Thanks again for all the responses and comments. Instead of responding individually, let me again summarize:
1. Not taking closing costs into consideration.
Good point. I’ll update the numbers using 4% of purchase price as closing costs.
2. Real estate is not liquid. You may change job to a different city, etc.
This is all true, but if you are worried about liquidity or changing your jobs every few years, I’m not sure you should ever buy a house. The fact that we are participating on this forum indicates we plan to stay in San Diego and are considering buying a house at some point in the future. Otherwise, why would you even care? In other words, other people might be leaving San Diego due to high housing price, but we are staying. 🙂
3. You took the entire PITI in your tax deduction.
I may be Mr. Wrong, but I’m not that wrong. 🙂 I’ve only used the interest portion of the mortgage and the property tax for tax deduction. Principle, Insurance, and HOA are not included.
4. You made up the number on the rent. It is too high and your HOA is too low.
This is a condo in Carmel Valley. Actually, it’s a townhouse. It’s a 3br and 2.5ba and over 1500 sqft. This craiglist link suggests the rent number is reasonable. I know the HOA is $200. They have a pool and a gym. HOA includes insurance, water, and waste.
5. Landlord uses GRM of 8.
I agree that it’s a lousy investment for a rental property at this price. My original post states this purchase is for primary residence and not for investment purpose.
6. You are double counting (counting equity and deducting it from the monthly cost)
Several people raised this point. I have to think about this one a bit more. This could defnitely be one of the places I was wrong.
7. Risk premium
Very interesting point. I think I can buy this argument. Can you suggest a quatitive number so that I can incorporate this into the monthly cost for buying?
Thanks again for all the comments. I’ll post the updated numbers later.
