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Cost of Ownership vs Renting situation. I did the Math.

By FloridaBill   Follow   Mon, 4 Jun 2012, 8:59am   10,851 views   115 comments
In Clearwater FL 33762   Watch (0)   Share   Quote   Permalink   Like   Dislike  

The numbers (ran through Patrick's Mortgage Calculator):
House Price = $250,000
Downpayment = %20
Interest Rate = %4
Total P & I ~ $955 Per month

Other housing ownership costs per month :
Home Insurance = $100
Flood Insurance = $100
Property Tax = $400
Maintenance = $200
Total other costs = $800 per month

Total Owner ship cost (Other plus P&I) = $1755 per month

I can rent in the same exact area, a nice 2 bedroom condo for $1200 per month.

Being realistic, I will only live there for 7 years so..
After 7 years Principal Paid = $27,881.06.
Total savings from renting for 7 years = $46,620

So... its basically going to cost me $18,738.94 to live in a house for 7 years. Not counting selling costs when I try to sell it (I wouldn't go through a realtor if I could).

Is there anything I'm missing with my math? Is this correct?

Btw, principal after 30 years for this = $200,000, savings from renting = $199,800. So if I did end up staying the full 30 years I'd make out the same for a better place.

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1. Call it Crazy Follow Befriend 249 threads 2,913 comments

   76   8:01am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   tatupu70 says And I'd still argue that you shouldn't consider those. While I agree that owners generally do more than landlords, it's because it gives them more utility. If you're truly doing a buy vs. rent, you should make it apples to apples. Well, that's the TRUE reality of ownership in general, owners WILL spend more. These costs HAVE to be considered!! In many of the rent vs. buy threads on this site, too many just want to compare their rent payment to their mortgage payment without calculating these additional "ownership costs" and not calculating the closing costs. They say "my mortgage payment is $200 less than my rent payment, so I'm way ahead"... FAIL.... ALL the costs need to be considered to be an apples to apples comparison, not just monthly payments.

2. tatupu70 Follow Befriend (3) 15 threads 5,718 comments

   77   8:31am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says Well, that's the TRUE reality of ownership in general, owners WILL spend more. These costs HAVE to be considered!! OK--we'll have to disagree on this one.

3. MsAnnaNOLA Follow Befriend 58 comments

   78   8:35am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   BoomAndBustCycle says MsAnnaNOLA says $10,000 / $250,000 purchase price is 4% of purchase price per year. Percentage of purchase price has is a lazy man's analysis of maintenance costs. The same $400K home in Los Angeles would probably go for $200K in Michigan. Why would my house in Los Angeles have such a higher maintenance cost than the same house in Michigan? ANSWER.. It wouldn't, it probably has less cost since the Michigan home has much worse weather beating down on the roof and windows than any home in So Cal. Did you read the rest of my post?

4. zesta Follow Befriend 1 threads 210 comments

   79   11:32am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says In reality, it depends on how you want to live and how you want your home surroundings. You don't HAVE to finish a basement, but if you want a place for the kids to play, you do it. You don't have to put in a shed, but if you don't like the look of throwing a tarp over your lawn mower, you do it. You get my drift.... Yeah, you're crazy to include upgrades in your rent vs buy calculations. Maintenance items are things you would ask your landlord to fix. Unless you're expecting your landlord to upgrade your kitchen every decade, how can you include that as maintenance. It's like renting a house with a three car garage and saying that since there's an extra garage you need to upgrade to three cars and that's maintenance. Or since there's extra land you need to put in a swimming pool. I understand there's the temptation of spending money for things you want since it's your home, but it's a choice. The way you describe it, it seems like a hobby for your wife. Plenty of people I know haven't made any improvements to their house since they've moved in except perhaps a new coat of paint and new carpet (similar to what you'd get when you move into a rental)

5. zesta Follow Befriend 1 threads 210 comments

   80   11:50am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   zesta says HRHMedia says It's worth mentioning that home ownership only works when there is appreciation at above 5% a yr. More than likely you will lose 13% a year while home prices under perform from the 5% increase norm Let's take this $250k house vs $2500/mo rent comparison and assume the house LOSES 5% of it's value per year for the next 10 years and rent stays the same. Which do you think comes out ahead a decade later? and by how much? Since I have some time, I'll plug it into the NY Times Rent Buy Calc. 250k house - DEPRECIATES @ 5% / year 2500 / mo rent - NO RENT INCREASES 20% down 4% 30 year fixed mortgage Prop tax 3800 / year* after tax deductions Maintenance 4750 / year (seems high, but will hopefully satisfy the maintenance hounds) Insurance 3325 / year "If you stay in your home for 10 years, buying is better. It will cost you $16,542 less than renting, an average savings of $1,654 each year." "If you stay in your home for 15 years, buying is better. It will cost you $70,997 less than renting, an average savings of $4,733 each year." "If you stay in your home for 30 years, buying is better. It will cost you $344,985 less than renting, an average savings of $11,499 each year." (This despite your home is only worth $53k after 30 years of 5% depreciation) )

