To Buy Or To Rent? This Simple Equation Will Help You Decide

To Buy Or To Rent? This Simple Equation Will Help You Decide

Tara Siegel Bernard of the New York Times highlights an equation from financial adviser William Bernstein, author of “If You Can: How Millennials Can Get Rich Slowly” to use as a tool in your arsenal.

She writes:

Never pay more than 15 years’ fair rental value for any home, or 180 months of rent. Why 15 years? By his calculations, someone paying more than 180 months of rent might potentially do better by investing in the market, after considering the costs of owning.

So if an apartment would rent for $4,000 a month, that means you shouldn’t pay more than $720,000 ($4,000 x 180) for an equivalent property.

That’s simply [cost of market value rent] x 180 = [maximum purchase price].

If you’re not sure about the rental price of your would-be home, contact NestQuest Direct and they will do a free valuation to help you determine the best course of action for you.
via BI | Lead image: Flickr / William Mewes

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