海角大神

鈥淧aying rent is like flushing money down the toilet.鈥� Everyone鈥檚 heard that one. It鈥檚 rare to have a conversation about buying versus renting without that old adage being thrown in. Something else you hear in these conversations is that buying a home is a good investment. The thing is, neither of these things is necessarily true. Like most things in life, it all depends on your situation.

There are certainly聽聽versus renting: You cannot be evicted (but you聽can聽be foreclosed on), you could make a profit聽if you sell at the right time聽and, if you stay long enough, your home will be paid off. However, there are many situations in which renting is the more reasonable strategy, in both the short term and the long term. Here are a few reasons why:

Building equity does not equal a good investment

Many people think that because you can build equity in a home, a home is a good investment. But you can build equity in your home for many years and still sell it at a loss. The amount of equity you have in your home has no bearing on whether you will come out ahead if you sell it. What matters is whether you can sell it for more than you paid for it, taking into account the costs involved in the sale, such as real estate commissions. You are at the mercy of the real estate market. Many learned this the hard way in the years following 2008.

The costs of ownership can be very high

When comparing the costs of owning and renting, people tend to consider only the amount of the聽聽payment versus a month鈥檚 rent. When you do this, owning often does look like the more economical option. But ownership carries other costs that are frequently overlooked.

Consider this typical assessment of the yearly costs of owning a home (as a percentage of the home鈥檚 value; percentages may vary depending on where you live):

• 3 percent to 4 percent for mortgage costs
• 1 percent to 3 percent for property taxes and聽听肠辞蝉迟蝉
• 1 percent to 2 percent for repairs and delayed maintenance (such as a new roof)

I have a client who rents a home valued at around $450,000. He pays $30,000 a year in rent (or $2,500 per month). His landlord鈥檚 total costs of ownership are about 8 percent of the fair market value of the home, or about $36,000 a year. His landlord is essentially subsidizing him by $6,000 a year to live in the home. This situation is not uncommon for clients of mine who choose to rent rather than own.

Likelihood of being able to sell for a profit

If you鈥檙e thinking about buying a home because it is a good investment, consider that the historical long-term, inflation-adjusted returns of the US residential real estate market are around 1 percent a year. For perspective, the long-term historical returns of the US聽聽are around 7 percent a year.

Cost of reselling

In addition to the not-so-stellar returns of the residential real estate market, the cost of reselling can be as much as 10 percent. This further erodes your chances of making a profit off of your home.

Intangible Benefits of Renting

Finally, there are many intangible benefits to renting that you can鈥檛 put a dollar value on. I choose to rent, and for me, the flexibility and ease of living it gives me are invaluable. I love the freedom of not being tied down 鈥� it gives me great peace of mind. I also love not having to worry about maintenance and repairs. My building鈥檚 maintenance service is just a phone call away, and they are able to come at a moment鈥檚 notice, regardless of whether I am home.

To sum it all up, do not listen people who tell you that renting is flushing money down the toilet. There are many good reasons to rent rather than buy, and you should thoroughly research the net cost of both options before making a decision.