6. zesta Follow Befriend 1 threads 210 comments

   81   11:58am Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Build New For Less Than Used says Nonsense. A 250K house can be rented for $800/month at current inflated asking prices of resale housing. Nice try though. Ya liar. FloridaBill says Going rate is 2.5k a month for rent something "worth" 250k FloridaBill says I can rent in the same exact area, a nice 2 bedroom condo for $1200 per month.

7. zesta Follow Befriend 1 threads 210 comments

   82   12:29pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Build New For Less Than Used says Call it Crazy says owners WILL spend more. ALWAYS*. Why? One word. DEPRECIATION. *anywhere in the northeast/mid atlantic/New England

8. David9 Follow Befriend (3) 28 threads 772 comments Tarzana, CA

   83   1:37pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Ok, I want to add my 2 cents in. After wisely studying Patricks housing blog in 2005, I sold my crap hole 930 square foot condo in the Central San Fernando Valley where I was an upside down mortgage prisoner for 11 years and did not buy locally. After paying off a previous free money financial/criminal housing equity loan whatever scam, buying a car, and paying some bills I had 100K. I happily rented in Hollywood for two years before purchasing a condo outright in Texas for 91k. At first it was great, I got a job, and had these expenses, $371 HOA that includes electric, $200 a month Property Tax, and $40 insurance. I now have $100 a month in interest in a HELOC and I pay someone $50 a month to manage it for me. This brings the total monthly expenses to $760. The economy tanks and I move back to California, staying with my Dad. One deadbeat renter moves someone else in and stops paying. Got rid of them. Now it's vacant, $760 a month added expense. Not knowing what else to do, (Sell? yeah right) I throw money at the problem and spend $5,000 fixing it up. Yes, it's rented now for $1,050, netting me $300 a month. Nice, you might say. However, it will take 16 2/3 months to recup my $5,000 and some electrical plugs just went kapooey which sent me back another couple hundred. I lean toward it costs more. Granted Yes, living in a paid for home with a job is the best option...

9. Nine6 Follow Befriend (1) 1 threads 8 comments

   84   1:45pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Build New For Less Than Used says A $250k house anywhere in the northeast/mid atlantic/New England rents for $800/month. ehh what kind of neighborhood. I'm in Southeastern MA and while there are some homes available for rent at that price, I'm not so sure they would be on most peoples "A: list. Another factor would be the number and size of the bedrooms. If it's a 3 Bedroom in a good area, your probably more at $1200/month and up. If the rental is in or close to the Boston Market the rental price will nearly double.

10. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    85   3:54pm Wed 6 Jun 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   Build New For Less Than Used says Once again, you misrepresented the truth. I had lobster for breakfast. Wore a silk bib. All because I own houses.

11. Patrick Follow Befriend (54) 5,235 threads 6,171 comments 46 male Menlo Park, CA Premium

    86   4:00pm Wed 6 Jun 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   JodyChunder says I had lobster for breakfast. Wore a silk bib. All because I own houses. Totally depends on which houses you own! If you own houses that cannot be rented for your costs, you lose. If you own houses that can be rented for enough to cover the cost of owning them, you win. Realtors never tell you about the first possibility. Most owners ignore it too.

12. bubblesitter Follow Befriend (5) 10 threads 2,329 comments

    87   4:17pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   JodyChunder says All because I own houses. How many of that were bought in 2006?

13. FunTime Follow Befriend (3) 41 threads 835 comments San Francisco, CA

    88   4:49pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says it's your duty as an American It's our duty to the people and companies loaning mortgages. They have seriously expensive lifestyles to maintain.

14. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    89   6:58pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   Patrick says Totally depends on which houses you own! You move down here to sleepy Victorville and buy a little cottage like this one here: http://www.zillow.com/homedetails/Little-Beaver-St-Victorville-CA-92395/2126120472_zpid/ And then another one and another...and pretty soon you'll be eating at Jody Chunder's table.

15. Call it Crazy Follow Befriend 249 threads 2,913 comments

    90   7:06pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   FunTime says Call it Crazy says it's your duty as an American It's our duty to the people and companies loaning mortgages. They have seriously expensive lifestyles to maintain. Don't also forget, they want those HUGE bonuses too!!!

