Renting Vs Buying: Absolutely No Contest

[CricketOnTheHearth]

Here I try some number-whackage to compare renting and buying. This bears probably no resemblance to the established methods for determining which makes more economic sense, but I thought I would toss it out here for discussion.
My apologies for the funkiness of the “tables”, the blog does not allow for good table-formatting.

The ‘rent’ used here is based on the current asking rent of my beloved, former apartment (which IMO would have been one of the best condos in Rancho Bernardo if they had ever converted it.)

What I am basically looking at here is, how many years would I rent the place before what I paid for rent in total, was equivalent to buying.

First scenario: Rent hikes of 10% per year (the legal maximum):

Year Monthly Annual Total
1 1500 18000 18000
2 1650 19800 37800
3 1815 21780 59580
4 1996 23952 83532
5 2196 26352 109884
6 2416 28992 138876
7 2657 31884 170760
8 2923 35076 205836
9 3215 38580 244416
10 3537 42444 286860
11 3891 46692 333552
12 4280 51360 384912
13 4707 56484 441396
14 5178 62136 503532
15 5696 68352 571884
16 6266 75192 647076
17 6892 82704 729780
18 7582 90984 820764
19 8340 100080 920844
20 9174 110088 1030932

Second scenario: Annual rent hikes of 5%:

Year Monthly Annual Total
1 1500 18000 18000
2 1575 18900 36900
3 1654 19848 56748
4 1736 20832 77580
5 1823 21876 99456
6 1914 22968 122424
7 2010 24120 146544
8 2112 25344 171888
9 2216 26592 198480
10 2327 27924 226404
11 2443 29316 255720
12 2565 30780 286500
13 2694 32328 318828
14 2828 33936 352764
15 2970 35640 388404
16 3118 37416 425820
17 3274 39288 465108
18 3438 41256 506364
19 3611 43332 549696
20 3790 45480 595176

This pretty much wowed me as to how much of a deal renting appears to be right now. To buy a decent condo in RB (~$300,000), does not come out to be cheaper than renting until at least 10 years’ of renting, if not longer. And this does NOT count property taxes, HOA fees etc which add to the cost of the purchased dwelling over time.

To buy a decent house in RB (~$550,000 currently) equates to no less than 15 years’ of rent, and possibly to much longer than that. And most “decent houses” in RB have a lot less ‘green space’ around them than this apartment does (it is really quite an exceptional place for Southern California).

Prices would have to drop to $170,000 for a condo and $240,000 for a house just to be equivalent to 7, and 9 years’ renting, respectively.

I am beginning to understand the rationale of these retirees who rent in a nice apartment in this complex for the rest of their lives.

This just absolutely reinforces the current wisdom of rent now, wait for bottom, then buy.

[Eugene]

If you pay 300,000 for a condo, in 10 years you’ll have a paid-off condo that’s worth at least 300,000 and maybe more.
If you continue renting starting at $1500/month, in 10 years you’ll have … what?

The correct way to compare: how much you have to pay someone other than yourself to own the place (interest, taxes, insurance, HOA fees, minus tax savings), vs. how much it costs to rent.

[Eugene]

If you pay 300,000 for a condo, in 10 years you’ll have a paid-off condo that’s worth at least 300,000 and maybe more.
If you continue renting starting at $1500/month, in 10 years you’ll have … what?

The correct way to compare: how much you have to pay someone other than yourself to own the place (interest, taxes, insurance, HOA fees, minus tax savings), vs. how much it costs to rent.

[Eugene]

If you pay 300,000 for a condo, in 10 years you’ll have a paid-off condo that’s worth at least 300,000 and maybe more.
If you continue renting starting at $1500/month, in 10 years you’ll have … what?

The correct way to compare: how much you have to pay someone other than yourself to own the place (interest, taxes, insurance, HOA fees, minus tax savings), vs. how much it costs to rent.

[Eugene]

If you pay 300,000 for a condo, in 10 years you’ll have a paid-off condo that’s worth at least 300,000 and maybe more.
If you continue renting starting at $1500/month, in 10 years you’ll have … what?

