Take careful planning before buying or selling.
Deciding whether to buy or rent can be tricky. For one, there is no universal measurement to determine your choice. Search for a rental calculator online, and you’ll find a myriad of conflicting solutions.
Then there’s the shortcut route. Take this advice from Tulsa World :
“… A sane housing market has homes with annual rents of one-fourteenth the home’s market value. Figure the home’s reasonable monthly rent payment by dividing that figure by 12 (months). Example: a house worth $140,000 (divided by 14 has an annual rent of $10,000) divided by 12 has a monthly rent fee of $833 a month. This ratio might vary, depending on taxes and utilities, but it’s a good, quick way to decide whether to rent or buy.”
This formula can’t be right or wrong. You definitely won’t use it for your final planning- but at least, you can have a quick gauge once you spot a potential home vs. your current rental property.
There are many assumptions involved when calculating your comparable expenses. A comprehensive rental calculator will compare rent assumptions (monthly payment, additional fees, insurance premium, and estimated rent increases) to purchase assumptions (purchase price, appreciation rate, mortgage amount, interest rate, insurance premium, property taxes, and maintenance cost). Other factors include number of years in comparison, tax bracket, net savings, and the inflation rate.
Evaluating your home buying decision is crucial. You may either find yourself paying excessive rents compared when you could have taken a mortgage or you may be losing on very high monthly mortgage payments compared when you could have rented.
Financial calculators and online tips should not be the sole basis of one’s buying or renting decision. It’s best to consult a financial advisor who can discuss your condition completely.