Deciding whether to Rent versus Buy

Some of my clients don't know how long they will be living in San Diego.  They are members of military families, students, medical professionals or they may just be looking for a change in a few years.  Here are a few of the many factors to consider when deciding whether to rent versus buy. (1)  Time horizon - No one can consistently predict what real estate prices are going to do in the short-term, just like the stock market.  For that reason, if you have a short time horizon, it typically makes sense to rent.  If you decide to buy and need to move shortly afterwards, you may find yourself taking a loss on the property if you have to sell it.

(2)  Rental Cash Flow - If you are not opposed to being a landlord, you may consider creating a rental cash flow analysis in the event you have to move and the market is not conducive to selling (or you don't want to sell.)   It is easy to look up rents in the area and compare projected income to the cost of continued ownership.  Factor in expenses such as your mortgage payment, property tax, insurance, property management fees and maintenance / repair costs. You may also choose to factor in some period of vacancy.  If your potential property would be cash flow positive as a rental, that gives you some peace of mind. The rental market can change at any time, so this is not without risk, but at least you would know where you stand as of today.

(3)  Job Stability & Risk Tolerance - If your rental analysis shows you would be slightly cash flow negative if you had to rent the property out, you may still consider purchasing it if you feel you have a stable job and a healthy personal cash flow. If funding a shortage of say, $200 per month, would not affect other areas in your life, like saving for retirement and other goals, buying may still be feasible.  If any sort of a shortage would stress you out, or if you have no interest in becoming a landlord, go ahead and rent until your future becomes clearer.


Planning Within Reach, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.