Finding myself disappointed with the capabilities of various free internet rent vs. buy calculators, I decided to design my own. I believe that my spreadsheet represents a reasonable compromise between accuracy and simplicity. Both the assumptions and the calculations are plainly visible so that the user can understand how the results are obtained. The spreadsheet can be viewed/saved here: http://tinyurl.com/lt4pUser entered data is shown in red. All other fields are calculated. There are provisions for entering both inflation and real estate appreciation rates. These rates are generally very close, but in growing areas it is common for real estate to appreciate a point or more above the general rate of inflation. The inflation rate is applied to rents and expenses of ownership. A data point which varies greatly from one individual to another is the percentage of real estate expenses which are deductible. (exceeds standard deduction). If you feel that your non-real estate deductions will always exceed the standard deduction amount, enter 100%, otherwise you will have to reduce this figure to allow for your personal situation. If you reside where real estate expenses are not deductible, simply enter 0. Purists will want to make sure that both the rental and the owned property are comparable in size and amenities to form a fair comparison. This is not strictly necessary though for the spreadsheet to be useful.Methodology:1. To the extent that the renter's required yearly rental expenses are less than the ownership expenses, the difference is invested in a portfolio yielding a compound rate of return as estimated and entered by the user. Similarly, funds are withdrawn from the portfolio if the reverse is true. For any given period, the rent vs. buy determination is based on the relative values of the renter's portfolio and the real estate liquidation value. The minimum evaluation period required to render a decision is 2 years.2. Most data significant to either renting or purchasing real estate can be entered by the user. For owners this includes marginal tax rates, financing details, insurance, maintenance/repairs, taxes, utilities and expenses of purchase and sale. For renters, rents, renter's insurance and utilities are included. 3. Real estate capital gains are assumed to be tax-free. The renter's portfolio is assumed likewise to grow tax-free.Limitations:1. The spreadsheet only accommodates fixed rate mortgages. If you desire to evaluate purchases involving variable rate financing, you must assume an average rate of interest.2. Rental security deposits are ignored for simplicity.I prepared this rather quickly and got distracted by the Hokies beating up on Central Florida this afternoon, so it is entirely possible that methodological or design errors may have crept in. As always, I appreciate recommendations regarding the methodology or accuracy of the spreadsheet. Enjoy.Regards,FMO
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