[quote=BGinRB][quote=FormerSanDiegan] So, the unit in question ‘cash flows’ at about 260 x rent with 20% down. Does that make sense to you?
Why use a rule of thumb (price as a multiple of rent) when the numbers are all laid out already.
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The numbers laid out are not inclusive. We would need to consider additional inputs if we want to come up with some actionable analysis.
That is why I pulled a “rule of thumb”, as a product of a reality-tested analysis.
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The issue regarding this particular rule-of-thumb is that the break-even point might be at 200x rent for folks at the 150K income level, but 140x rent for folks at the 50K income level. The impact of taxes is non-linear, plus there is a large offset from zero to deal with (standard deduction).
Using a ratio implies a linear relationship and zero offset. So a scale factor of rent to property value is inherently flawed.
One must run the numbers for the particular income and home price range.
