Let's look at the economics and factors involved in buying vs. renting a home. A house depreciates in value, whether you buy or rent the home. If you buy the home, your investment continually depreciates from the moment you make your purchase. From an economic standpoint, when you sell your home in the future, after paying down the initial home loan, or possibly even after paying the home loan off, chances are that from a financial standpoint you will not recoup the full loan amount that you paid for your home upon its purchase. This means that the community has a home worth X number of dollars, and your home will be sold for under ...
This solution discusses if it would be better to buy or rent a house.
Buying vs. Renting or Leasing
1. When does it make sense to rent your home vs buying a home? Can you describe it in terms of NPV?
2. If in some situations it makes financial sense for a consumer to lease a car, why does it make sense for a dealer to lease the car to the consumer?
3. Much like many businesses, consumers are faced with buying or leasing their cars. Thinking about the lecture, the readings, and your own experiences, how should the decision be framed?
4. The housing market has seen a recent rise in home appreciation. Many investors bought second homes. Outline the decision making process to determine if it makes sense to buy a second home and lease it. What are your basic assumptions? Do they hold for a 10 year time horizon?View Full Posting Details