“I own a condo in LA that I bought in 1996 and I have tenants in it and they are paying 3-4x my mortgage and they rented when homes were selling much lower. Had they bought the same condo their payment would have been less than their rent”
That’s irrelevant now. If you bought that same condo today using a 20% down payment you would probably have a delta of at least 1K. Let me give you example why it is better to rent from a strict financial point of view. I live in a condo unit that could probably sell for 1 million but lets be conservative and say 850K, I pay 2k a month in rent (all of it going down a drain). if I were to buy this unit for 850K with a 20% down payment, here is how the cost break out AFTER tax benefit;
Property Tax: $566 (885 per month at 1.25%, 566 after deduction)
Interest: $2097 (3277 per mth at 5.9%, 2097 loss after deduction)
other cost $ 350 (insurance, maint, etc)
Total $3013 (down the drain) verses 2k down drain renting
The price of that condo will more than likely fall. You are literally throwing money out of the window owning right now. This is called a home price to rent ratio. When you have ratios have like this it signifies that home values are too high and due for correction.
