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There are many ways for you to look at the home ownership versus renting question. One
of the things that you should not do is make assumptions. Many online sources today unfortunately
suggest that you think about how many years your going to live in particular property,
or what the market is going to do in a particular location of the country. Unfortunately, that's
all speculation. You don't know the answers to those things today. You want to work with
facts. And there are two buckets into which you can put your decision-making: the first
is financial - it's very mathematical and clear cut, and then the second is more of
the intangible aspects which we'll look at in the next video. For now let's talk about
the financial aspects of it. If you are an investor you're going to be looking at the
cashflow for that property - rental income minus the expenses. What is that property
going to earn for you? As a homebuyer looking to live in the property you're going to look
at the relative expenses of what you pay today to what you would pay as a homeowner - including
such things as utilities, maintenance, repairs, upkeep, the "rainy day" fund, the potential
tax advantages. All of those questions would need to be answered to some degree of accuracy.
How do you go about doing that? First, speak with a loan officer. Rather than trying to
make "guesstimates" a loan officer will take a look at all of your documentation, as well
as your plans for the type of property that you're looking to buy, etc...and develop a
set of numbers for what the terms would look like, what the payments would look like. That
you can then use in a calculator for comparing rentals versus owning. In fact, we have a
rent versus own calculator in our Additional Resources section down below and I encourage
you to make use of it. So, you speak with a loan officer, get more accurate figures,
then use those figures in a calculator. Once you've seen how those numbers work out and
how the cost of home ownership would compare to renting, one of the best pieces of advice
I'd ever heard: take the difference in payment - let's say it's $1500 as homeowner $1200
as a renter - take the $300 put it in the bank every month. Don't touch it. Why? You'll
accomplish two things. First, you're going to save additional funds - how great is that?
You get to put funds away for the eventual purchase perhaps of property. The second thing
is you'll test your budget. Is it sustainable? Does it affect your lifestyle in a way that
you're not willing to do? Whatever the reasons that you may have, you'll be able to see how
that new expense affects your budget by putting it in the bank each month and not touching
it. So, that's basically the financial aspect of home ownership versus renting. In the next
video we'll talk about the intangibles. Thank you for watching.