Buy versus Rent Analysis
To rent or to buy question is observed in this cheap essay writing. We can help to write your essay!
The main argument whether to rent or to buy is practically never resolved on the origin of a careful financial investigation. Landlords must set their rents high enough to recover all costs plus a return on their money. By the same token, one of the true costs that should be considered in an evaluation of homeownership is the income foregone on the homeowners’ investment in his house (the opportunity cost of his own capital).
Since the purpose to rent or to buy is merely to determine which, if any, costs differ between renting and homeownership the first step in the analysis is to itemize the respective cost categories without estimating their magnitude, though ultimately this will be necessary. The costs a landlord must reclaim in his rental income are property taxes, maintenance, obsolescence, a vacancy allowance, interest on borrowed money, management payments and a fair return on his own investment. Two costs not included in this analysis are insurance and utilities. An incomplete reason for eliminating them is that they will not contrast with ownership and renting; another reason is that insurance is typically such a small portion of total costs as to be insignificant; finally, most home rentals do not involve utility costs.
In our case, person stays at home for 6 years. We draw an analogy between to rent or to buy the costs of buying and renting a home using the calculator.
If person stays in the home for 6 years or more, buying is better. It will cost him $19,002 less than renting, an average savings of $3,167 each year.
In contrast to the difficult-to-predict and largely extraneous criterion of capital profit or loss, this paper shows that the major factor that should determine whether it is economically wiser to buy or rent is the duration of tenancy. That is why, length of tenancy is a significant factor in explaining to rent or to buy question. If one chose to use this analysis for reaching a resolution about a specific rent-versus-buying situation, it seems best for him to insert in the model the specifically pertinent costs so far as he can determine them. However in this paper estimates were made of typical costs, with the result being that the cost of owning is probably less if tenancy continues for more than five-six years, and renting is probably the less expensive way to acquire housing if the person is going to stay in the home for two years or less.