Personal Finance on Yik Yak | I’m starting college next year. Is it smarter to just keep renting or buy a house? My mortgage would most likely be cheaper than my rent. But I plan to buy a house when I graduate regardless. any advice would help.

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Personal Finance 8w

I’m starting college next year. Is it smarter to just keep renting or buy a house? My mortgage would most likely be cheaper than my rent. But I plan to buy a house when I graduate regardless. any advice would help.

Anonymous 8w

Buying probably cheaper then, but have to remember to incorporate transaction costs + being willing to lock yourself in to the town postgrad. If you buy and sell 4 years later the 6% realtor commission could kill your savings vs rent

Anonymous 8w

Since you aren't building equity by renting, you can think of rent as an unrecoverable cost (spending with no return). There are also unrecoverable costs of owning a house such as maintenance, property taxes, and insurances. This amount is generally 5% of the home value per year. Compare your annual rent costs and the annual home costs and you'll see which is more financially optimal. Obviously there are more factors to consider besides the $ but this is the best way to compare the costs

Anonymous 8w

I’d say just rent for now since you have no idea what’s gonna happen in your life over the next few years and you should focus on school, not being a homeowner

Anonymous 8w

Rent for now, especially once you graduate you might move to a different city.

Anonymous

#6 8w

You’re missing the biggest unrecoverable cost that is consumption of the house / opportunity cost of capital. Owning a house can be decomposed into buying then renting out a house to someone, and then also renting that house from someone else. If you wouldn’t buy the house to rent out to someone else at prevailing market rates, you’d be better off renting yourself from someone else in the same area.

Anonymous

#6 8w

For example, a $250k house would have $12,500 of annual expenses. Annual rent for a $1,200 is $14,400. You'd save $2 grand a year by buying the house. So buying is the better option strictly from a financial perspective. But some people are willing to spend more on rent given the advantages like flexibility, no responsibility for maintenance/landscaping, and overall ease compared to owning a home

Anonymous

#6 8w

-$15k in fees when you sell the house (3.75/y if 4y college), -$250k*.05 risk free rate cost of capital = $16k/y annual cost of ownership you’re not considering

Anonymous

#2 8w

If you can rent a house at a 5.8 cap rate (14.4/250) you prob should do it

Anonymous 8w

but taxes