To rent or to buy comes down to a lifestyle choice. First look at the facts: What are the true costs of buying versus the cost of renting? Once you can clearly see the facts, does it make financial sense to buy or rent? If rent comes out on top, then stand back and ask yourself, “But, do I want to rent?” The answer may very well be “no.” If so, the emotional issues may outweigh the financial ones.
I tell my clients that most financial planning decisions are based 80% on facts and 20% on emotions—except when the decision is based 100% on emotions. The decision to rent or buy a home is a perfect example of this principle. No matter what the facts are, sometimes our emotions are the real reason we decide to do things. If you run the numbers, they may show that it is more cost effective to rent: the fact. But you may just feel better knowing that the roof over your head is one that you are going to own one day: the emotion. If you decide to buy when the facts suggest differently, that is a decision 100% based on emotion. That’s fine, as long as you decide it consciously.
The important thing is to make the decision based on the lifestyle elements that are really important to you. Avoid making an automatic decision to buy because you have been told it’s a great investment or because you feel it’s necessary in order to be considered a grown-up.
If your reason for buying a home is based on financial issues alone and the analysis shows rent is better, then rent. If you need the emotional security of owning, then buy.
Financially, you’ll make few purchases in your lifetime that rival the cost of a home. Study your alternatives closely. Understand your options, and then weigh the facts against your underlying values and emotional needs.
You do not have to buy a home to “have it made.” It is equally okay to rent. The choice is up to you.