Quote:
Originally Posted by amazinmets73
I've been told by every real estate investor that rent is burning money. Anyone who can dissuade me? Keep in mind I don't intend on getting married or having kids.
Think of the problem this way:
When you pay rent you get a place to live in return.
When you own a home you pay mortgage + some other stuff and get a place to live plus equity in a house in return.
Do you see how we can equalize these two equations?
Take your mortgage payment and strip out the part that's going to equity in a house (i.e. principal). Everything else can be thought of the same way as rent. Figure out this effective rent number for a house you're thinking of buying and compare it to renting prices for similar places in similar neighborhoods.
Note that it's not quite as simple a calculation, basically, the longer you stay in a house you're owning the more attractive owning it becomes.
This is because there are closing costs when you buy (money you have to pay up front for things like title insurance) and because the longer you stay in a house the more of your payment goes to principal (and less goes to interest).