SD R – Thanks.
I didn’t expect it to pencil out as a rental. However, it is getting closer to penciling out when comparing monthly carrying costs versus renting, (depending on one’s income and tax situation).
I figure the monthly carrying costs for purchasing this at 440K at 6.5% interest and 20% down would be approximately equal to renting a place for $2100 per month
Here’s the monthly numbers …
Principal & interest: 2225
interest portion: ~ 1900 (in the first year)
principal: ~325
property taxes: 460
insurance: 100
Assume a 30% tax benefit from taxes & interest (varies depending on income, other deductions, etc) ..
I used to own a rental property on Mt streets west of genessee. When I sold it in 2001 the rent was 1300 per month. I sold it for 270K. That’s a price/rent ratio of 207.
If this house would rent for at least 2125 per month, it would be a ratio of 207.
I don’t think we are at rent/own equilibrium in that neihborhood on the whole yet. But, it is getting close.
Another 5-10% broad decline in prices and we would solidly be there.
After that, the questions become:
1. How much future depreciation will buyers price into their purchases ? (psychology)
2. Rental rates (which depends on economy and jobs)
3. Interest rates (affects the rent vs. own decision)
