Is it better to buy a house or to rent?

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

  1. Joeman Eviiiiiiiil Clown Registered 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
    ---------------------------------------------------
    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
    ---------------------------------------------
    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.
     
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  3. lotuseatsvipers CloseMindedBob Registered Senior Member

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    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!
     
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  5. Joeman Eviiiiiiiil Clown Registered Senior Member

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    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.
     
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  7. wet1 Wanderer Registered 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 Martini Valued Senior Member

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    19,125
    Joeman

    You're forgetting one important factor; equity.
     
  9. Joeman Eviiiiiiiil Clown Registered Senior Member

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    2,448
    Doh!!!!!!. I can't believe I am over-analyzing things and forget about something simple.
     
  10. lotuseatsvipers CloseMindedBob Registered Senior Member

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

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