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Strategist
2016 Mar 7, 8:06pm
Model assumptions:
Purchase Price $425,000.00
A $425,000 home does not rent for $12,000 annual. The whole model is hard to comprehend.
Bellingham Bill
2016 Mar 7, 9:28pm
this is not renting the $425,000 house, but renting a $1000 apartment instead and saving the difference.
turtledove
2016 Mar 7, 9:33pm
this is not renting the $425,000 house, but renting a $1000 apartment instead and saving the difference.
Uh, but you're living in an apartment. And I don't want to see an apartment in OC that rents for $1,000/month. Seriously, are you suggesting that a professional family of four should be content with 800 square feet? Forever? What's the fucking point of attempting to achieve anything based on your model?
There's a lot that exists between some crappy apartment and a mansion. Those aren't the only two choices.
There's a lot that exists between some crappy apartment and a mansion. Those aren't the only two choices.
I agree, AND a $425,000 house??? Okay, so I know you're talking CA - just another reason I don't live there. No way I would/I could afford that much in a mortgage. You spend that much down here and you get a REAL mansion. Look, you can still get a 2,000 plus square foot house down here for well under $200K (depending on area and age of house you can get it for under $150K).
Strategist
2016 Mar 8, 10:55am
this is not renting the $425,000 house, but renting a $1000 apartment instead and saving the difference.
Uh, but you're living in an apartment. And I don't want to see an apartment in OC that rents for $1,000/month. Seriously, are you suggesting that a professional family of four should be content with 800 square feet? Forever? What's the fucking point of attempting to achieve anything based on your model?
There's a lot that exists between some crappy apartment and a mansion. Those aren't the only two choices.
Makes the whole analysis questionable when you compare apples with oranges.
you have to compare apples to apples or you are wasting your time.
saying "a home would cost $425,000 bot I could sleep in the back of my 1979 chevy van, and just crap at mcdonalds" isn't exactly a direct comparison.
Where I live, I can buy a home for $300,000 that will rent for $2000 instantly. same house comparison.
I'm ready to move, and looking for cities with better buy/rent ratio. Maybe Vegas? Jacksonville? Tampa?
Strategist
2016 Mar 8, 11:39am
you have to compare apples to apples or you are wasting your time.
saying "a home would cost $425,000 bot I could sleep in the back of my 1979 chevy van, and just crap at mcdonalds" isn't exactly a direct comparison.
And the math will show it's cheaper to sleep in the old van.
Strategist
2016 Mar 8, 11:39am
Look, you can still get a 2,000 plus square foot house down here
Where is here?
He's in Houston.
FNWGMOBDVZXDNW
2016 Mar 8, 11:43am
If you want to live in a smaller place to save money, you could always find a house that is arranged so that you could rent out some space. That would be more equivalent than renting an apartment.
One other thing about owning a house is that you are your own manager. This might be a huge pain in the ass, or no problem. That depends on the person, but haven't a 'not my problem' approach to maintenance is nice for some people.
you have to compare apples to apples or you are wasting your time.
saying "a home would cost $425,000 bot I could sleep in the back of my 1979 chevy van, and just crap at mcdonalds" isn't exactly a direct comparison.
And the math will show it's cheaper to sleep in the old van.
It's also cheaper to 24 condom packs at the 99Cent store. Who cares if you can't feel a damn thing during sex, you just saved $1 a night!!!
Bellingham Bill
2016 Mar 8, 7:01pm
Seriously, are you suggesting that a professional family of four should be content with 800 square feet? Forever? What's the fucking point of attempting to achieve anything based on your model?
actually I tried to stack the deck in favor of the $1000 apartment, but buying is clearly superior with these numbers.
After 30 years I could have $800,000 saved by renting, or sell the house and have $1.3M, plus the better life experience of living in a nice house for 30 years.
Model assumptions:
Purchase Price $425,000.00
Down Payment 20%
Interest Rate 3.50%
Points 1.23%
PMI 0%
Term 30
Tax Bracket 21%
Base Deduction 6300
Savings Yield 4.0%
Insurance 0.30%
Maintenance 300.00
Property Tax 1.25%
Appreciation 4.0%
So the red columns are the rent case. "Cost Delta" is the difference between PITI etc and renting for that year. "Total Saving" is saving every dollar of the cost delta and getting 4% compounding yield on that too.
Blue/Green is buying, the green part is the stuff not dealing with principal. ACO is "annual cost of ownership" -- PITI etc. less the P, MCO is that /12.
The bottom line by this model is that after 30 more years of renting I'd have an extra $860k in the bank vs. the buy case of owning free & clear a house worth $500,000 more than that.