Home Buyers Make a Rent vs Buy Decision

There are many “calculators” used to compare renting versus buying. Perhaps one of the first things a buyer/renter should consider is why would an investor owner offer his home for rent rather than selling it. Isn’t he betting a lot of money in the opposite direction of a renter?

  1. The property owner may have bought the home a long time ago and his property tax is lower than you, as a new homeowner would pay.
  2. For the investor-owner, costs of repairs are tax deductible against rental income.
  3. Appreciation isn’t subject to current income taxes until the property is sold.
  4. The investor owner can improve the property creating wealth for himself and deducting the cost of improvements against rental income.
  5. Capital gains (investment) taxes are generally lower than income taxes on salaries.
  6. If home prices are falling and you don’t want to suffer a near term loss of your home equity, the investor-owner may believe he can “ride-out” the cycle and not suffer any loss.

Most home sellers put at least some money into making their home look great just before they offer it for sale and it is easier to sell a vacant home. Selling a rental property will probably require expenses and loss of income while selling it. Some of the reasons the investor owner has for not selling the home have more to due to time rather than the actual activity. If you have the means to buy a home, don’t expect to be moving soon, and are making the decision to rent, then you are putting a different emphasis on the situation than the person renting the house to you.

Rent vs Buy Calculators

Two good rent vs buy calculators are:
Freddie Mac Rent vs Buy
New York Times Rent vs Buy

Interest Rates – Rent vs. Buy

Home mortgage interest rates affect the choice to rent versus buy. A good realistic way to estimate current interest rates is to refer to the current Freddie Mac mortgage survey which is shown.


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