Not Sure if Buying or Renting Is Best for You? The BURL Rule Can Help

Single family house on pile of money.
Pictac / Getty Images/iStockphoto

Homeownership is considered by many to be part of the American dream, and a sign of success and prosperity. But, in a recent survey of American small business owners, 37% said that owning a home (and a car) is an outdated part of the American dream. Another national poll from The Los Angeles Times and Reality Check Insights found that only 45% of Americans believe owning a home is essential.

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While homeownership may remain part of the American dream for some people, it helps to consider your own circumstances and goals. Renting may be the right choice for you. And if you already own your primary residence but are considering a vacation home, you may want to think twice before investing in more real estate.

Sam Dogen, a real estate investor, wrote in an article for CNBC that he uses the BURL rule to determine if you should buy or rent a specific property. And if you do opt to buy it, should you live there or rent it out?

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Dogen explained that the BURL rule stands for “buy utility, rent luxury.” Utility would be a home you need, with just enough bedrooms and living space for yourself, family and pets. There would be very little wasted area. Luxury includes amenities you may not need, such as a spacious yard, swimming pool, or bonus room.

If you choose to buy, you must think not only of the added cost, but also the lost income opportunity. If you purchase a luxury home and rent it at market rate, you’re earning income to cover not just your primary residence, but a better quality of life for yourself.

The other side of this coin is to rent a luxury property from someone else to live in, if that’s your desire for the time. Dogen said that savvy real estate investors try to pay no more than 100 times the monthly rent to purchase a multi-dwelling property. He uses an example of an apartment in a luxury high-rise that earns $7,500 per month rent. The property itself sells for roughly $2.7 million. That’s 360 times the monthly rent, so it would not be a good investment. If you like the property and want to live in one of the units, your better deal is to rent for $90,000 per year. It may be a nice apartment, but it’s not a good investment.

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On the other hand, if you find a multifamily property in an area with lower housing prices and high rents, it might make more sense to buy the property. Dogen uses a $200,000 single family home in the Midwest, which could rent for $2,000, as an example. To rent that property, you’d pay $24,000 per year. But to buy it with a mortgage at 4% interest and $40,000 down (including property taxes, maintenance, and insurance) you’d pay just $13,000 per year.

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In the end, abiding by the BURL rule may work out well for those considering substantial investments in real estate — one calculation among many to be made by smart buyers (or renters).

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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