16. Call it Crazy Follow Befriend 249 threads 2,913 comments

    91   7:13pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   zesta says Plenty of people I know haven't made any improvements to their house since they've moved in except perhaps a new coat of paint and new carpet (similar to what you'd get when you move into a rental) Like I said, it depends on how you want to live. Your description sounds like my dog house. If you want to live in the luxury and condition of a crappy dog house, that's your choice. Me, I like to live in something that's been "freshened up" and where I don't need to get a tetanus shot to live there....

17. Call it Crazy Follow Befriend 249 threads 2,913 comments

    92   7:14pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   Stop The Lies says A $250k house anywhere in the northeast/mid atlantic/New England rents for $800/month. Don't know what your smokin' but your not even close....

18. tatupu70 Follow Befriend (3) 15 threads 5,718 comments

    93   7:20pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says Like I said, it depends on how you want to live. Your description sounds like my dog house. If you want to live in the luxury and condition of a crappy dog house, that's your choice. So renting is like living in a doghouse then?

19. Call it Crazy Follow Befriend 249 threads 2,913 comments

    94   7:37pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   Stop The Lies says WRONG again. I'm right on the money. Can't speak for other states but in NJ it's in the range of $1700- $1900 for the $250K house.

20. Call it Crazy Follow Befriend 249 threads 2,913 comments

    95   7:40pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   tatupu70 says So renting is like living in a doghouse then? No, you missed it... living in a house that is not upgraded regularly and where nothing is changed except paint is like living in a old dog house..

21. tatupu70 Follow Befriend (3) 15 threads 5,718 comments

    96   7:43pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says No, you missed it... living in a house that is not upgraded regularly and where nothing is changed except paint is like living in a old dog house.. That describes most rental houses I've ever seen/lived in... If they do put in upgrades, the rent will upgrade as well.

22. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    97   7:51pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   tatupu70 says If they do put in upgrades, the rent will upgrade as well. If I have to snake your septic while you rent from me, I will be tacking on 10% next rent renewal. Free gallon of spring water on rent day though.

23. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    98   7:53pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   tatupu70 says OK--we'll have to disagree on this one. Shwew! I was real worried you might be getting all amenable all a sudde3n!

24. Call it Crazy Follow Befriend 249 threads 2,913 comments

    99   8:19pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   tatupu70 says Call it Crazy says No, you missed it... living in a house that is not upgraded regularly and where nothing is changed except paint is like living in a old dog house.. That describes most rental houses I've ever seen/lived in... If they do put in upgrades, the rent will upgrade as well. Go back up and read, the guy that made the reference was talking about other "owners" he knew not "renters"...

25. Call it Crazy Follow Befriend 249 threads 2,913 comments

    100   8:20pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   JodyChunder says tatupu70 says OK--we'll have to disagree on this one. Shwew! I was real worried you might be getting all amenable all a sudde3n! Don't worry, he'll learn in time....

26. Call it Crazy Follow Befriend 249 threads 2,913 comments

    101   8:43pm Wed 6 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   Stop The Lies says And how about in Warren County? And Cumberland County? There are countless places in both those counties where $800 aren't just cherrypicked but the norm. OK, now go back and select areas where residents actually have teeth and report back....

27. tatupu70 Follow Befriend (3) 15 threads 5,718 comments

    102   4:21am Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says Go back up and read, the guy that made the reference was talking about other "owners" he knew not "renters"... I know what he was talking about--you are completely missing the point. It's the whole apples to apples thing. Comparing costs of renting vs. costs of owning.

28. Call it Crazy Follow Befriend 249 threads 2,913 comments

    103   6:37am Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   tatupu70 says I know what he was talking about--you are completely missing the point. It's the whole apples to apples thing. Comparing costs of renting vs. costs of owning. I know the point, I've done the spreadsheets, I can use a calculator... the math doesn't lie on a apples to apples comparison!!! Come back and see me when you find YOUR calculator.

29. tatupu70 Follow Befriend (3) 15 threads 5,718 comments

    104   7:47am Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says I know the point, I've done the spreadsheets, I can use a calculator... the math doesn't lie on a apples to apples comparison!!! I'm not sure you do. It has nothing to do with spreadsheets or calculators. It has everything to do with understanding which costs are maintenance and which costs are simply consumption.

30. zesta Follow Befriend 1 threads 210 comments

    105   2:34pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Appraisers Are Corrupt says ALWAYS. Why? One word. DEPRECIATION. Appraisers Are Corrupt says A $250k house anywhere in the northeast/mid atlantic/New England rents for $800/month. Appraisers Are Corrupt says And how about in Warren County? And Cumberland County? There are countless places in both those counties where $800 aren't just cherrypicked but the norm. I like how we went from ALWAYS -> NE/Mid-Atlantic/New England -> "countless places in Warren County and Cumberland" backpedal much? surprised you tried to keep arguing instead of just break out the real-turd/liar card.

