Re: Is my thinking off here? (renting vs owning situation)
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I'll run some numbers next week and post them, but I really must be missing something huge or some of you guys are so dead-set in never thinking that renting can be the better play.
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Taken out of context I can see why you might jump to that conclusion. I think renting is better for more than half the people in the USA, but in the precise example you cited it is foolhardy. Why you can't see why is frankly beyond me as well.
Jimbo
ie: Taxes; $20,400 per year in interest should save this person over $9000 per year in income taxes. Another $300 per month in excess rent and now you have $12,600 total savings to overcome. Now you have to get a 5.04% after tax return on your $250,000 investment just to break even. Is it worth it? Can they even do it year after year. You will notice I did not allow for appreciation/depreciation of the owned home, you think it will go down in value, I think that historically over long periods of time that has rarely happened, at the very least this should be a wash but you yourself stated that you expected the home to outpace inflation by 1% per year. If they have a million dollar home with 25 to 30 % equity they are still earning another $10,000 per year in appreciation. Under these assumptions you need a 10.48% after tax return just to break even. Convinced I might have a clue yet?
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