Bob Newbie
Feb 4, 2016 · 1 min read

This completely ignores the cost of owning a home, such as repairs, improvements, maintenance, etc.

This also assumes a $5,250 down payment on a $150,000 home, which is insanely low.

If you take your $1031 that you calculated and add in maintenance/repairs, you get a larger number… lets say around $1250.

Also the average rent in Michigan is more like $750, so that is a $500 monthly savings from renting instead of buying.

This article completely ignores the opportunity cost of renting versus buying.

Potential Opportunity Cost: Lets say instead you take the $500 a month you save from renting instead of buying and contribute it towards a Roth IRA… you can make the full $5,500 contribution and still have $500 left over.

Also assume that you invest the $5,250 down payment that you didn’t have to pay… if you assume a very reasonable expectation of 7% interest(combination of stocks/mutual funds) over the course of 10 years you would have $91,637 in your Roth IRA plus an extra $5,000 in your savings(Leftover $500 after $5,500 max contribution)

Wealth Gained over 10 years:

Renting while investing $500 a month: $96,637 in Roth IRA

Your example in buying a home: $83,445

You also can’t guarantee that home prices will continue to go up at even a 3% rate.

Please be more objective next time, renting is not a bad option if you invest the amount you save from not buying/maintaining a home.

However, I guess for the general unaware population buying a home might be a better idea if they’re not savvy in investing.

    Bob Newbie

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