I’ve learned that most people prefer to learn by looking at something, versus just reading about it. It makes it easier for us to understand the more complicated things. Because of this, I created a visual graph to compare renting vs owning a home.
I tend to show my clients the long term benefits of owning vs renting, because most renters think short term. I know I did when I was younger and renting.
Below is a link to a graph were you can visually compare renting vs owning, but you need to know the specifics of what I’m comparing. Keep in mind, I used more conservative numbers, mostly because most of my clients are in Wisconsin, but in other parts of the country I know rent is much higher than what I’m using below.
Here are the specifics of what I’m using:
- I’m using a current rent payment of $1000. On a conservative approach, I didn’t assume any future rent increases.
- I used a savings account balance of $10,000 that the renter has and the percent they are receiving in this account is 5%.
- The purchase price of the home is $200,000 and a 5% down payment with a conventional mortgage is $10,000. Exactly what the renter has saved.
- I used the example of a FHA mortgage, because it has a lower down payment of 3.5%.
I want you to look at my most important tip that most renters don’t know when it comes to the long term benefits of owning vs renting.
Tip: The rent graph (red) under “Net Worth In 15 Years” shows your what your current investment would be if you didn’t add anymore to the 10k savings, earning a 5% return. I also set the property appreciation at 0%. Most investors would agree to move your money to the one that pays you a higher return, even if it takes a bit longer.
Here is the link to the graphs. http://mcedge.tv/16azqh
Also, the graphs under “Rent vs Principal Paid In 2 Years” is a realistic situation, because many renters will continue renting over the next couple of years.
I hope this helps bring light to renting vs owning, because I do receive lots of positive feedback that looking at graphs help renters understand the rent vs own answer in the long run.
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