Guest-host Leonard Baron, a real estate professor at San Diego State University and principal of LPB Services, a real estate consulting firm, tackles your real estate questions today as part of Savvy & Sage: Tips on Buying and Selling in 2009.

Reader Julia asked:

I am a single woman in my late 30s and do not own a home. Many friends tell me I need to have (a home) as an asset. I have always worked under the assumption it is actually better to rent (if low to moderate rent) and invest the extra in the stock market. It seems that there are so many expenses associated with owning a home, it doesn’t seem worth it. I also live in an expensive area and would prefer not to buy in a lower cost area with which I am not familiar.

Hi Julia,

Where you want to live (and where you are willing to live) is a personal decision that you make. And if you are happy living somewhere, but you prefer not to pay the high costs of owning a home in an expensive area (especially a huge mortgage) it makes total sense to rent — let someone else deal with the hassles and low investment returns. You will be saving a lot of money that you can, if you are diligent, invest in other places like the stock market. 

In many areas of San Diego, the rent vs. own equation is sharply on the side of the renter (where there are low rents compared to property prices — think beach areas).

For example, if I wanted to live downtown in a really nice condo, the monthly cost of owning would probably be 35 percent to 50 percent more than renting. So the hope for an owner is that the long-term appreciation would make up the difference — and in time it may, or it may not. If you rented, you could invest the difference in another asset — stocks, bonds, gold, mutual funds.

Separately, owning investment real estate, or not, is also a personal decision that one makes. It is hard work and takes time energy and effort. So does this appeal to you? It can be easy at times, and it can be a major time consuming hassle at times.

These are totally separate issues and need to be evaluated separately.

So live where you are happy and if you want to delve into investment real estate, do the due diligence tasks I noted in another post and look for a fair deal for long-term wealth gains. If real estate isn’t appealing to you, that is fine — stay away from it. Many people over the past few years who purchased are wishing they made that decision.

So let your friends know that you are happy where you live and do not want the high costs and low investment returns of owning real estate in that area. And as to owning investment property that would have better returns — but where you may have to deal with tenants and toilets every few months — you’d rather avoid the stress and put your money into less time consuming stocks and bonds.

If you have more questions for Leonard Baron, please leave a comment below or send an e-mail to kelly.bennett@voiceofsandiego.org.

— LEONARD BARON

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