The problem with the argument of renting vs. owning is that
people cannot get beyond the initial numbers. Rent a 3 BR, 2 BA home for $2,000
a month or buy it and pay a mortgage of $2,400 a month? Hmmm? Let’s face it,
most people automatically think they save $400 a month by renting. And most
people would be wrong.
What people cannot easily calculate are the details beyond
those initial numbers. I will try to help with a short answer.
If you make $50,000 a year and your rent is $2,000 a month
($24,000 a year) you are taxed on the $50,000 because rent isn’t deductible. If
your tax bracket is at 20%, your tax is $10,000. Your net for the year is
If you make $50,000 a year and your mortgage is $2,400 a
month ($28,800 a year) you are taxed on $21,200 because most of your mortgage
is taxable. If your tax bracket is at 20%, your tax is $4,240. Your net for the
year is $16,960 ($50,000-$28,800-$4,240).
In this analysis, owning a home would net you $960 more a year vs. renting. Every situation is different so your numbers might be higher or lower.
Keep in mind also that if you own your own home the equity on your house is your
savings. It is said that 90% of today’s wealth is achieved from
owning a home. I experienced this firsthand with my parents buying their first
home for $26,000 in 1971. Today, that same house is valued at over $900,000. That’s
a whopping $874,000 gain. Far better than their friends and acquaintances that
rented during that same period and have nothing to show for it. The same holds
true today. But, just like yesteryear, most people think they are priced out of
buying a house or don't know there are a number of home loans they qualify for that are out there.
If you have questions, I can help. I turned a hobby of buying homes in California, Hawaii, and
Portugal into a real estate license helping other people buy and sell
I serve the entire San Francisco BAY AREA.