Renting vs. Buying A Home: Probably the single biggest financial decision.

May 17, 2012 - PRLog -- Although it could seem like a clear-cut no brainer, deeper issues needs to be examined. “To start, buying offers many advantages,” says Lee J. Schneider, Long Island real estate expert and founder of Richmond Equity Group.  “Chief among them is building equity,” Lee continues. However, in addition, tax write-offs, credit building strategies, potential rental income are also important as are the intangibles, privacy, security and the comfort of being in "your" home, not someone else's.

These seem like ideal reasons to purchase--and it well may be the right thing to do from an investment strategy--buying in a declining real estate market could also prove to be a challenge when trying to make the right decision. Lee J. Schneider warns, “If you were considering purchasing a home now, you could be in for a surprise.”  For instance, you purchased a home today and saw the value drop $50k over the next year, that may have greater implications than just trying to vie for home ownership.

If building equity is a major reason to buy a home, than the loss of equity should be equally compelling. Yes, there are those who will say, "the market will come back, you just have to hold on" It is you who must say, "Yes, but for how long?"

Overall, buying is by and large a good long term investment, and is often better than renting.  However, timing is important too and should be considered when making your purchase. Perhaps waiting the market out a bit may serve you with a greater pool of potential homes to choose from and at a more leveraged or discounted price. Saving 50k on purchase could be greater than the perceived tax incentives realized.

For example, if you take the purchase price of $300k today, and subtract $50k in down trending market, the value of the home over a period of time is 250k

However, if you wait out the downturn until a full recovery commences, and buy for $250k or lower as down markets force prices down exponentially the price home’s value could be more like 210k.

“There are no absolutes and this is not an exact science,” says Lee.  “Deals present themselves all the time. Nothing is more encouraging than a motivated seller.” However, a large part of investing should rely on gut instincts and a lot of empirical data. Having your pulse on the market will tell you everything you need to know.