Why Buy Real Estate
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Are you a student about to attend LSU?
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Are you parents of a student who want to invest in your children's lives more than just by education?
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Are you a part of the LSU faculty?
If you answered yes to any of the above questions by either attending LSU or working at LSU for more than a couple of years then this information is for you.
Below is an example of two people, a renter who rented while at LSU for 4 years, and buyer who bought a house to live in while at LSU for 4 years. Read on to see how their financial portfolios differ because of their choice between buying and renting real estate.
The renter we will call "Renter". Renter is a freshman at LSU. He went to LSU for only 4 years. Every month he paid $500 for rent. Renter ended up spending $24,000 for rent in the course of his college career.
The buyer, who's name we will call "Buyer", is a freshman at LSU. Buyer's parents helped her buy a small condo. The costs for owning the condo cost Buyer $700 a month. Buyer went to school for 4 years. Buyer ended up spending $36,000 on her house over the course of her college career. The condo had closing costs, but Buyer had the seller pay for those costs. As for a down payment, Buyer gets the loan from her parents, who will eventually be paid the money back upon sale of the condo or refinancing.
In these scenarios, Buyer ended up paying more than Renter over the course of her college career, but she actually gets to keep some of her money. If her condo was more than just a one bedroom, Buyer could have a roommate to help her split the costs, and it would end up costing Buyer even less than Renter. Buyer can get tax benefits for home ownership, and if Buyer decides to sell the condo when she graduates, she will likely be able to sell it for a profit from appreciation. Every payment she made on the house had a part that went to the bank that she never gets back, but also a part of the payment that goes towards the total payment of her house. Over the course of the years, whatever that amount of her payment that goes to her house adds up to, Buyer keeps. Buyer can use this amount (called equity) to buy a car or something else by taking out a special loan called an "equity line of credit". Buyer also gets the benefits of owning a home, the responsibility of owning a home that helps her mature, and lots of good memories.
As for Renter, he benefits by getting lots of good memories. He didn't have to worry too much about the apartment he lived in. Whenever something broke, he called the apartment complex to fix it. He didn't pay out of pocket for that. He doesn't have to be committed to staying in one place at not so much a consequence. So if he has problems with his rental he can move around. But he really has nothing material to show for it after paying $24,000 over the course of his 4 year college career.
