Author Topic: Poke holes in my math  (Read 1849 times)

dantownehall

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Poke holes in my math
« on: August 28, 2013, 01:34:58 PM »
I just bought my first house for $145,000.

Previously, I was renting an apartment by myself for $782/month.

I now pay $680/month (includes principal, interest @ 4.6%, taxes, & insurance).  I also now have a roommate paying me $300/month.

In effect, I am now saving ~$400/month over what I was doing.  To my way of thinking, this amounts to a 1.25% per month return on my $32,000 down payment, or 15% annually.  Actually, better because I'm building equity as well.

This seems too good to be true.  Am I missing something?  At first I was wary of pulling that $32,000 out of investments, but looking at it this way, it was definitely the thing to do.

Kazimieras

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Re: Poke holes in my math
« Reply #1 on: August 30, 2013, 09:33:29 AM »
This seems too good to be true.  Am I missing something?  At first I was wary of pulling that $32,000 out of investments, but looking at it this way, it was definitely the thing to do.

If you're in the US, don't forget your interest is tax deductible, which should bump up the savings a bit.

Now you are forgetting 2 things, although they are not directly money related. First is that you've decreased your mobility. This may not be a bad thing if you like where you are and have the right career opportunities in your current location. But it would suck if the house became an anchor. Second thing is your risk profile just changed. Your previous investments had certain risks before, but now you're into more of the risks (and rewards) of the real estate sector. It isn't bad, but it is a difference that isn't easily calculated on an excel sheet (so most people tend to miss it). Oh-  and as a home owner you are now responsible for repairs, whereas when you rented your landlord was responsible for them. You haven't included the math and $$$ for that. Personally houses are a lifestyle thing and are typically not an investment (unless it is a rental property), but that's me.

Spork

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Re: Poke holes in my math
« Reply #2 on: August 30, 2013, 09:50:29 AM »

If you're in the US, don't forget your interest is tax deductible, which should bump up the savings a bit.


...property taxes as well.