Why You Should Consider Buying

Stop wasting money with long-term renting 

Paying $850 rent per month now is similar to buying a property for around $200,000 with a 10% percent down payment. In 10 years, with a 5% average increase to your rent each year, your $850 per month rent may increase up to $1400 per month.

In other words, after 10 years of paying rent that increases at an average of 5% per year, you would have ended up paying $128,287 in rent! Once you purchase a particular home, much of your housing costs are not exposed to inflation if you use a fixed-rate mortgage for your purchase.

Now that I've got your attention, let’s see what the difference between 10 years of renting and 10 years of home ownership really is:

(rent starts at $850/month and increases at 5%/year. Home ownership appreciation is calculated at 5%/year)

This chart shows the clear difference between long-term rent payments and long-term home ownership. The example uses simplistic figures of 5% annual rent increases and a corresponding 5% increase in property appreciation. In the Greater Seattle, property appreciation is historically higher than 5% in the metro areas.

The table also shows you how your property creates equity for you over time. Your property’s equity is simply the difference between the fair market value of your home and the amount remaining on your mortgage. Over time, equity can be increased in two ways:

    1. The value of your home increases through appreciation, physical improvements, etc

    2. You pay down the principal on your mortgage.

You can think of your equity as a potential lower-interest investment tool. I recommend that you only use your equity for investments that help you to create and build more wealth, as it can too easily become a source of funding for personal purchases that increase personal debt and financial liabilities.

Look at your home’s equity as a source of money to make improvements to your home that will increase its value, to use as a source of leverage for other property purchases, as a funding source for a new business, or to help you fund other investment vehicles, like a 401K, IRA, etc (which may have additional tax-deduction benefits for you as well).

Insider’s Insight: As a general rule of thumb, properties in major cities tend to double in price roughly every ten years. While it takes longer for rents to double, it does increase consistently over time. By continuing to rent, not only does the mere fact of renting get more expensive, but the option to purchase gets more expensive as well. It’s a double-whammy!