Shall we buy or never in San Diego or wait for more depreciation?

[BuyOrNot]

Thank you for your feedback. We got it that maintaining a rental property out of state is not easy and it will not be financially viable.

There was very legitimate question asked why we are thinking about buying at first place considering short time period of 5 years. The reasons (not in priority order)
(a)renting from last 10 years
(b)most of our friends have homes and it is putting some what pressure on us
(c)it is making sense financially somewhat as compared to 2006 lets look at the example numbers below

Prop bought for 500k with 100k Down
400k loan Closing cost = $4000
At 5% Interest only loan
Interest $1667
Prop tax $625 (at 1.5%)
Federal Tax rate of 28%
State Tax 9.55%
Effect Interest and Tax = ($1667 + $625) * 0.6245 = $1431
Add about $169 for insurance and hoa etc
Total monthly money out of our hand is $1600

Compare it with renting a property for $2000 we save $400 per month and over 5years (60 months) we are +$24000

Add 8000 federal tax credit and 10000 state tax credit then we are +$42000

Now assume we will able to sell the home for the same value of 500k after 5 years. Then after 5 years 6% commission + closing cost – $42000 = -30000 – 4000 + 42000
= +$8000

The positives assumptions if work out (most likely) then it can add to saving even more

(1) The one variable is that we may not able to get similar property for $2000 as rent if I look today the asking rent is about 2200$ plus for similar property.

(2) There is always an opportunity to get the property for less than 500k currently.

We are assuming to keep down payment conservatively invested so there is not much of a loss of opportunity for $100k down payment

These are the reasons we started thinking of buying property and planned to get feedback from “piggs”. Let us know if we are missing some thing in calculations above. What “piggs” recommend now?

[temeculaguy]

Here is what you are missing, 400k INTEREST ONLY LOAN!!!!

Look, I am considered a contrarian on these boards lately because I have an optimistic view of the future and have put today in perspective of where it falls in the last 20 years. I am not a “real estate is always bad, we are going to hell in a handbasket” guy. And I think you are talking yourself into bad math.

Interest only is nothing more than rent with risk. Use my formula, or at least use the fully amortized piti and ignore the tax deduction, it gets roughly cancelled out by maintenance and upkeep.

[temeculaguy]

Here is what you are missing, 400k INTEREST ONLY LOAN!!!!

Look, I am considered a contrarian on these boards lately because I have an optimistic view of the future and have put today in perspective of where it falls in the last 20 years. I am not a “real estate is always bad, we are going to hell in a handbasket” guy. And I think you are talking yourself into bad math.

Interest only is nothing more than rent with risk. Use my formula, or at least use the fully amortized piti and ignore the tax deduction, it gets roughly cancelled out by maintenance and upkeep.

[temeculaguy]

Here is what you are missing, 400k INTEREST ONLY LOAN!!!!

Look, I am considered a contrarian on these boards lately because I have an optimistic view of the future and have put today in perspective of where it falls in the last 20 years. I am not a “real estate is always bad, we are going to hell in a handbasket” guy. And I think you are talking yourself into bad math.

Interest only is nothing more than rent with risk. Use my formula, or at least use the fully amortized piti and ignore the tax deduction, it gets roughly cancelled out by maintenance and upkeep.

[temeculaguy]

Here is what you are missing, 400k INTEREST ONLY LOAN!!!!

Look, I am considered a contrarian on these boards lately because I have an optimistic view of the future and have put today in perspective of where it falls in the last 20 years. I am not a “real estate is always bad, we are going to hell in a handbasket” guy. And I think you are talking yourself into bad math.

Interest only is nothing more than rent with risk. Use my formula, or at least use the fully amortized piti and ignore the tax deduction, it gets roughly cancelled out by maintenance and upkeep.

[temeculaguy]

Here is what you are missing, 400k INTEREST ONLY LOAN!!!!

Look, I am considered a contrarian on these boards lately because I have an optimistic view of the future and have put today in perspective of where it falls in the last 20 years. I am not a “real estate is always bad, we are going to hell in a handbasket” guy. And I think you are talking yourself into bad math.

Interest only is nothing more than rent with risk. Use my formula, or at least use the fully amortized piti and ignore the tax deduction, it gets roughly cancelled out by maintenance and upkeep.

[Aecetia]

Or buy a cheaper home. Personally I think anything is better than renting. The only person you help is your landlord. I have only rented under dire circumstances, as in when I lost my house in a divorce. In 5 years a lot can change. I suggest you listen to some of the posters who provide math models like the above and really think about buying rather than renting. You are still better off than those who bought in the bubble years. If it really hits the fan, we will be worrying about food more than rent as in, harvesting our own. That would be a whole new set of worries.

[Aecetia]

Or buy a cheaper home. Personally I think anything is better than renting. The only person you help is your landlord. I have only rented under dire circumstances, as in when I lost my house in a divorce. In 5 years a lot can change. I suggest you listen to some of the posters who provide math models like the above and really think about buying rather than renting. You are still better off than those who bought in the bubble years. If it really hits the fan, we will be worrying about food more than rent as in, harvesting our own. That would be a whole new set of worries.

[Aecetia]

Or buy a cheaper home. Personally I think anything is better than renting. The only person you help is your landlord. I have only rented under dire circumstances, as in when I lost my house in a divorce. In 5 years a lot can change. I suggest you listen to some of the posters who provide math models like the above and really think about buying rather than renting. You are still better off than those who bought in the bubble years. If it really hits the fan, we will be worrying about food more than rent as in, harvesting our own. That would be a whole new set of worries.

[Aecetia]

Or buy a cheaper home. Personally I think anything is better than renting. The only person you help is your landlord. I have only rented under dire circumstances, as in when I lost my house in a divorce. In 5 years a lot can change. I suggest you listen to some of the posters who provide math models like the above and really think about buying rather than renting. You are still better off than those who bought in the bubble years. If it really hits the fan, we will be worrying about food more than rent as in, harvesting our own. That would be a whole new set of worries.

[Aecetia]

Or buy a cheaper home. Personally I think anything is better than renting. The only person you help is your landlord. I have only rented under dire circumstances, as in when I lost my house in a divorce. In 5 years a lot can change. I suggest you listen to some of the posters who provide math models like the above and really think about buying rather than renting. You are still better off than those who bought in the bubble years. If it really hits the fan, we will be worrying about food more than rent as in, harvesting our own. That would be a whole new set of worries.

[4plexowner]

“Interest only is nothing more than rent with risk”

amen to that!

and similarly, minimum payment on an Option ARM is worse than rent with risk – it’s rent with a death wish

[4plexowner]

“Interest only is nothing more than rent with risk”

amen to that!

and similarly, minimum payment on an Option ARM is worse than rent with risk – it’s rent with a death wish

[4plexowner]

“Interest only is nothing more than rent with risk”

amen to that!

and similarly, minimum payment on an Option ARM is worse than rent with risk – it’s rent with a death wish

[4plexowner]

“Interest only is nothing more than rent with risk”

amen to that!

and similarly, minimum payment on an Option ARM is worse than rent with risk – it’s rent with a death wish

[Author]

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