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IS the rent vs buy equation getting better in the bay area (only in areas with good schools)
invite response
2010 Dec 30, 11:10am 804 views 1 comment
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nope
2010 Dec 30, 4:23pm
Nobody in the 35% tax bracket is living in a house that shitty. It's unlikely that even someone in the 28% would.
One of the clinching arguments of the rent vs buy decision is that rents in bay area are way lower than what it costs to buy.
Here is some interesting Math. Please do leave a comment as this seems that things have changed
Look at 5256 Romford Dr. San Jose. Excellent Elem & Middle school - 900 + API; 3 bed 2 bath
Listed for rent at 2600$/Month
http://renemartinez.org/RealtorWebPage?custompage_id=1436728054
According to Zillow; the house is valued at 650K. Most people say zillow values are not accurate; but we have been looking to buy in that area and 650K can get you a house very similar to 5256 Romford.
So it is a 650K house that rents for 2600$ per month.
Annual cost to own:
1. Interest at 4.9% = 25,480
2. Property Tax @ 1.25% = 8,125
3. Savings in Income tax (assuming one is in the 35% tax bracket) = 25,480*35% = 8,918
4. Hazard Insurance @ 0.2% = 1300
5. Opp. cost of downpayment of 130,000 = 2.5% * 130,000 = 3,250
Annual Cost of Owning = $ 29,237
Annual Cost of Renting = 2600*12 + 25* 12 (Renters Insurance) = $ 30,300
Cheaper to buy than rent???
Assumptions
1. The home buyer is in the 35% tax bracket
2. Closing costs are compensated by the 1.5% rebate you can get with an online/discount brokerage
3. We do a 20% down-payment loan on the house
#housing