The NYTimes Rent vs Buy calculator

One of the often pointed to resources when deciding whether to buy a home is the New York Times Rent vs Buy calculator.  This is a fully interactive web page that takes in many assumptions and spits out how many years, if ever, it takes to make buying better than renting.

While it truly is a great resource and one you should play with extensively, it’s not actually very good at telling you whether to rent or buy.  Why?  Because the calculation is dominated by the appreciation rates you plug into the rental and home appreciation fields.  Even a single percentage point can make a massive difference.  And so, yes … even though this tool can factor in everything you need it to, you still need expert knowledge to guess at whether the appreciation rate should be 4% instead of 3%.

Real estate is a highly property and location specific business, so the other sin of a calculator is that it assumes a lot of average things.  In the current market, if you are looking to buy, you should be investing in areas and properties where other people with money will want to buy in the future.  In other words, places that are anything but average.  One of my rationales for this is the overall trend of technology and globalization accruing more wealth to less people who can scale market efficiencies.

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