7 ms·

With the state of rental rates at the moment, if you can scrape any kind of down payment together, it's worthwhile to buy rather than rent. Even if you are on

• throwthisawayt 10y ago
  Unfortunately the economics don't really work out for those in the Bay Area.
• maxxxxx 10y ago
  Depends on where you are though.
• jandrewrogers 10y ago
  That very much depends on where you live. I have a pretty thorough spreadsheet for modeling this kind of thing. Even if I had a 20% down payment, fully accounted for tax deductions, payment against principal, etc, and ignoring costs like maintenance, my lease in Seattle is significantly less than the monthly cost of a mortgage for the same place. This is true more often than people expect. Many landlords are not covering a mortgage payment as large as yours would be, or any mortgage at all, with your rent check. Their cost basis is not your cost basis so it is not unexpected that the market clearing price for rent is below the monthly cost for many people to buy the same property.
  • derefr 10y ago
    > Many landlords are not covering a mortgage payment as large as yours would be Why not? I can understand already owning the property, but do property-management companies just get better mortgage rates or something? Does that mean I could theoretically save money by buying a house as a company and then renting that house to myself as an individual?
    • tinylittlefish 10y ago
      At least where I live, many landlords have no mortgage at all, because they just buy properties with cash. Another scenario would be a landlord making a very large down payment, and thus, financing a much smaller amount, and thus a much lower monthly payment.
    • jandrewrogers 10y ago
      There are a number of reasons beside owning the property outright. They can make a bigger down payment than you can, so the total debt is lower. They bought it at a much lower price many years ago. Their total capitalization is much larger than yours, which drives interest rates toward zero. Their tax basis is different than your tax basis would be. It is straightforward financial math. If they have more capital than you or a different tax basis, they can have a lower monthly cost basis than you.
    • AnimalMuppet 10y ago
      Also, the landlord could have bought the property before the price went up. Their mortgage does not necessarily reflect today's price.
    • ap3 10y ago
      Maybe they bought it 20 years ago - in CA that would be lower price and lower property tax. Rents are set by the market not the interest rate.
  • 5ilv3r 10y ago
    Out of curiosity, did you deduct the expected end value of the owned property from the end total expenses?
  • obelos 10y ago
    What's the likelihood your rent in, say, five years will still be less than your mortgage would be now? Your mortgage payments won't appreciably increase. In high demand areas, though, rents will.
    • hx87 10y ago
      If renting is cheaper than buying right now, a better question is whether rent will increase faster over the next five years than an index fund portfolio funded with the difference.
    • cloudjacker 10y ago
      There are calculators for this, NY Times and Washington Post have them. Your anecdotes can be played around with variables on their data visualizations. The break even point is typically 11 years in NYC and SF. Find and play around with the calculators yourself.
  • danmaz74 10y ago
    > my lease in Seattle is significantly less than the monthly cost of a mortgage for the same place With an amortization period of how many years?
  • timothycrosley 10y ago
    This is very interesting to me, because the median rent in Seattle just crossed $2K while the median condo price just reached $410K. Since you said your ignoring all the extras and just talking about payments after 20% down - that means with the current median 3.28% interest rate in Washington for 30 YR loan you would only be paying $1,433 a month way lower. Sounds like either your math is bad or you just have a good deal :)
    • burger_moon 10y ago
      Typically HOA fees don't exist in rentals where as in condos that's an extra fee you're paying every month in addition to your mortgage. The $400k condo is going to have a substantial HOA fee. I only have knowledge of my local area, but for condos around the $200k price range here have HOA fees around $500/mo. That would put him right back at a wash for monthly price if they didn't put any down payment on the condo.
      • douche 10y ago
        $500 a month to an organization that tells you all the things that you can't do with your own property? That is absurd.
        • sokoloff 10y ago
          I agree (which is why I live in a single-family), but to be fair, the HOA/condo fee also typically pays for things like the outside maintenance, snow removal, common area maintenance, roof, painting, landscaping, pool/tennis court/gym/what-have-you, trash removal, insurance and other expenses relating to the shared/public areas.
        • deleted 10y ago
          [deleted]
        • massysett 10y ago
          The value in that is that they also tell your neighbors what they can't do with their property.
  • newman314 10y ago
    Link to spreadsheet? =) I'm always curious to see how others have modeled this decision.