# Is it better to buy a house or to rent?

Discussion in 'Business & Economics' started by Joeman, Jul 16, 2002.

1. ### JoemanEviiiiiiiil ClownRegistered Senior Member

Messages:
2,448
I have been thinking about buying a house last 6 months. The interest rate is 4 decades low. Here is sort of my cost analysis. I assume the house cost $150,000 and I pitch in 25% down payment. cost to buy a house House Cost.......................$150000.00
subtract 25% Down payment
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money need to borrow..... $112500 which translates to interest payment of$112500 * (0.07) = $6750 / year (assuming interest is 7%) Total Cost Per Year Interest................$6750
Property Tax.........$4000 Home Insurance...$720
Misc......................$500 ---------------------------------------------- Total.....................($11970)

Now assume annual value increase of 4% (national average)

Value increase........+$6000 Tax Deduction.........+$4000
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Total....................(+10,000)

Annual Cost $11970 -$10,000 = ($1197) The rent I pay annual for my apartment is ($6000). According to my calculation, there is a saving of almost $5000 annually. How much saving really is a function of interest rates, % down payment, and proper value increase. I hope you guys can follow my calculation. I don't know if there are flaws somewhere in my thinking. so it appears to be cheaper to buy a house than to rent. However, if I don't live in the same house for very long, I have to pay a lot of money for a realtor to sell my house plus going through all the hassel. If I have to pay a realtor$10,000 to sell a house and I end up living in the same house for less than 2 years, it doesn't seem to be worth it.

3. ### lotuseatsvipersCloseMindedBobRegistered Senior Member

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340
well the common accepted standard is that owning property is about the best financial move you can make. Also, you get tax breaks for owning a house don't you? not to mention a better credit rating.
Check out the area where you plan to buy and whether the houses have been appreciating.

Obviously theres more things to consider than this. but its a start.

...and don't use a realtor!

5. ### JoemanEviiiiiiiil ClownRegistered Senior Member

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2,448
tax breaks is already included in my calculation.

if don't use a realtor than use what? If it is cheaper to use a realtor than it makes sense.

7. ### wet1WandererRegistered Senior Member

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8,616
One of the only problems I see with not using a realitor is that and abstract is required to be done. This requires a license in most states. It may be that you can get the realitor to do only the abstract and handle the rest yourself.

Most loans require a house inspection, an abstract, the checking of backdue taxes, propertly lines by surveyour, and a few other items.

If you stay in a place for 5-10 years then it is worth it for the tax breaks.

8. ### (Q)Encephaloid MartiniValued Senior Member

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19,125
Joeman

You're forgetting one important factor; equity.

9. ### JoemanEviiiiiiiil ClownRegistered Senior Member

Messages:
2,448
Doh!!!!!!. I can't believe I am over-analyzing things and forget about something simple.

10. ### lotuseatsvipersCloseMindedBobRegistered Senior Member

Messages:
340
haha, joeman has 666 posts, he's more evil than xev now.
(well for about 10 minutes anyways)