Housing #

Buying vs Renting #

Financially, there is no clear answer whether to buy or rent a home in the general case. To determine which is the best option for a specific situation, this NYT calculator is a great back-of-the-envelope style resource.. This Ben Felix video does a great job digging into the factors at play that determine which decision is best.

To aid in my own home search, I made a spreadsheet that calculates the expected return-on-investment for a given candidate house. This was extremely helpful when shopping for both the house and my loan.

Of course, there are other not-strictly-financial advantages/disadvantages that are worth exploring:

Why Buy? #

• More freedom to modify the property.
• No risk of being kicked out by a landlord selling or moving in themselves.
• Really cheap loans/leverage to boost risk and reward in a portfolio.
• Offers option to earn money by improving the property either by (1) making it nicer to earn money on resale, (2) adding rental space and income, or (3) making it more efficient. This is often referred to as “sweat equity”.

Why Rent? #

• More freedom to change your living situation - buying and selling a house within < 5 years can be very costly.
• Housing will take up less mental space and energy, which you can use for other things.
• Lower commitment, and therefore less stressful.

Categories: Investing And Finances