EA, President of 1st Tax
Author of The Small Business Tax Guide and Pro Choice, A Financial Guide for Women
“Renting can be better than buying in many circumstances.”
As a tax professional who works with many real estate investors, and a real estate investor myself, I find renting can be better than buying in many circumstances.
I’ve always used a general rule of thumb that if the rental price is greater than 1% of the purchase price ($3,000 monthly rent for a $300,000 home as an example) then buying is a no-brainer. If the purchase price ratio is lower than 0.5% ($3,000 monthly rent for a $600,000 home) then renting is the clear answer, the extra money saved can be invested in the real estate market by purchasing a vacation home elsewhere. Anywhere in between those two ratios the decision process must weigh in the length of projected residence (greater than 5 years a must), the need for personal changes to house (additions for children and/or pets) and projected return on investment for owning compared to other investment choices for the excess costs involved in ownership.