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Buy vs Rent case studies over three price ranges. The math behind the recommendation.

Buy vs Rent case studies over three price ranges.  The math behind the recommendation.

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.

 

 

 

 

 

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Jelena

Multi-Million Dollar Producer with Specialties as Buyer’s Agent, Listing Agent, Relocation and Foreclosure in Cleveland, Ohio

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