Liz Pulliam Weston published a column explaining why it’s smarter to buy rather than rent a home. She cited some statistics that show that the average net worth of home owners in any income range are much higher than that of renters in the same range.
Liz warns the readers to stay away from “buy vs. rent” calculators found on the internet:
Outlays for maintenance, repairs, insurance and utilities almost invariably will be greater for a homeowner than a renter, yet many calculators fail to consider the full impact of these expenses. And some expect you to predict events — like future appreciation or how much your down payment would earn if invested in stocks instead — that you can’t possibly know.
Here are her four keys to profitable home ownership:
You plan to stay put at least three years and preferably more. This is the main reason I haven’t purchased a house yet. I don’t know where I’ll be, and frankly I’m not quite happy I’m still in the same place I was three years ago.
You’re psychologically prepared. Being able to deal with issues isn’t a problem. I’ve fixed some maintenance issues myself even though my landlord will do that for me. Sometimes it’s a smaller issue if I just get it done myself, if it’s something simple.
You have some extra savings. To buy a house now, I’d have to take money out of retirement savings to cover a down payment (or get help from parents, which they have not offered). I’d rather not go down either path. I still have some debt to pay off, which I’m hoping to accelerate this year.
You manage your money pretty well. Sometimes I spend too much money on myself or others, but in general, I manage my money well. That wasn’t always the case, but as I’ve aged (and through the help of this blog), I’ve grown more responsible about money.
Updated April 4, 2008 and originally published January 12, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.