The Rich Kids Conundrum -- Should I Buy or Should I Rent?
I get asked this question quite a bit and the answer really depends on the person! There are a few things that you should consider when deciding whether to rent or to buy:
- Are you planning on staying in one place for the next few years or are you out of here the moment you land your first starring role in the CW’s 20-something version of “Sex and the City” shooting ASAP in NYC?
- Do you have the money to comfortably put down roughly 10% of the purchase price or are you parents willing to invest in purchasing your first home?
- Are you currently and consistently paying more than $2500/month in rent?
- Do you have a reliable career or other sources of income that you can depend on for the long haul?
- Do you have an emergency cushion (parents with money count too) that will see you through should you find yourself laid off, fired, or otherwise without a job for the next 8 months (thank you Suze Orman for this bit of wisdom)?
If you’ve answered yes to all of these questions, then I would advise purchasing overrenting. Every rich kid knows that the way to secure a rich future is to invest your money properly. Your $3000 a month rent at the hottest luxury apartment complex featured in “The Hills” could be paying down a roughly $500,000 condo. A wise agent whom I greatly admire once told me to buy everything you can get your hands on and never sell unless you have to. These are words to live by!
You’ve heard it before, a real estate agent telling you that you should buy a place instead of throwing your money away on rent - how original! I get it! Let’s look at some numbers to put things in perspective:
| Sale Price | $500,000 | $500,000 |
| Down Payment | $100,000 | $50,000 |
| Loan Amount | $400,000 | $450,000 |
| Rate (fixed) | 5.25% | 5.25% |
| Payment | $2,208.81 | $2,484.92 |
| Taxes & Insurance | $520.83 | $520.83 |
| Home Owners Dues | $280 | $280 |
| Mortgage Insurance | $215 | |
| Total Monthly Due | $3009.65 | $3285.75 |
*This is a general estimate to be used as a guide. |
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Make sense? Please reference the Rich Kids Guide to Buying a Home for a step by step break down on the home buying process.
Not ready to purchase yet? Please visit my leasing section for a guide to leasing in LA or contact me for help in finding perfect temporary digs!