Rent vs. Own
Rent vs Own
A case study on purchasing 614 Wyeth St
This case study was first published September 2009, 1 year after Great RE Market
Crash, when there was an $8k government incentive to purchase homes, and at a
time when there were ample appraisals to get thru the otherwise daunting
task of appraisals in a broken market. While
the timing relate matters are no longer relevant, this information still does a great job of
explaining financial benefits of renting versus owning.
---------- $7k seller contribution ---------
I just sold a similar house at 623 Wyeth St. in May for $279k....so getting this to appraise should be simple for the first 6 months after that sale ....which, given the new appraisal rules, is never a given these days.....And as long as this house appraises for $279k....I'll contribute $7k towards your settlement...
---------- $8k government credit -------
Credit expires November 30th, 2009...can purchase between now and November now and refile last years taxes for ~$125 accounting fee and
receive credit check in mail
-----$13k in settlement costs drop to $5k once you receive your credit------
Total settlement costs for an FHA loan (down payment, expenses, mortgage insurance, etc) are ~$20k....I contribute $7k of that which brings them down to $13k....you come to the table with $13k....buy the house....refile your taxes...receive $8k check from federal government, and you've just moved into a beautiful loft rowhome for $5k
out of pocket!!
The mortgage on that property for a 30 year fixed mortgage at 5.5% runs about $1950/month....sounds like a lot...but is it really? $300 of that is going towards principal...so that's like a forced savings account....~$1500 of that is tax
deductible....which means it really only costs you about $1000 after
itemized tax deductions....so this $1950/month mortgage is
comparable to paying ~$1150/month in rent!!! Why would you spend
$1200-1800 in rent, when you can own for so much less!?!? Fixed
rates have been fluctuating between 5 and 5.5%....at 5%, that
payment drops by about $80/month....likewise, 5/1 arms have been
fluctuating around 4.5%....which drops that payment by $170/month!!
That makes owning this comparable to renting for $980/month!
Minimum combined income of those looking to purchase is about $55k.....that assumes no other long term debt.......credit score of 680 or better assures the best rates....
Dont take my word for all this...... call Andy Duda.....tell him your income and
debt info, and if you qualify, he'll provide you with a free HUD1
that details all this.....proof is on the paper....Andy's website
FINANCIALLY, THIS MAKES A LOT OF SENSE! OWN A 3BR HOUSE FOR COMPARABLE TO PAYING $980-1150 IN RENT!!!....AND
DON'T FORGOT TO LOOK AT WHAT YOU GET IN A PROPERTY FOR YOUR INVESTMENT!!!Exposed beams, catwalks, stained concrete floors, roof deck, a heated floor, and much more...most likely not like anything You've seen before.
This is an opportunity to purchase a home that otherwise may be $15k
further out of reach...