
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, March 4, 1990                   TAG: 9003052390
SECTION: HOMES                    PAGE: D-1   EDITION: METRO 
SOURCE: The New York Times
DATELINE:                                 LENGTH: Medium

TO RENT OR BUY: HOW TO MAKE THE DECISION

On a cash-flow basis, forgetting taxes, a person can rent for about half the cost of buying, said Kenneth Rosen, the director of the Center for Real Estate and Urban Economics at the University of California at Berkeley. "And the tax benefits of owning have been reduced by tax reform."

But homeowners still can deduct mortgage interest and most property taxes, a considerable savings in regions where property taxes are high.

One important determination in deciding whether to buy or rent: Would you be better off investing your money in a house over a period of time or investing the down payment and saving any difference?

"The markets today may lead you to rent," said Susan Wachter, an economist at the Wharton Real Estate Center of the University of Pennsylvania. "But your costs tend to be stable when you own, and that's a main motivator to home ownership."

The U.S. Bureau of Labor Statistics suggests that consumers make these calculations to help them decide whether to buy or rent housing.

Write down the purchase price and financing terms for the house or apartment. Include the down payment, closing costs and points.

Estimate your gross monthly shelter costs as a homeowner, including utilities, maintenance and repairs.

Figure out your net monthly outlay, computing the tax savings by deducting mortgage interest and property taxes.

Project what the proceeds would be from selling the property after, say, 5, 10 or 20 years. Some experts say a 4.5 percent annual gain should be projected for the next 10 years.

What will your total rent be for the same period? And if you invested the money you would spend on a down payment, closing costs and points, what would your return be? Today an investor might reasonably expect to get a return of about 8 percent on Treasury bonds, 6 percent on municipal bonds and 6 to 8 percent on stocks.

Compare the two sets of figures.

by CNB