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 that owning is a good investment?

  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, deducting the cost of improvements against rental income.
  5. Capital gains (investment) taxes are generally lower than income taxes due on salary or pay.
  6. Home prices are falling, you don't want to suffer a near term loss of your home equity but the investor owner believes he can "ride-out" the cycle.

Most home sellers put at least some money into making their home look great just before they offer it for sale. Some of the reasons the investor owner has for not selling the home have more to due with history rather than the actual current rent/buy balance. If you have the means to buy a home, you don't expect to be moving soon, and you are making the decision to rent, then you probably have 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:

Interest Rates - Rent vs. Buy

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Consumer Financial Protection Bureau
Explore interest rates

Home mortgage interest rates affect the choice between renting versus buying. A good realistic way to estimate current interest rates is to refer to the current Consumer Financial Protection Bureau's "explore interest rates" which is shown.

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