d4

Critique your peers’ posts in relation to your own recommendation considering the assumptions your peers have made. Support your critique with sound reasoning and evidence.

Clarence B

This was a great exercise. At first, I felt a little overwhelmed, but by the end I was looking at the numbers with a different mindset. I think the rent vs. buy decision is one that we have all had at one point in time or another. It isn't always this perfect example of buying/renting the exact same property. In looking at the data, it is my conclusion that Rebecca should absolutely rent. This comes from that fact that she knows she will not stay in the property for longer than 10 years. There is often a profit to be made from purchasing a property for 10 years and reselling it, but the difference in monthly cost between renting and buying makes the length for profitability much longer. One of the items that help me make my decision, is the fact that Rebecca looks to try to get the biggest ROI she can get, so I assume she would invest the difference between the cost to buy and the cost to rent. If Rebecca invested the difference, and the money got a modest 4% return, she would get a bigger ROI from investing the money saved at 10 years, than selling at 10 years. There might be some room if she were to purchase a less expensive property, but the difference in fees between renting and buying makes this too much to overcome. 

Cleary, S., & Foerster, S. (2014). Time Value of Money; The Buy Versus Rent Decision. Ivey Publishing.

Samantha P

There were numerous data points that had to be considered when determining the best decision on whether to rent or buy in four different scenarios.  First, I calculated what the financial impact of renting would be utilizing the data that was given in the case study.  Based solely on these numbers it looks like renting for any amount of time over five years would not be the best option.  However, after considering the different scenarios, I found that this in fact was not the case.

I then went on to determine what the financial impact of the four different scenarios would be.  I did this by first calculating what the return on equity was by deducting the remaining loan balance from the value of the condo.  I then factored in the cost to sell the condo, as well as the monthly costs that were incurred.  After determining these values, I was able to compare the metrics of buying the condo and renting.  When considering the first and second scenarios, renting would be the better financial option since Young is able to better invest her money.  When analyzing scenario three, Young would be better off renting if she plans to sell the condo in either year two or year five; however, if she plans to hold onto the condo until year ten then buying would be the better option.  In the last scenario, it would be wiser for Young to continue to rent if she was planning to sell the condo in year two; however, it would be better for her to buy if she plans to sell in either five or ten.

References

Cleary, S., & Foerster, S. (2014). Time value of money: The buy versus rent decision. Retrieved from https://mbsdirect.vitalsource.com/#/books/9781307045062/cfi/235!/4/[email protected]:0.00

Rent or buy. (2020). Retrieved from https://www.realtor.com/mortgage/tools/rent-or-buy-calculator/