This is an increasingly common question in our financial planning practice. We find that most of the families we deal with (including some of our own) think that rent money is “thrown away.” This belief is often quite wrong.
When you add up the cost of owning a property, you will find that it is at least eight percent of the total cost of the home. This is true regardless of whether you pay cash or finance the entire amount (if you use your own cash, there is an “opportunity cost” of not having it invested and making money elsewhere .
One way or the other, you are laying out forty thousand a year to live in a half million dollar house.
From a strictly financial viewpoint, if the cost to rent is less than the cost to own, renting is just fine. If you can rent that half million dollar house for twenty five hundred dollars a month (thirty thousand a year), you can assume the owner is paying you ten thousand a year to live in their residence.