Thursday, June 10, 2010

Rent versus own


I miss my apartment in Washington, DC. It came with a man named Marlon, who fixed everything that broke…the same day, too.

Now, I own. Even after my bankruptcy goes through, I will still “own” this house, even though it is worth $40K less than I owe. The reason? I can’t rent a house for the amount of the mortgage payment, so here I am.

Ilyce Glink, Tribune Media Services, says searches on the phrase “apartment to rent” are up 162% from a year ago.

Another article I read in the Wall Street Journal recently said renting makes more sense in today’s mobile society—which is about to become more mobile when people have to move to get a job.

To see what you’re looking at, create a rent ratio. If a house is $500,000 to buy, but a similar house is $24,000 a year to rent, the rent ratio is 21.

The tipping point is 15-20. The higher the ratio, the more houses would have to go up to justify buying.

You also need to look at lifestyle factors. The beach may be great, but the school district sucks—does that matter to you?

You need to stay in a home 5-10 yrs to justify buying. How does your job look?

What about long-term obligations—you may not want two stories, for instance, if you think an elderly relative will be coming to live—or you might not want stairs one of these days.

I am still stuck on that rent ratio. I hate math. Google it if you want to figure it out.

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