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I think it depends a bit on location... Posted by Snowmobile [Email]  (#686)  [Profile/Gallery]
(more from Snowmobile) on Fri, 20 Jul 2012 08:51:14
In Reply to: Yes, I am serious, MI-Roger [Profile/Gallery]
, Thu, 19 Jul 2012 14:04:03
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ie how strong the relative rental and sales markets are.
a $1600 rental here sells in maybe the $250k range (eg a modest suburban townhouse or small condo/apartment downtown), but the taxes for that here are not $6k, more like $3k. Your budget has me confused a little because $10500 is not the p+i for the $300k house (more like $150k). Are you trying to show that $1600 rents you a much lower value house? It would be lower, but I don't think it would be that low... especially the % of taxes seem very high for a house with that p+i for the terms you noted...
Basically a landlord is going to try to charge what they need to not lose money... though they can only charge what the market can bear. Probably they bought it a while ago at a better price and have a smaller mortgage, but if they are losing money renting it, they'll probably want to cut and run from the (poor) investment (reducing the rental pool and firming the average market price). So they do factor in the taxes, maintenance, etc above and beyond the P&I.
If one buys a house, and after the amortization is done, if the accumulated rent for the same house (lets say $1800/m for the $300k example) exceeds the interest + taxes/maintenance etc spent on it minus the differential of purchase price and current valuation, it is a winner vs long term renting. How much so depends on the magnitude of that differential - not necessarily as much as ELaw's comment, but often still significant. BTW, some things we call "maintenance" are actually upgrades, though in many cases, those do not make financial sense (what landlord tears out laminate counters to put in granite without raising the rent?)... so by "maintenance", I mean actual maintenance or taking into account differential in upgrade cost/value.
The main thing with renting is it is usually a short term proposition, so it does make sense to rent in periods of volatility. If you were going to lose $100k in 2 years, absolutely it would be better to rent for 2 years and then buy than to buy from day 1 (lose $100k+2years tax etc vs lose $40k of rent). If the market correction in your area has already been significant + you plan to not sell for a significant time + the location has long term value, buying is most likely a winner vs renting imho...
the key is to be prudent and not go (significantly) upside down... but that has been true forever. we've just been strongly reminded of this in recent years (due to a recoil from massive lack of prudence)! part of being prudent is not amortizing over 30 years (or more!) so less of the payment goes to the bank! interest = rent. it's a gray scale between renting and owning.
->Posting last edited on Fri, 20 Jul 2012 08:58:30.
, Wed, 18 Jul 2012 09:10:42, Thu, 19 Jul 2012 06:28:54
, Wed, 18 Jul 2012 14:32:56, Wed, 18 Jul 2012 14:49:25
, Wed, 18 Jul 2012 22:42:48, Wed, 18 Jul 2012 10:17:01, Thu, 19 Jul 2012 05:48:21, Thu, 19 Jul 2012 14:04:03, Fri, 20 Jul 2012 08:51:14 <-- Viewing This Message, Wed, 18 Jul 2012 11:37:39, Wed, 18 Jul 2012 09:43:42, Wed, 18 Jul 2012 09:54:10, Wed, 18 Jul 2012 11:25:35
, Wed, 18 Jul 2012 11:42:16
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