Author Topic: Calculating whether buying a home was "worth it"  (Read 1113 times)

bridget

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Calculating whether buying a home was "worth it"
« on: June 03, 2016, 01:39:48 PM »
What is the best way to calculate whether your real estate purchase was "worth it" in retrospect? Our apartment has just gone under contract, and the sale will probably close at the end of the month. I've read jlcollinsnh's post about how to calculate rent v. buy opportunity cost, but that seems to be focused on a fixed moment in time.

We owned our apartment for 7 years and 6 months. I have an amortization spreadsheet for our mortgage, so I can see how much I was paying in interest and principle for each month (the proportions of each obviously changed over time). Now that we're selling it, I know both the purchase and sale price. I can calculate with reasonable certainty how much we paid in HOA fees and property taxes each month (both of which steadily marched upward over time). I can also estimate how much comparable rent would have been (again, not static over time), and the hypothetical investment return, had we reliably put all savings into VTSAX.

I basically want to be able to say that buying cost us $X, and if we had rented instead (given the benefit of hindsight), we would have spent $Y. I suspect the answer won't be a quick and dirty formula; otherwise I would have found something easy by googling (most comparison calculators are also based on a fixed moment, to help people make the initial decision).

TL;DR: This sounds a job for a spreadsheet - does anybody have one they've created for this problem? What data should I include? Is month-by-month best, to get the most precise comparison?

bridget

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Re: Calculating whether buying a home was "worth it"
« Reply #1 on: June 03, 2016, 01:44:13 PM »
Oh, and potentially adding a wrinkle: for about 20 months, we rented the apartment out (which almost, but not quite, covered month-to-month carrying costs). We lived rent-free during that time.

SnackDog

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Re: Calculating whether buying a home was "worth it"
« Reply #2 on: June 03, 2016, 01:49:45 PM »
Just make a spreadsheet of the annual totals for the two cases.  Try to include all the apt-related expenses in the house own case (taxes, repairs, maintenance, upgrades, realtor, etc).  Try to estimate if you gained materially from the mortage interest tax deduction. In the rental comparison case, just take the annual difference between the rental cost and the apt cost and invest it in VTSAX.  Use the actual VTSAX return for each year.  Compare final total net from apt sale (after all costs and fees) and invested sum.