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Try This Formula to See If You Should Rent or Own

Money Tip: Try This Formula to See If You Should Rent or Own


The decision to continue renting or make the jump to buy your own place is one of the biggest financial decisions you can make. David Leonhardt of the New York Times offers a simple formula to help figure out if renting or owning is more costly: "You find two similar houses, one for sale and the other for rent, and divide the sale price by the annual rent. You can call the result the rent ratio." He says that a rent ratio above 20 means that the monthly cost of ownership exceeds the cost of renting and indicates a bubble.

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