Over the last five years, our company has spent hundreds of thousands of dollars on renting our office.
As we look toward the future, I’ve needed to analyze if it’s going to be better for us to buy or rent a future space.
Buying will most likely be beneficial over the long run, but it isn’t always the case… Especially if for any reason a property goes down in value… Or if we can get a much larger return on our money by investing in other avenues.
There are many costs of real estate to consider when debating whether to make a purchasing decision: the opportunity cost of the capital of the down payment being held in the equity of the home (will the best return for this money be in real estate?), property taxes, total interest paid over time + interest rate of the mortgage itself (second properties will almost always be at a higher rate), furniture we may never use again, and commission on selling the property at a later date.
Even when I purchased my home, I was ignorantly unaware of how much the interest would cost over time. Luckily, my business manager helped me get a great interest rate on the mortgage (3.75%) and my home in Sherman Oaks has appreciated significantly in value in the three years since I’ve purchased it.
In taking into consideration all the above aspects as to whether it will be more valuable to rent or buy, there is a great calculator tool I found called Karl’s mortgage calculator – It automatically calculates many of the above factors to help the user make the best decision for their financial future.