Buying Or Renting: The Quest For An Answer Continues

April 4, 2016

One of the more recent articles taking a stab at answering the ever present rent vs. buy debate comes from The New York Times. As the article notes, it is a question that, in the future, will provide a definitive answer for which was the better strategy. The problem is it is impossible to know which one will come out on top before it happens, as there are persuasive arguments on both sides.

For example, buying can be particularly appealing for someone who expects to live in the same place for at least the next five to seven years and a mortgage acts like a forced savings plan. When purchasing a home, you also don’t need to worry about the ever-increasing rents anymore and, though it can sometimes backfire, a house is likely to appreciate over a long period of time leading the owners to accumulate a good amount of equity.

But when looking at a theoretical renter who puts their down payment in a portfolio and continues to invest any savings from renting, some studies, such as one from Florida International University and Florida Atlantic University, showed they would typically come out ahead of most buyers.

Other studies have shown similar results. A HelloWallet study compared two hypothetical median-income families, one that bought and one that rented, in 20 major cities across the country. The study concluded that a median-income family will typically build more net wealth if they rent versus own over a ten-year period from 2013 to 2022.

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