Well said patientrenter… Same with me. We just moved into a house in La Jolla which would probably cost 2.5M. Using the above numbers – it would cost 200K per year int/only, taxes, maint. I am using the entire home cost in the calculation, because any amount down would reduce my investment income as it would be tied into the house. Only the interest on the first 1,000,000 (and an additional 100,000 equity) is deductible. If you are in the AMT situation, not even that 1.1 Million is all deductible.
This house is costing 6.5K / month to rent. Even grossing that up by 40% would be equivalent to 9.1K. Much better deal than 18,000 / month for a purchase.
The more important issue is that house prices have to appreciate over 6% per year minimum to make buying a better proposition. If that 2.5M house decreases in value to 2.3M, that is a 200K hit to equity, but still having a mortgage of 2.5M (or whatever was not put down as downpayment.
