Katherine Hepburn’s Brownstone: Lessons in Buying and Renting

Have you ever wondered what it would be like to live like a movie star? You’ll get your chance if you can afford to rent the former New York City home of four-time Academy Award winner Katherine Hepburn, which is currently for rent at $27,500 per month. If you think that price is steep, you’re wrong – that’s a bargain rate. In 2009, they were asking $30,000 per month and, in 2007, it went for a whopping $39,500. A month.

In order to live like a Hollywood immortal though, you need to have the means of a modern day icon. For most people, a rental of that caliber is out of the question. At those rates, it may even be cheaper to buy the home, although it’s not currently on the market. But it does beg the age-old question…is it better to rent or buy?

With mortgage rates at historical lows, and a depressed real estate market offering deep sales on homes, it makes sense for renters to consider a home purchase. After all, they may never see an opportunity like this again. Surprisingly, according to an article in the Wall Street Journal, people shun this sensible idea. It’s hard to pull the trigger when you’re not sure if the economy will recover, or a collapsing stock market will decimate your retirement funds or, even worse, you’ll lose your job. But sometimes you have to act in spite of your fears. Considering that you can build wealth through homeownership in two ways – paying down a mortgage and appreciation of value – it makes sense to pull the trigger now.

Advantages of homeownership

There are plenty of good reasons to own your own home. First, you can build equity each month -- a sure path to wealth. According to the Federal Reserve’s Survey of Consumer Finances, owners tend to be wealthier than renters. Second, you can deduct mortgage interest from your taxes. You’re also entitled to a significant capital gains break when you sell -- $250,000 for singles, and $500,000 for couples. Third, you have the satisfaction of being a homeowner and realizing the American dream.

Advantages of renting

The disadvantages of homeownership translate into advantages of renting. As a renter, you don’t have the headaches of home maintenance. No roofs to fix, faucets to stop leaking, and property taxes to pay. You’re not tied to a physical structure, and can move easily if you have a new job, or want to relocate. Third, you can take the money that you’re saving by not paying for a mortgage, home upkeep, and down payment, and funnel it into investments to help fund your retirement.

On the flip side, though, you build no equity, and have nothing to show for your monthly rental year after year after year, whereas putting your monthly funds into a mortgage is an automatic way of saving for retirement by building home equity.

You may not be able to afford to either rent or buy Katherine Hepburn’s brownstone. But don’t fret – you can still catch a piece of her celebrity by purchasing one of her postage stamps.