an area where homes are affordable, other several other factors do come into play. Taxes, insurance costs, maintenance, utilities, mortgage rates and how long you plan to stay in the home are a few of the things that need to be added into the rent versus buy equation. This might seem to be an impossible calculation but there is a great tool available online. Check out the NY Times Rent VS Buy Calculator. It is an interactive tool where you adjust the graphs to what is happening in your market, your life and your future. The tool calculates where the breakeven rent versus buy point would be for you. It is very helpful no matter where you live.
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