One of our best-kept secrets: Renting
Dear Bruce: Can you tell me your thoughts on owning versus renting? My girlfriend thinks that renting is throwing money out the door. I think that there are more costs to owning than she realizes. — Mike, via e-mail
Dear Mike: I don’t know what your girlfriend is thinking unless she has the ability to throw out a tent in the park: Some way or another, she has to pay for shelter. Often, renting is a great deal less expensive than home ownership. There is a whole generation out there, up until a short time ago, that was persuaded that real estate has to go up in value. There are a lot of folks out there are finding out the hard way that’s not necessarily true. In other words, you would owe more on a house or condo than it is worth. Tens of thousands of people are in that position right now. You have to objectively start to figure the costs involved. In the case of a house, not only the monthly payment, the lost interest on the down payment, insurance, taxes, maintenance, utilities and all of the other costs, often time exceeding by a great deal what you would pay per month for a rental. As a matter of fact, renting has been one of America’s best-kept secrets. Many times over the last several years, the guy renting and saving the difference between all of the costs in owning is way ahead. On the other side of that, right now there are a great many solid real estate bargains out there. This is not a simple equation, but to find the right solution it is necessary to consider all of the factors that I have mentioned.