Buy or Rent? Learn the Rule of 15

Buy or Rent? Learn the Rule of 15 Posted By:Carmen Wong Ulrich Topics:Personal Finance | Credit | Credit Cards | Mortgages Ever hear of the real estate Rule of 15? I mentioned it yesterday on a segment with Al Roker on the TODAY Show as we discussed a question tossing and turning through many American heads these days: “Should I buy or rent?” Here’s how the rule goes: Let’s say you’re looking at a... [more]

Buy or Rent? Learn the Rule of 15 Posted By:Carmen Wong Ulrich Topics:Personal Finance | Credit | Credit Cards | Mortgages Ever hear of the real estate Rule of 15? I mentioned it yesterday on a segment with Al Roker on the TODAY Show as we discussed a question tossing and turning through many American heads these days: “Should I buy or rent?” Here’s how the rule goes: Let’s say you’re looking at a 2-bedroom house or apartment: 1) Find the going rent in the neighborhood or location you’re interested in—which you can track down through sites like Zillow.com and Trulia.com—and calculate how much you’d spend in rent a year. Say, $2,000 a month would mean an annual rent of $24,000. 2) Multiply that number—your annual rent—by 15. (in this case: $360,000) 3) Now look up and compare the going price of a comparable space in the same area, to buy. 4) If that number is much greater than your annual-rent-times-15, the location probably still has a way to go down in home value. The bubble here ain’t done burstin’ and you should rent for a while. The last thing you want to be is upside-down on a mortgage—owing more than your new home is worth. Keep in mind that some bubbles burst more quickly than others. So if you’re going to stay put for 10 to 30 years and you need to buy now, then buy. Just be very well informed about where you’re buying, what property values are and, should you dip into the cheaper well of foreclosures, do your research. You want a ‘merit’ badge in your local market before you buy these days. http://www.cnbc.com/id/25625777 What have I been saying? If prices are more than 15x annual rent they're overpriced. Properly priced is 12x, as was demonstrated in another thread a few days ago. I live in a 2-br 2-ba 1000 sf apartment in Chelsea, pay $4,500. 15x that is $810,000. Think I can buy my apartment for $810,000? LMAO. They want $1.2 million minimum for similar units. 12x is $648,000. AKA 50% overpriced. [less]