The correct way to compare: how much you have to pay someone other than yourself to own the place (interest, taxes, insurance, HOA fees, minus tax savings), vs. how much it costs to rent.

[Eugene]

If you pay 300,000 for a condo, in 10 years you’ll have a paid-off condo that’s worth at least 300,000 and maybe more.
If you continue renting starting at $1500/month, in 10 years you’ll have … what?

The correct way to compare: how much you have to pay someone other than yourself to own the place (interest, taxes, insurance, HOA fees, minus tax savings), vs. how much it costs to rent.

[surveyor]

Has nobody here ever googled a “rent vs. owning” calculator?

[surveyor]

Has nobody here ever googled a “rent vs. owning” calculator?

[surveyor]

Has nobody here ever googled a “rent vs. owning” calculator?

[surveyor]

Has nobody here ever googled a “rent vs. owning” calculator?

[surveyor]

Has nobody here ever googled a “rent vs. owning” calculator?

[temeculaguy]

rent vs own calculators are kinda tricky because they ask you determine the annula appreciation. If you use case shiller, there is no appreciation. To make it easy, use this formula, when the asking price is equal to or less than 150 rent payments, you can start looking, when it hits 125 look real hard, at 100, it’s a no brainer. If you are paying 1500 a month, 150k=buy immediately, 187k, look real hard, 225k, that when you begin to shop but anything more, rent. The hoa, taxes, insurance are roughly offset by the tax deduction so just go with a pure rent multiplier.

You may think it is not possible but investors shop with numbers, not emotions. they can find 125k multiplier properties elsewhere, so that is where they are going to go, not 200x multipliers. If they wont buy and you wont buy, the price goes down, it really is that simple.

[temeculaguy]

rent vs own calculators are kinda tricky because they ask you determine the annula appreciation. If you use case shiller, there is no appreciation. To make it easy, use this formula, when the asking price is equal to or less than 150 rent payments, you can start looking, when it hits 125 look real hard, at 100, it’s a no brainer. If you are paying 1500 a month, 150k=buy immediately, 187k, look real hard, 225k, that when you begin to shop but anything more, rent. The hoa, taxes, insurance are roughly offset by the tax deduction so just go with a pure rent multiplier.

You may think it is not possible but investors shop with numbers, not emotions. they can find 125k multiplier properties elsewhere, so that is where they are going to go, not 200x multipliers. If they wont buy and you wont buy, the price goes down, it really is that simple.

[temeculaguy]

rent vs own calculators are kinda tricky because they ask you determine the annula appreciation. If you use case shiller, there is no appreciation. To make it easy, use this formula, when the asking price is equal to or less than 150 rent payments, you can start looking, when it hits 125 look real hard, at 100, it’s a no brainer. If you are paying 1500 a month, 150k=buy immediately, 187k, look real hard, 225k, that when you begin to shop but anything more, rent. The hoa, taxes, insurance are roughly offset by the tax deduction so just go with a pure rent multiplier.

You may think it is not possible but investors shop with numbers, not emotions. they can find 125k multiplier properties elsewhere, so that is where they are going to go, not 200x multipliers. If they wont buy and you wont buy, the price goes down, it really is that simple.

[temeculaguy]

rent vs own calculators are kinda tricky because they ask you determine the annula appreciation. If you use case shiller, there is no appreciation. To make it easy, use this formula, when the asking price is equal to or less than 150 rent payments, you can start looking, when it hits 125 look real hard, at 100, it’s a no brainer. If you are paying 1500 a month, 150k=buy immediately, 187k, look real hard, 225k, that when you begin to shop but anything more, rent. The hoa, taxes, insurance are roughly offset by the tax deduction so just go with a pure rent multiplier.

You may think it is not possible but investors shop with numbers, not emotions. they can find 125k multiplier properties elsewhere, so that is where they are going to go, not 200x multipliers. If they wont buy and you wont buy, the price goes down, it really is that simple.

[Author]

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