To Buy or Rent?

To Buy or to Rent, That is the Question

Abstract

All variables remaining constant, it will always be economically better for my family to rent the house we are currently in rather than to purchase a property. However, strict economics do not answer all of the variables when considering whether to purchase a property or to continue to rent. This paper attempts to describe and to reconcile this dilemma which has plagued us for years through the use of economic theory with a little consumer behavior tossed into the mix.

To Buy or to Rent, That is the Question

Executive Summary

The following analysis reveals the economic answer to the question that has been in our minds for years regarding the decision of whether to continue to rent or to purchase a property. The economic answer is that it will always be better to continue to rent our current residence than to purchase a property as long as all of the variables remain unchanged. Unfortunately, life and emotion can't always be rationalized through pure economic analysis; and since this decision is affected by these inputs, our ultimate decision is a compromise between the two options (Moore & Taylor, 2009, p. 1212). We will purchase a piece of undeveloped land and build a structure on it while we continue to live in the rented residence.

Definition

My family has been following the real estate market for years, trying to decide when and if we should make the leap from renting to home ownership. This analysis has helped to clarify our goals, our priorities, and has helped us make sense of the emotional side of this decision by defining the objectives. Our alternatives are to continue to rent the house where we currently reside, to purchase an existing home, or to purchase bare land and build a structure on it over time while we remain in the rental home.

Factors and Costs

There are numerous factors and costs to consider when attempting to answer this question. Some of these are very important to...