Buying versus Renting a Marin Home
The New York Times recently published a very sensible article regarding the real estate market and its impact on home buyers and renters: “Four Not-So-Obvious Things to Consider When Deciding to Buy or Rent.”
For your convenience, here is our summary as it applies to buying or renting a home in Marin County, CA.
Advantages of Owning a Home
As explained in the article, there are three main advantages to home ownership and investing in real estate:
- You can stop worrying about rent increases.
- You will have a forced savings plan.
- You will increase your equity as home prices increase.
Except for one four-year setback, over at the last 50 years, home prices in Marin have increased consistently. Given that new home construction is very limited by the lack of land to develop (over 80% of our county is preserved as open space), it is likely that house prices will continue to rise. This trend is shown in this graphic.
There are also tax benefits in owning real estate:
- Your down payment is making money for you, and this is tax free. If you put this in investments, you would have to pay annual income taxes on the interest.
- Capital gains are protected when you sell: the first $250,000 in gain for a single person and first $500,000 for a married couple is tax free.
- You can claim a home mortgage deduction on your income tax returns.
Disadvantage of Owning a Home
Maintenance cost may come unpredictably and in large amounts.
Advantages of Renting a Home
Renting a home also has advantages. These include:
- Renting means you don’t have to worry about the unpredictable costs of maintaining a home. Maintenance costs should be built into the rent that you pay each month.
- You can live in Marin without the cost of a down payment.
Disadvantages of Renting a Home
Rents are likely to increase since the housing supply is limited.
So what’s the bottom line?
How to Find Out What’s Best for You
The New York Times provides a calculator to look at the economics of rent versus buy. You provide the present value of your home, how long you intend to live there, details of your mortgage, and more. Try it for your home. We used this calculator for our 3 bedroom, 2.5 bath home in central Marin. The conclusion was quite dramatic:
If you can rent a similar
home for less than …
… then renting is better.
There’s no way that I could find a comparable rental for $884 or less. The price of a rental would be about five times that amount. It definitely looks like owning is a better idea.