Renting vs. Owning a House

Activity Description

In this worksheet, students will compare the financial implications of renting versus owning a house. They will analyze the costs associated with both options over a selected duration of stay. The scenario includes various assumptions and a slider to adjust the duration of stay, allowing students to see the total rent paid, the appreciated value of the house, and the profit or loss from buying and selling the house.

Assumptions:

• Renting: The first year rent is $1,200 per month, increasing by 5% every year. Renters insurance is $30 per month.
• Owning: The house price is $350,000 with a $70,000 down payment. The remaining amount is covered by a mortgage loan. The house appreciates by 6% annually. Fixed costs include property tax, home insurance, and other costs. Upon selling, a 6% Realtor fee is applied to the sales price.

Activities:

• Scenario Presentation: Students will be presented with the assumptions for renting and owning a house, including rent increases, renters insurance, house price, down payment, mortgage loan, property tax, home insurance, appreciation rate, and Realtor fee.
• Slider Activity: Students will use a slider to adjust the duration of stay (e.g., 1 to 30 years). Based on the selected duration, the worksheet will display: Total rent paid over the selected period, Total cost of owning the house, including down payment, mortgage payments, property tax, home insurance, and other costs, Appreciated value of the house at the end of the selected period, Total profit or loss from buying and selling the house, considering the mortgage and Realtor fee.
• Data Recording: Students will record the values for different durations of stay in a table.
• Reflection: Guided questions will help students reflect on the advantages and disadvantages of renting versus owning and how these factors impact their financial decision-making.

Key Learning Outcomes:

• Comparative Financial Analysis: Students will develop skills in comparing the financial aspects of renting versus owning a house.
• Real Estate Appreciation Understanding: Students will understand how property appreciation affects the financial outcome of homeownership.
• Informed Decision-Making: This worksheet will equip students with the knowledge to make informed decisions about renting or owning a house based on their financial goals and circumstances.

This worksheet is designed to enhance students' understanding of the financial implications of renting versus owning a house, providing them with valuable insights for making informed housing decisions.

Learning Objective

The learning objective of this activity is to enhance students' financial literacy by comparing the long-term costs and benefits of buying a house versus renting. Students will analyze various durations of stay (1, 3, 5, 10, and 30 years) to calculate and compare the total rent paid with the profit earned from buying a house, staying there for the specified duration, and then finally selling the house at an appreciated price. They will factor in mortgage payments, property taxes, insurance, rent increases, home appreciation, and selling costs. This exercise aims to develop critical thinking, decision-making skills, and a comprehensive understanding of housing economics, helping students make informed choices about their future housing options.



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