Again we find ourselves facing another financial dilemma: should I rent or should I buy? And just like many other financial quandaries, we have seen the example of our parents and perhaps friends but have little true professional knowledge to base our decisions on. We get a lot of advice from those around us, which is VERY tempting to listen to, but should we? For me the answer is "Don't ask a butcher how to bake a loaf of bread!" It's a good idea to listen to everyone you meet in your life, but it's an even better idea to consider who is giving the advice when you're faced with a decision.



A good adviser takes into account several factors to help you come up with sound financial decision. One, he must consider your individual situation; and two, he must be experienced enough to back his claims with solid evidence. Since no two people have exactly the same predicament and your case is unique from the others - it is crucial to weigh the costs and benefits of buying versus renting. As the co - author of the book Equity Happens (Russell Gray) puts it, "Do the math!"

Intelligent decision arises when you do careful examination of both buying and renting. Having said that, I will spell out some considerations here, which you might find useful. Moreover, since I am not aware of your current financial condition - I will not belabor you with countless rhetoric anymore. In renting, all you need to add up are the costs of your rent, some additional fees, and other utilities.

Buying your own home, on the other hand appears to be more complicated. With the help of a professional, a calculating device known as PITI are added together to determine your expenses. PITI stands for "principal" or the amount of money paid towards the principal of your loan, "interest" or the amount of money paid toward the interest of the loan, "taxes" or the property taxes to be paid, and "insurance" or that which pertains to property and/or if possible, mortgage insurance.

Owning a home also covers utility expenses plus other maintenance outlay aside from the PITI. In the case of renting, while it is compelling that you only pay the same amount on a monthly basis; you can go back and determine what your previous payments could buy you a home for. Monthly monetary costs are important aspects in deciding what to choose between owning and renting but it is also equally significant to look at the long-term benefits.

The majority of these long-term benefits often lie on the side of ownership. After many years of renting you will still have title to nothing and you will continually be paying higher rents. After owning for many years your payments will remain basically the same as when you first purchased the home (except some costs like utilities, insurance, etc. that rise with inflation, your main costs will not change). And, what's even better, you will have the wonderful thing called equity from all the payments you've made towards owning the home. If you choose wisely in an appreciating market (not hard to do!) you will also gain the value of appreciation of your home....it's like free equity!

Buying your own home boosts your morale and gives you more freedom in making changes with it. There is a feeling of pride here aside from the fact that you do not have to ask permission whenever you want something done like painting the walls with the color you wish for. You also derive satisfaction in terms of enjoying the benefits home ownership provides. However, your decision might have a turnabout since renting requires minimal maintenance as opposed to the other.

The math is very important to look at, however, and often will put in perspective the subjective feelings you have. For example, maybe you won't think not having to worry about replacing your refrigerator in a rented apartment is a big issue anymore when you see how much extra you are paying to rent instead of own. Or it could go the other way and maybe the benefit of choosing your own paint color in your owned home seems minor when considering the outrageous property taxes and lack of appreciating home values that come along with the area you want to live in. The numbers usually don't lie and choosing the best option for your personal finances usually outweighs your subjective considerations.

There are two main points you should take out of this article. First, always enlist the help of a professional to help you weigh all the options and do the math. Second, don't simply look at the monthly expenses of owning vs. renting. The gains of ownership often appear over the long-haul and will not be immediately apparent on a monthly cost comparison. Remember that we are currently in a buyer's market and this will often favor ownership over renting.