Author Topic: Rent vs Buy case study  (Read 1462 times)

shanaling

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Rent vs Buy case study
« on: May 06, 2017, 10:24:06 AM »
Hi everyone, I think buying in this case is not a bad idea.. what do you think? Am I missing something?

Rent 2/1 apartment, carport, 850 sq ft
$1400/mo

Buy 2/2 condo, garage, 1200 sq ft
Out of pocket cost: $1500/mo

PITI: $2586/mo
Tax deduction: $445/mo
Equity: >$642/mo
Purchase price: $525k



2Birds1Stone

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Re: Rent vs Buy case study
« Reply #1 on: May 06, 2017, 11:39:36 AM »
Not enough information at all.

You should also take into account 1% per annum for maintenance/repairs/etc over the course of the mortgage.

How long will you live here for?

If housing does dip 10-20% it will potentially take a LONG time to get back above water on a loan that large.

My vote would be to rent, much more freedom and liquidity.

Another Reader

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Re: Rent vs Buy case study
« Reply #2 on: May 06, 2017, 11:48:31 AM »
Your out of pocket cost is $2,586.  Yes, some of that payment amortizes the loan, but you write that $2,586 check every month.  The equity you think you are building can disappear quickly in a market downturn.  You also forgot the HOA fee and maintenance expense.

Run the NY Times rent vs buy calculator and see what that says.

shanaling

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Re: Rent vs Buy case study
« Reply #3 on: May 06, 2017, 12:19:08 PM »
Thanks i do need to make sure maintenance is kept in check.

The ~$2586/mo does include HOA. Its located in a highly desirable city in california that had 4% annual appreciation during the housing crash.

I plan to keep this property indefinitely, maybe rent out in the future. Before remodel and being on market, it was rented out for $2000/mo.

I did run the NYT calculator - the cutoff rent is around $1600/mo. I used 5% for appreciation (5.65% since 2000 per neighborhood scout), 7% for investment return, 1% yearly maintenance.

Another Reader

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Re: Rent vs Buy case study
« Reply #4 on: May 06, 2017, 01:03:57 PM »
What city in California had 4 percent annual appreciation during the housing crash?  Having trouble with that statistic...

shanaling

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Re: Rent vs Buy case study
« Reply #5 on: May 06, 2017, 01:22:52 PM »
I can't find the exact article right now... but the city is in in 91006, 91007

Another Reader

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Re: Rent vs Buy case study
« Reply #6 on: May 06, 2017, 01:32:08 PM »
Arcadia! Chinese buyers have been investing there for a number of years.  I understand the upper end McMansion market there is slow because of the Chinese government's restrictions on currency flow.  True?

shanaling

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Re: Rent vs Buy case study
« Reply #7 on: May 06, 2017, 01:35:34 PM »
Yes in recent years, the million/multi-million mansion market has cooled significantly, but not the first-time buyer condo market. In general, there has been far fewer all-cash buyers than previous years.