31. Call it Crazy Follow Befriend 249 threads 2,913 comments

    106   2:37pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   zesta says I like how we went from ALWAYS -> NE/Mid-Atlantic/New England -> "countless places in Warren County and Cumberland" ...and he STILL isn't correct about the Warren and Cumberland areas... he must get paid by the word....

32. zesta Follow Befriend 1 threads 210 comments

    107   2:38pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Call it Crazy says tatupu70 says I know what he was talking about--you are completely missing the point. It's the whole apples to apples thing. Comparing costs of renting vs. costs of owning. I know the point, I've done the spreadsheets, I can use a calculator... the math doesn't lie on a apples to apples comparison!!! Come back and see me when you find YOUR calculator. I'm saying you're trying to add in things you "want" in your maintenance costs. It's like saying a minivan is more expensive than a Ferrari because the extra seats in the minivan causes me to have more kids which are expensive. No calculator in the world will ever fix user error.

33. Call it Crazy Follow Befriend 249 threads 2,913 comments

    108   2:47pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike (3)   zesta says I'm saying you're trying to add in things you "want" in your maintenance costs. It's like saying a minivan is more expensive than a Ferrari because the extra seats in the minivan causes me to have more kids which are expensive. No calculator in the world will ever fix user error. I'm saying TOTAL costs.... TOTAL costs.... as in cash flow... when you "own" you usually spend EXTRA money on things you "want" vs. "need" because you "own" it (the bank really owns it, whatever)... You won't spend extra money on someone's else's rental... If you took two different people who live in identical houses, one is a "renter", the other is a "owner", and you tracked every dollar they spend in a five year period that was house related, I guarantee the "owner" will have more receipts and out of pocket expenditures compared to the "renter"!

34. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    109   4:10pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   tatupu70 says I'm not sure you do. It has nothing to do Tatuptu! Let's argue about something. You pick the subject.

35. zesta Follow Befriend 1 threads 210 comments

    110   4:31pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Appraisers Are Corrupt says Isn't it interesting you liars detract from the $250k house/$800month equation with the same worn out lie of "not anywhere around here". Why is that? Why lie? Why deflect? Well, I didn't bring up the $250k house for $2500/mo, the OP, FloridaBill did. I bet if you could find him a $250k house in his area for available to rent for $800/mo he'd happily take it and probably pay you a hefty finder's fee for doing so. It shouldn't be a problem, right? Good luck with that.

36. chip_designer Follow Befriend (1) 13 threads 139 comments

    111   5:28pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   FloridaBill says Is there anything I'm missing with my math? Is this correct? yes, your math computes right. besides housing , for example one can save tons of money by not marrying a housewife, not having kids, driving a used car, using disposable phone service, free on the air tv reception, etc. One factor why people buy a house, because at one point in their life, they also wanted to pursue their american dream. or being on the same level as co-workers, or becoming a proud owner of a dream house after work so hard saving for it. Suppose most of co-workers having a house, most of church acquaintances having a house, then you still only rent. That is not good feeling, they might think things.

37. Call it Crazy Follow Befriend 249 threads 2,913 comments

    112   5:38pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   chip_designer says besides housing , for example one can save tons of money by not marrying a housewife, not having kids, driving a used car, using disposable phone service, free on the air tv reception, etc. Crap..... NOW you tell me....... chip_designer says One factor why people buy a house, because at one point in their life, they also wanted to pursue their american dream. or being on the same level as co-workers, or becoming a proud owner of a dream house after work so hard saving for it. Your right, but now your spinning the equation using "emotions" instead of "math"... the OP was referring to the MATH.. When you inject "emotions" into the math equation, then the sky is the limit on how much MORE you are wiling to spend on a house. That is an individual decision depending on your emotion/checkbook. We have been discussing the math aspect only because that is the only definitive data to work with. How do you put a number on "keeping up with the Jones"??

38. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    113   5:44pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   chip_designer says becoming a proud owner of a dream house after work so hard saving for it. In Every Dream Home a Heartache &feature=related

39. Call it Crazy Follow Befriend 249 threads 2,913 comments

    114   5:51pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike (2)   JodyChunder says In Every Dream Home a Heartache &feature=related Boy, that's some scary group.... I'm going to have to stock up on some more zombie killer ammo after watching that video...

40. JodyChunder Follow Befriend (3) 21 threads 1,512 comments Victorville, CA Premium

    115   10:15pm Thu 7 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   Call it Crazy says m going to have to stock up on some more zombie killer ammo after watching that video... I've been scouring far and wide for a muzak version of that to play in the background of my Virtual Tours for my rental listings!

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