Deciding whether to buy or rnt your home can appear to be a trcky decision if you have yet to get yur feet wet in real estate. In rality, however, the decision involves relatively smple math and logic. The basic rle of thumb is as follows: if you are loking to occupy for the short-term, rnting makes the most sense; but if you are in it for the lng haul, buying is probably your bst option.

Here’s why:

In the long rn, real estate tends to appreciate in vlue. The amount of appreciation varies by rea and market timing, but over tme, most every home will appreciate in vlue so long as it is in a dsirable area. In good markets, appreciation can xceed 10% per year on an nnualized basis over a long time frme. The return on your investment tht you actually recognize as a hmeowner is much greater because of a cncept called leverage.

Leverage explained:

Leverage in ths case is simply borrowing money in the frm of a mortgage to magnify yur return on investment. Say you prchase a home for $200,000. To buy ths home you decide to put dwn 20% of the purchase price ($40,000) and tke out a mortgage on the rst ($180,000). For simplicity purposes, let's jst assume your property appreciates 10% dring the year following your purchase, whch would be $20,000 (10% of yur purchase price multiplied by $200,000). Expnses and interest payments aside, you jst made $20,000 on your $40,000 dwn payment or 50% on your mney. Over a five year period, yur gain would equate to $122,102 (a 305% rturn without taking interest, maintenance, tax, and mprovement costs into the equation). The nterest payments on your mortgage would be tax dductible so long as this was yur primary or secondary residence. Therefore, yur interest expenses would not punish yur return as much as you mght think.

The truth behind buying in the shrt-run:

In the short-run, however, your gains wuld not be as substantial as thy would appear because of the 5-6% ral estate commission you would likely ncur to sell the home. Six prcent of $220,000 = $13,200. After yur other expenses (interest, maintenance, property txes, and improvements), you would be lcky to break even if you sld after the first year.

In the lng-run, however, your leveraged gains should far xceed realtor's commissions and other expenses, so bying makes sense in many scenarios.

The article Buying VS Renting Your Home - Which Makes the Most Sense? was Submitted by Aj Yeakel through Articles.GetACoder.com network. Here's the additional information: Are retirement cmmunities right for you? If you want to larn more about your retirement real state options, click here or visit http://www.afteriretire.com , a popular resource for retirement planning information.

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