Assuming 100% financing on $500k at 6% your monthly payment is about $3k. Let’s say that $2700 is interest. Total payment: $36k, interest: $32400.
Let’s assume a property tax rate of 1.1% for an annual bill of $5500.
Let’s also assume about $700/yr in insurance.
Therefore, your annual carrying costs of the house are $36000 + $5500 + $700 = $42200. Your tax write off is ($2700*12 + $5500)= $37900. Assuming a 28% tax bracket, this will save you $10600/yr in taxes.
So, your net annual outlay for buying is $42200-$10600=$31600. Your taxable income is $130,000-$37900=$92000
For renting at $2k/month, your annual outlay is $24k but you will also have to pay tax on the whole $130k (since we are assuming no other write offs) this increases your tax by the amount we subtracted before ($10600) so your net annual cost would be $24000 + $10600 = $34600 (if you assign all of the loss of tax write off to housing).
So, in essence, you are paying pretty close to the same amount to rent and buy (within a few thousand dollars). However, [b]in the long term[/b], owning a property should have some tangible benefits since you will be paying off the loan with cheaper and cheaper dollars and the house will increase in value (NOTE I said ‘long term’, not short term pump and dump investment).
Of course, this simple calculation ignores the additional expenses incurred by owning a house (maintenance, water/sewer/trash, etc).
