We have all heard the recommendations – “Buying is better then renting!… Blah Blah Blah…”  Well, I actually did the math, and it IS better then renting.  My analytical people, my perfectionists, let me build my case.

I am VERY cautious with money, especially my client’s money.  So in my example, I am using ‘worst case scenario.’  I am overestimating everything.  I like to under promise and over deliver, because if there are any unforeseen expenses, I want you to be prepared.

For ease of math and demonstration, lets assume:

• 30 year fixed rate conventional (20% down) mortgage
• mortgage interest rate is 4.5%.  This is high my friends.  On the day of this writing, we are experiencing the highest rate of 4.38% (over the last 12 months)
• mortgage payment consists of principal & interest, property taxes and home insurance
• rent estimate is for a comparable home in the same neighborhood (per rented-out comps in MLS)
• no extra expenses like utilities or others are considered
• We will also assume the market stays flat; meaning there is NO increase in value at selling time in 5 years. 
  • we will include an additional estimate for an annual 3% home price increase/year to stand in line with inflation

So…  If the market stays flat – no growth and the purchase price IS the selling price five years down the line, it is not pretty to look at, but a buyer would have at least *some* money that is coming back at the time of the sale.  Spent rent money is just that – spent and gone…

It is reasonable to assume that if the housing market DOES go up at least 3% a year, we see a full return of initial down payment and closing cost investment and then some extra cash a homeowner can walk away with.

Buy and Sell after 5 years vs. Rent for 5 years

 

Case Study:

$100,000  Parma OH 44134

Annual Taxes: $2300

Home Insurance: $750

3 bedroom,

1 full bathroom

1,000 square feet (additional 900 below ground, partially finished)

Misc: 2 car garage, full exterior waterproof, huge kitchen and very large bedrooms. Updated electrical, newer windows.  Garden-like yard.

 

 

 

 

Case Study:

$130,000  Parma OH 44134

Annual Taxes: $2461

Home Insurance: $750

3 bedroom,

2 full bathrooms

1,379 square feet (additional 900 below ground, partially finished)

Misc: 2 car garage, full exterior waterproof, huge kitchen and very large bedrooms. Updated electrical, newer windows.  Garden-like yard.

 

 

 

 

Case Study:

$170,000 Brunswick OH 44212

Annual Taxes: $2461

Home Insurance: $750

3-4 bedroom,

2 full bathrooms

1,800 square feet (additional 400 below ground, partially finished)

Misc: turn-key, but may need a few minor updates.  High-er ceilings if split level; nice bedrooms, possibly master bath.  Nice yard.

 

 

 

 

Case Study:

$200,000  Highland Heights OH 44143

Annual Taxes: $6000

Home Insurance: $850

3 bedroom,

2 full bathrooms, 1 half

1,800 square feet (possible basement)

Misc: 2 car garage, turn-key condition, updated throughout.  Large room, master with a small master bath.

 

 

 

 

Case Study:

$250,000  Pepper Pike OH 44124

Annual Taxes: $8,000

Home Insurance: $850

4 bedroom,

2.5-3 full bathrooms

2,400 square feet (possibly basement)

Misc: 2 car garage, high ceilings, good sized room; master with master bath, hardwood throughout, modern and beautiful.