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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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aimeeb aimeeb 8 years
Good to know!
aimeeb aimeeb 8 years
Good to know!
bigestivediscuit bigestivediscuit 8 years
Ooh - great tip - I need to remember this one!
MindayH MindayH 8 years
good info - thanks
MindayH MindayH 8 years
good info - thanks
JaimeLeah526 JaimeLeah526 8 years
Great info to have.
JaimeLeah526 JaimeLeah526 8 years
Great info to have.
Renees3 Renees3 8 years
We've been talking about looking into buying so this is helpful!
verily verily 8 years
I wish I could own instead of rent, but I'm looking to go to grad school and need my life to be flexible enough to be able to move for a future job.
girlgreen girlgreen 8 years
good ny times article. it made me feel better about renting in nyc, because my bf is always telling me i'm throwing money away by renting.
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