4 ms·

I see how you're doing the math, but I think you're presenting it misleadingly to say your monthly cost is $1400+$1000. First of all you left off the $600 princ

I see how you're doing the math, but I think you're presenting it misleadingly to say your monthly cost is $1400+$1000. First of all you left off the $600 principal; you may recoup that in a sale but you still gotta pony it up every month. Second, your $2000 a month mortgage payment seems low on a $500k home. Talking to realtors and friends that have bought, the rule I've been told to go by is plan $700-$800 per $100k for mortgage and property taxes (not including any HOA). So that means a cost of $3500-4000 PLUS HOA dues every month. Even if you are offsetting $1000 of that with tax benefits, renting for $3k still looks attractive, especially if you factor in the cost of maintenance of a period of 10 years or more. Between two homes I've rented I've not had my rent increased once by a landlord in the past 6 years.

rayiner 14y ago
It's not misleading, it's accurate. Your principal payment is money you'll get back on sale (or can borrow from if you need liquidity). It's qualitatively different than interest or a rent payment that you'll never get back. My number is roughly in line with the $700/100k figure. I'm assuming 20% down, so the loan is for $400k. If your credit is excellent, and you don't live in one of the high-tax areas, $2000 loan payment + $500 taxes is doable. As for rent increases, I've never not had a rent increase in 8 years of renting in Chicago and Atlanta. It's standard practice in the city.
- greghinch 14y ago
  Well it does matter from a practical sense in that you'll need to write checks for $2500 a month (plus HOA). You may recoup $5000 or so in tax relief at the end of the year, but you still had to come up with that money in the first place (let alone save up $100,000 which is no mean feat, even if you're making a low six figure salary like a lot of professionals in their late 20s/early-mid 30s). I guess my bottom line with my original comment was, I can think of a lot better uses for the money, time, and effort it takes to buy a $500,000 condo, and to me the returns in my quality of life vastly outweigh any sort of long-term security you might feel from owning a home
  - salsashark 14y ago
    Don't forget the cost of improvements and remodeling for a home you own? Home owners will probably need to update at least the bathrooms and kitchens before they sell, which can be an investment of >$20k. Not to mention the costs of repair, which you don't take on in a rental...

rayiner 14y ago

It's not misleading, it's accurate. Your principal payment is money you'll get back on sale (or can borrow from if you need liquidity). It's qualitatively different than interest or a rent payment that you'll never get back. My number is roughly in line with the $700/100k figure. I'm assuming 20% down, so the loan is for $400k. If your credit is excellent, and you don't live in one of the high-tax areas, $2000 loan payment + $500 taxes is doable. As for rent increases, I've never not had a rent increase in 8 years of renting in Chicago and Atlanta. It's standard practice in the city.

greghinch 14y ago
Well it does matter from a practical sense in that you'll need to write checks for $2500 a month (plus HOA). You may recoup $5000 or so in tax relief at the end of the year, but you still had to come up with that money in the first place (let alone save up $100,000 which is no mean feat, even if you're making a low six figure salary like a lot of professionals in their late 20s/early-mid 30s). I guess my bottom line with my original comment was, I can think of a lot better uses for the money, time, and effort it takes to buy a $500,000 condo, and to me the returns in my quality of life vastly outweigh any sort of long-term security you might feel from owning a home
- salsashark 14y ago
  Don't forget the cost of improvements and remodeling for a home you own? Home owners will probably need to update at least the bathrooms and kitchens before they sell, which can be an investment of >$20k. Not to mention the costs of repair, which you don't take on in a rental...