Wednesday, June 11, 2008

Total Cost of Ownership

Wow, that phrase is a blast from my college business course past. With the housing market taking a turn for the worse I had an epiphany that perhaps, now would be an ideal time to buy. Especially since I am a young professional with nary a black spec on my credit report (well 0k there is the Cox Bill debacle of ’07 I still need to straighten out) nonetheless, I begin to ponder whether a mortgage of a slightly higher price is better than rent. After all, this money is going towards an investment, something that will only benefit me in the long run right? Wrong. Turns out, counterintuitive as it may be, that buying isn’t always the best option. First clue to this conclusion (excluding the lecture I received from my mother along the same lines) was a website I stumbled upon called TCalc a web based financial calculator that, among numerous other scenarios, can calculate how much money you save by renting or buying. You can see my results below:

According to the site I would save $11,360.31 over the next 5 years by renting.

So if you realize renting is your best option for the time being, how do you ensure you are paying a fair price for your area? Rest assured, my friends, I've got this one covered as well: check out RentoMeter. It'll give you the surrounding rents for your area and provide your rent on a Barometer scale. Mine ended up falling right in the middle. Share your thoughts on renting vs buying. I'd love to hear.

2 Comments:

  1. Megan said...
    So I did my rent at $800.00, a 4 bedroom 2 ba 2 car garage in Arizona...it was VERY low...I think thats what is keeping us from purchasing a house, i don't want to pay anything more than $900 a month and after interest rates and tax we will not be able to , unless we live pay check to pay check...who wants to do that!?
    Kat said...
    I'm so a renter and I'll probably be one for awhile. After hearing Jeff Yeager who wrote "The Ultimate Cheapskate's Road Map to True Riches" I realized that renting can be cheaper than owning in the long run. And he stated that if you do plan on owning, you should just stay in your starter home. Anyway, I love renting. I'm in a one bedroom at $634.00 per month, including water. It's no Taj Mahal, but you know what? I'm pretty happy with it. I don't have a family or kids, so why would I need more? Plus, I couldn't imagine cleaning a house. It's hard enough to clean my little apartment.

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