[quote=temeculaguy]I think the tax benefit is being underplayed here. Rent neutral is a good time to buy because it is a sound fundamental and it also means others can buy because they are successfully renting. I use a formula that doesn’t factor in the downpayment, it is more simple to figure out (…)
When rent equals the P&I of the purchase price, then I rate it as a “buy.” (…)
You can wash out the taxes, insurance, hoa, mello roos, maintenance, etc. with the tax deduction (…)Since you pay 2500 for rent. 450k at 5.5% P&I is $2555, if you were to pay 450k for a house that rents for 2500 (I know you still have to overcome the fair rent since you are moving areas and housing size/style) is where you should buy it. If you were to find a 2500 rental for 450k and you have been successfully paying the 2500 rent you will be paying a fair price as well as setting yourself up for success. (…)others pay $2500 rent and are waiting for the same house to be 300k, it may get there but it will make sense to the other guy before it gets there.
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Thanks, TG, that is true, tax benefit is often underplayed, but if you don’t think about it, and do take into consideration all the other fees & taxes, it’s a nice surprise 🙂 I usually wash out only the property taxes with the tax benefit; MeloRoos can be quite substantial in certain newer parts of PQ (e.g. Del Sur). Sometimes the HOAs can be in the couple hundred range. BTW, congrats for your new home!
Hmmm… You know, TG, with your formula, we can sort of predict what the “minimum” bottom will be for the PQ SFH market (for a given rate)! The 4 BR SFH in PQ that rent for $2500 are fairly large & nice, newer, upgraded houses, which are selling now for 550K-600K…Will they ever reach $450K though? That will mean at least 20% more from the current prices. It’s possible, but it’s a pretty steep decline. (Or are the rents going up in PQ? I doubt that. Maybe down.). If the rates get even lower (e.g. 4%), AND the prices go down another 10-15%, and rents stay about where they are (or higher), then the house price treshhold will become close to 500K.
500K is actually in line with the old formula of home price = 3 x household income for me, so I am now more confident than ever that 500K should be my goal for a decent 4 br SFH in PQ.
I actually wanted, long before this, to buy such a house for only 500K; but it was just a nice round figure and maybe a gut feeling; now I feel much better that all the wise advice and smart tips I received from you guys points towards the same ballpark figure.
Thanks a lot, everybody, and Happy Holidays to all of you and your families!
