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  • February 2011
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  • Mary K. Lenahan, J.D., Realtor

Rent vs Buy: A Formula to Consider – Another Sign It May Be Time To Buy


Pasadena CA Home
Pasadena CA Home

There are many factors to consider when deciding whether to rent or buy.

One fabulous factor to consider is the increased take-home pay you will enjoy as a result of the tax deductions allowed to home-owners.

There are many other factors that are more personal and emotional to consider when buying a home,  such as your family’s size, ages, and needs, your desired life style, and what seems to be an innate desire to own a corner of the world that you can call all your own.

According to an article in CNNMoney,  a rule of thumb used by economists to determine if it makes more financial sense to buy vs  rent is a mathematical formula.  This formula is:

Purchase price divided by Annual Rent for a similar home.  If the resulting number is BELOW 15, start looking for the home you want to buy.   If the number is ABOVE 15, continue to rent.

Out of curiosity, I applied that formula to Pasadena living.   I used the average sale price of a Pasadena, CA home that sold in December 2010, which according to DQNews.com was $490,000.   The “average” rental price for homes listed for lease in Pasadena this  month that are 3 bedrooms and 2 baths is  $2771.00.

I then divided the average priced home sold by the  annual average rental price ($33,252).  The resulting number was 14.7 – which according to economists, is a “buy sign”.

The above CNN.Money articles notes that out of 50 major cities, 36 were now on the buy side.

How to calculate if you should rent vs. buy

.

Mary K. Lenahan, JD, Realtor
Beautiful-California-Homes-For-Sale.com
626) 798.9050 / Cell*Text: 626.226.6056
MKLenahan@yahoo.com
Dilbeck Real Estate Real Living
Short Sales & Probate Real EstateTransactions

DRE 01867737

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