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Personal Finances / Buying or Selling a Home
|Subject: Re: Buying a home makes sense???||Date: 5/30/2000 6:13 PM|
|Author: YJP386||Number: 11649 of 128456|
A few things that you're neglecting to consider in your analysis:
First, you have to compare apples-to-apples. I doubt you can rent an equivalent $270k value house/condo/coop for $1,000/mo. anywhere in the country. You need to compare attributes of a $1,000/mo. apartment (i.e., # of BR and BA, square footage, finish, etc.) to a house/condo/coop with similar attributes and in a similar area. So, in your analysis, you monthly rental payment # needs to be higher OR your housing price needs to be lower.
Second, you've neglected to take into account the tax aspects in your buy/rent decision. As you may know, mortgage interest and real estate taxes are tax deductible; it will more than likely permit you to itemize your deductions rather than just electing a standard deduction.
Also, when you sell your primary residence, the appreciated gain (up to $500k) is not taxed as long as you've lived there at least 2 years. Unless you invest in the stock market via a Roth IRA or a variable life insurance, your stock market gains would be taxed. Therefore, you need to analyze on an after-tax basis.
Third, the amount of down payment you assume in your analysis would impact your decision of whether to buy vs. rent since it affects your financing cost. If you can afford to pay down only 7% of the purchase price, maybe it is worth it to wait until you can pay down 10-20%--at which time the economic decision would be clear cut.
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