To Rent or to Buy? That is the Question.

Steven Bock thought he was a typical downsizing baby boomer. With his second child graduating from college, he and his wife felt it was time to put their 7,000 square foot, multimillion dollar, suburban Boston home on the market and head into the city to rent. What they found changed the plan entirely.

“We were looking in town, and the properties we were looking at, in the size range we wanted to rent, were extremely expensive. A couple thousand square feet is not really tax efficient, and what were we going to do with all our stuff?” said Bock.

So they turned their sights back to the Boston ‘burbs, this time in search of a single-family home for rent.

High-end rentals dominate the New York and San Francisco rental markets.

Getty Images
High-end rentals dominate the New York and San Francisco rental markets.

“We found a brand new house in Lexington owned by an investor, and it was perfect. Not small. It’s a lot less of a hassle. We have a ton of flexibility. We can let the lease run out and move. We can renew year to year if we want, so it was the best of all worlds,” said Bock.

The rent is high but slightly less than what the Bocks were paying on their previous home, when you add property taxes and maintenance to the mortgage payment. They were also able to take the equity from the sale of their home and use it for other investments.

“It was more a capital allocation, flexibility, lifestyle change,” Bock concluded.

Sky-high rents for luxury rental buildings in urban centers are shifting the rent-vs.-buy equation on the high end. For much of the nation, it’s less expensive to buy than to rent. Homeownership in cities such as Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia, San Diego and St. Louis, on average, produces more wealth than renting a comparable property and reinvesting in stocks and bonds, according to a report by faculty at Florida Atlantic University and Florida International University. Dallas, Denver and Houston housing markets still favor renters.