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Home >> Property and Real-Estate >> How to determine whether you should buy or rent property...
17.05.2007, 07:34 quote
I have found an interesting rule of thumb...to roughly estimate whether it is worth to buy a specific property or whether it is better to rent and invest your money otherwise. I have done some example calculations and I have always reached about the property prices I would have estimated independently....i.e. the property prices at which I would buy myself (in theory!).
- Try to find out how much rent you would get per month for renting it out - and then multiply it by 12.
- then multiply it by 20 (or directly multiply it by 240 of course!)
Then subtract about 8% (or 10% as it is quicker to do) - these are the other costs such as taxes, commissions etc...
This is a reasonable price to buy under the conditions that the property itself is in a good condition and does not need any additional spendings - it also assumes property prices will not fall and rise by the inflation rate at least.
If not, it might be cheaper for you to put your money on a bank account and rent something,...independent whether people say it was always a good idea to buy property or not.
The only problem with a savings account is that you need to pay taxes on the revenue you have from the interests....to bascially the real interest rate is a lot lower...depending on how much you earn.
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