Rent or Buy?

by Terence Wong

This is a big decision, but if you step through the constraints, it becomes straight forward.

Answering no to any these questions will lean you towards the Rent category:

Do you have (or can get a hold of, e.g. family, 401k, etc.) 20% down payment?
Is your income able to cover mortgage, tax, maintenance, utilities and sustain your living?
Do you have a great opportunity (starting a business, investing into someone else’s business, etc) to deploy your money?
Are you planning to stay in the same location for about 5 years?

Given the price trend in real estate, one would quickly assume that investing in real estate is the answer. And this may very well be true. Real estate is a great diversification investment if you already own liquid equity investments like funds, stocks and bonds. So the key to making your decision is flexibility and opportunity cost.

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