Rent vs. Own - the debate is settled

Feb 14, 2019 | Jeremy Goldfarb


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An interesting article in the FP this morning which you can read here either before or after reading my comments.

 

I have rarely run into people for which there is a gray area in this debate. It seems it is entirely black or white when it comes to opinions on the subject. There are a number of ways to look at this, but let's highlight 2: 1- the short term cash flow benefit of rent vs. own  2- the long term wealth benefit of own vs. rent

 

1- In a number of major cities across the country it was found that the overall cost of rent was actually cheaper than that of a mortgage. We can debate whether including the principal component or not is a factor worth considering. There is also the matter of the massive down payment that is required due to changes in lending rules and regulations, but let's leave that out for now. A $500,000 mortgage can carry a payment amount of almost $2700/mo. If you consider average condo prices in urban developed main centers, a $500K mortgage is not a stretch.

 

2- Owning a home with a mortgage attached to it can be akin to having forced savings. You are gradually paying down the balance in the principal. This is essentially investing in your home's value on an ongoing basis, putting each principal dollar to work as you pay the mortgage down. Depending on the long term ROR on those dollars, it can be an important part of a diversified portfolio.

 

So the debate is settled right? No......not really.