Buy or rent?
So really, it depends who you ask.
The answer won’t be the same for everyone. Perhaps the intangible feeling of ownership is priceless to you; perhaps you like the freedom of knowing you can up and leave your rented home whenever you want.
If you are making the decision for yourself, Tara Siegel Bernard of the New York Times highlights an equation from financial adviser William Bernstein, author of “If You Can: How Millennials Can Get Rich Slowly” to use as a tool in your arsenal.
Never pay more than 15 years’ fair rental value for any home, or 180 months of rent. Why 15 years? By his calculations, someone paying more than 180 months of rent might potentially do better by investing in the market, after considering the costs of owning.
So if an apartment would rent for $4,000 a month, that means you shouldn’t pay more than $720,000 ($4,000 x 180) for an equivalent property.
That’s simply [cost of market value rent] x 180 = [maximum purchase price].
Punching a few numbers into your phone’s calculator may not make up your mind for you, but at least it’s somewhere to start.
Credits Business Insider