The rent or buy? question sometimes answers itself—especially when the requisite down payment amount isn’t available. Other St. Cloud residents have to wrestle with a very important decision that simply doesn’t have a one-size-fits-all solution, any more than does a what car is best? question. 

Factors that make it complicated have to do with how predictable many other facets of their future are: how long do they know they will be living in St. Cloud; how reliable is their income stream; how stable is the size of their family, and—an associated issue—how important will the quality of neighborhood grade, middle, and/or public high school be…and when?

Once you are convinced that there is no simple answer to the rent or buy question, it becomes much easier to dismiss some of the mythology that passes as common sense when it comes to the decision. Chief among the myths is the one that has renting being more economical because of the associated costs that go with homeownership—

Taxes! Maintenance! Insurance! Put them all together, pile them on top of the monthly mortgage payment, and there’s no way it isn’t cheaper to rent!

That idea is sometimes bolstered by taking pencil to paper. If the immediate monthly expense does come out in favor of renting, it’s probably why the myth endures (even though some other “common sense” has it that owning your St. Cloud home is the smart way to go). 

What’s the unbiased bottom line when it comes to dollars and sense? Is the answer to rent or buy dependent on speculation—that St. Cloud real estate values need to continually grow? If everything else is equal—if the emotional and prestige aspects of homeownership are set aside—why isn’t it financially more prudent to risk nothing, and just rent?

The answer that’s most comprehensive was recently cited by media financial guru Dave Ramsey, who is most well-known for counselling against debt. With that as his philosophical touchstone, you’d expect that the last thing he’d recommend would be signing on to a debt the size of a typical St. Cloud mortgage. Yet the opposite is true. Among other reasons, the asset value of the underlying property soon balances out against the liability of the debt, so it’s not troubling. But that’s not the real answer to his coming down on the side of owning over renting.

Ramsey’s reasoning is simple enough: the key lies in inflation. When you measure this month’s cost of homeownership versus the monthly rental for a comparable St. Cloud home, the two might be almost equal—or even cheaper for the rental. But that’s only this month. Thinking ahead a year or two…or more realistically, seven, or 10, or 15 years, inflation can be counted on to add significantly to what the renter will pay. The homeowner’s costs are much more stable. Ramsey says that a renter would pay 38% more over the next seven years than would someone who buys today. He quotes Zillow’s finding that between the years 2000-2014, the cost of renting grew twice as quickly as did household incomes. Currently, rent costs nearly 30% of a typical renter’s income.

The financial part of the rent or buy decision is another area where my clients benefit from up-to-the moment market knowledge…and why a call to my office always results in valuable information!