How much cheaper should the own vs. rent be, in order to buy?

[temeculaguy]

I think the tax benefit is being underplayed here. Rent nuetral 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 even though you are likely to put money down, it takes out the variable of how much (5%, 10%, 20%, 25% 50%, or cash).

When rent equals the P&I of the purchase price, then I rate it as a “buy.” This formula also gives more power to interest rates, since you factor everything at 0 down (but dont factor PMI, since you will be making a down)

You can wash out the taxes, insurance, hoa, mello roos, maintenance, etc. with the tax deduction, so just use the P&I as the solid number vs. the rent. Whatever you put down will reduce it but those dollars cost you the loss of interest in other investments so that ends up being a personal decision based on your situation and portfolio.

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. Some people pay $1500 rent and then try to tackle a $3k mortgage, they are setting themself up for failure, while 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.

This doesn’t mean it will bottom when it hits rent nuetral, markets have a way of overcorrecting, but it gives you an idea of once it’s crossed sea level and you are in the overcorrection water, nobody can guess how far it will overcorrect. But that is the fun part, thats the gamble.

[bsrsharma]

When you can’t get reliable comparable rent information, you can still use the old reliable norm: Can you buy the house that you would like to live in for 3 times your annual income? If so, ignore the rent info and go buy it. Rent comparison is not necessary or very useful if you can afford to buy the house comfortably.

[bsrsharma]

When you can’t get reliable comparable rent information, you can still use the old reliable norm: Can you buy the house that you would like to live in for 3 times your annual income? If so, ignore the rent info and go buy it. Rent comparison is not necessary or very useful if you can afford to buy the house comfortably.

[bsrsharma]

When you can’t get reliable comparable rent information, you can still use the old reliable norm: Can you buy the house that you would like to live in for 3 times your annual income? If so, ignore the rent info and go buy it. Rent comparison is not necessary or very useful if you can afford to buy the house comfortably.

[bsrsharma]

When you can’t get reliable comparable rent information, you can still use the old reliable norm: Can you buy the house that you would like to live in for 3 times your annual income? If so, ignore the rent info and go buy it. Rent comparison is not necessary or very useful if you can afford to buy the house comfortably.

[bsrsharma]

When you can’t get reliable comparable rent information, you can still use the old reliable norm: Can you buy the house that you would like to live in for 3 times your annual income? If so, ignore the rent info and go buy it. Rent comparison is not necessary or very useful if you can afford to buy the house comfortably.

[felix]

I think the data on Zilpy is questionable.

I know they have the rent for the place I lease out wrong. I have leased out my house in the Del Mar area for 18 months for over $3800/month. They have it listed as rented for $2000/month on Zilpy. I don’t know where or how they got the number they are using.

[felix]

I think the data on Zilpy is questionable.

I know they have the rent for the place I lease out wrong. I have leased out my house in the Del Mar area for 18 months for over $3800/month. They have it listed as rented for $2000/month on Zilpy. I don’t know where or how they got the number they are using.

[felix]

I think the data on Zilpy is questionable.

I know they have the rent for the place I lease out wrong. I have leased out my house in the Del Mar area for 18 months for over $3800/month. They have it listed as rented for $2000/month on Zilpy. I don’t know where or how they got the number they are using.

[felix]

I think the data on Zilpy is questionable.

I know they have the rent for the place I lease out wrong. I have leased out my house in the Del Mar area for 18 months for over $3800/month. They have it listed as rented for $2000/month on Zilpy. I don’t know where or how they got the number they are using.

[felix]

I think the data on Zilpy is questionable.

I know they have the rent for the place I lease out wrong. I have leased out my house in the Del Mar area for 18 months for over $3800/month. They have it listed as rented for $2000/month on Zilpy. I don’t know where or how they got the number they are using.

[Scarlett]

[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.
[/quote]

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!

-Scarlett

[Scarlett]

[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.
[/quote]

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!

-Scarlett

[Scarlett]

[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.
[/quote]

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!

-Scarlett

[Scarlett]

[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.
[/quote]

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!

-Scarlett

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