I have a personal example for you. My rent is $1,200.00 a month. If I were to buy the place, it would cost me $300,000.00 cash. I don’t borrow money so that is why I give a cash example. Not counting closing costs and the 3%-6% usurped from me by the realtor when it comes time to sale, the expenses to own are as follows: $250.00 a month for property tax, $200.00 a month for HOA, $100.00 a month for insurance, $20.00 a month for misc. maintenance. Right off the bat you are down $570.00. Now let us do the math.
Own: (-) $570.00 per month
Rent: Interest on $300,000.00 at a meager 5% after taxes is $1,000.00 a month worst case.
Rent = $1,200.00
-$1,000.00
= $200.00 a month out of pocket
Own = $570.00 a month out of pocket
The deference appears to be $370.00 per month cheaper to rent. Now I know this was over simplified math, but I don’t think it is far from the truth. This does not take into consideration the possible appreciation or maybe even depreciation or the variables I mentioned earlier. The bottom line is I don’t feel bad renting. Please let me know if I am using voodoo math or if I have left something out.
I think the disparity gets even bigger if you do the comparison on getting a mortgage.
