Renting vs. Buying a home
Apr.29, 2010 in
House Buying Tips
The math of renting vs. buying a home. Challenging the notion that it is always better to buy.
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The math of renting vs. buying a home. Challenging the notion that it is always better to buy.
February 25th, 2010 at 12:10 pm
You forgot to add the income taxes you would owe of $30K to the $-26K you would spend on renting. So isn’t it better to buy?
Rent $-56K vs Buy -$41.5K
February 27th, 2010 at 1:00 pm
@zad04 Only assuming that interest rates won’t continue to skyrocket and that housing values will never plummet, I guess.
March 1st, 2010 at 12:29 pm
Nice video! One thing is that you do have to pay taxes on your interest income from your $250,000. I like this though!
March 1st, 2010 at 11:15 pm
number trick
March 3rd, 2010 at 2:08 am
“number trick?”
my house note is 1,200 per month, and I get 1,300 per month in rent (3 bedroom, 2 bath, 2 rooms rented out)
so I go to sleep each month under a roof I *own* — and can tear down any structure, paint any room any color I wish, add windows/doors, tear down a wall anywhere I want to, here and there — and if I were to rent? — I couldn’t do any of it
the numbers seem to play out but, in the end — when you pay rent — you’re just paying someone else’s mortgage.. .
March 8th, 2010 at 11:55 am
biggest issue.. 4% on a cd??? yea, like 3-5 years ago. a cd is at 1.5% or less now.. and starting with 250K is a great scenario that is ridiculous for the average person to relate to. though i get what your saying because you are lucky enough to be able to survive in such an expensive area. take it down to the average person trying to buy a $300k home with 30k in the bank renting at $1,500/mo
replace the 10k with 3k and the scenario is not that sweet. nice try tho
March 12th, 2010 at 8:57 pm
You forgot to add the income tax on the 250k interest!
March 12th, 2010 at 9:59 pm
Interesting analysis IF they comparison to rent was a real number. How can the market get 1 mil for an identical property when the rental market can only get 3k per month. the landlord will need to get the cost of capital plus a return in invested capital that will be greater than the rent. In your example the renter is also is paying PITI which would make the renters cash flow being 52k annual after the 10k deduct for interest on the 250k. less than HALF savings…
March 12th, 2010 at 11:02 pm
this is so wrong… for renting the house ..it was calculated as per year. however for buying your own house you calculated all the interest that needs to be paid over a long period of time and pretended its just per year. therefore there is a big gap between these 2
March 16th, 2010 at 8:11 pm
3k apartment != $1M home. You have convinced yourself this is the right thing to do, but not me. I am currently on the fence, but your math is completely off base. You also don’t mention that interest payments are tax deductible.
March 22nd, 2010 at 7:38 pm
If you have money to be buying or renting a million dollar house than this might be the case, but what about people who are starting out and getting their first house that is 50,000-$60,000. Monthly payments would be probably under $500, cheaper than renting almost anywhere. Not to mention once the house is paid off it is completely yours, if you are renting you are going nowhere. I dont think your theory is correct for the average people. Most people dont have $200K lying around the invest.
March 23rd, 2010 at 3:26 pm
@living4fire I rent and guess what I dont have to worry about anything my landlord takes care of everything I need and is a damn good landlord I wouldnt want to waste 30 yrs of my life paying off a house no matter how much the montly payments are and I am 19 you mean to tell me if I take out a 30 yr loan I wont own my house until im 49 id rather rent
March 23rd, 2010 at 4:41 pm
@jdprice455
sure you get everything taken care of if it breaks, but how often are things going to break, id rather take my chances of fixing things every once in awhile knowing I have a place that is mine. Not to mention when you are renting you cant paint walls, or make any other type of modifications you want to the house. ….
March 23rd, 2010 at 4:41 pm
@jdprice455
…Renting may be better in some situations but for most people this is not the case. I will not be having a 30 year loan and even if I did I would be paying more than the minimum payment to pay it off within maybe 10 years, after that and I have money saved I can purchase a new home and rent that one out making it an investment property. All that money you are throwing into rent is going down the drain, you have nothing to show for at the end.
March 23rd, 2010 at 4:55 pm
Im not wasting money I am saving money my rent is very much affordable I just cant see my self paying a mortage if i do decide to buy a house it will be in cash form only whether the house is 100,000 or 1 million I am paying cash that way I own my house flat out people dont own their houses until they pay off that final payment so really theres not much of a diffference between renting and a mortage because if you dont pay either your EVICTED
March 23rd, 2010 at 4:58 pm
@hoffenpot Right because guess what happens to a home owner who fails to pay HOA Mortage Payment or Property Tax they get that little notice in the mail called a FORECLOSURE lol
March 23rd, 2010 at 5:00 pm
@jdprice455
it is going to be better to rent for some and to buy for others, in my situation i am young too and looking for a smaller house that meets my needs in the $50K-60K price range to buy. Payments should be under $500 a month, which is good compared to most places you rent your going to be paying at least $700+ for most places that arent roach motels. To each his own.
March 23rd, 2010 at 5:01 pm
thats why you dont get in over your head and plan things out.
March 23rd, 2010 at 5:12 pm
@living4fire But thats what alot these homeowners do buy a house they know they cant afford having a champagne taste on a koolaid budget the real estate market is just going down and those agents use to making a good amount of money have to leave their million dollar homes
March 23rd, 2010 at 5:15 pm
@living4fire And go out to california and see how many for sale signs you see all those people out there didnt plant things out and looked what happend now people who rent out places are able to get their properties for less than what they paid for and making the rent affordable thats what my landlord does she buys foreclosed houses flips them and then rents them instead of selling
March 23rd, 2010 at 5:17 pm
I agree.
March 23rd, 2010 at 5:20 pm
I live in California. I know what you mean. That is why I plan on buying one that is $50-60K, and once paid off renting it out and purchasing a better home. Payments should be no more than $500 a month which is pretty reasonable considering almost anywhere you rent your going to pay more than that. Prices are a lot higher here in California for everything though, California is an expensive place to live.
March 23rd, 2010 at 5:30 pm
@living4fire Right I think the mortage companies shouldnt have given out all these loans to people who are known not to pay on time and have bad credit had they not have did that the real estate market would have been much better than it is now because here in indianapolis certain areas arent selling at all and now the banks have to deal with all those properties
April 25th, 2010 at 8:51 pm
You totally missed it! When you rent you are also paying more on income tax and that is not in your calculations. You would spend over 50k by renting.
April 26th, 2010 at 4:06 am
…and he was right. the housing market got in that horrible situation in part because of the stupid assumption that “buying is always better then renting”. Here in Spain people insist that renting is throwing money away, and here we are … with a devastated economy, 20% unemployment. Of course there are many other problems in the mix.