specifics
Thought it might spur more specific commentary to post a specific possibility.
Using the NYT calc at http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html. Defaults are used when not specified. I'm assuming all growth percentages are nominal.
Price $500K; stay 10 yrs
4.0% home price growth (long-term avg is 5-6% depending on specific area)
4.0% rent growth
7.0% investment return
1.03% prop tax
36% marginal rate
$200 monthly utilities
$100 common fees
This returns $1,420/mo ($17K/year) and below as where to rent. We are spending $15-18K/year on rent for 6-8/weeks in the location now. And would like to spend more time (ie that 15-18K would go up). So if we could buy a $500K place that meets our needs--even if that price is lower than what the place we rent would sell for--why would we not? As I stated in an earlier post, the $500K place we might buy is more inland from the ocean but there aren't many/any short-term rentals in these more inland areas.
It seems the most obvious risk is the 4% appreciation (even though it's marked down 20% from historical). Each 1% below 4% increases the annual break even by $3,600/year.
Thought it might spur more specific commentary to post a specific possibility.
Using the NYT calc at http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html. Defaults are used when not specified. I'm assuming all growth percentages are nominal.
Price $500K; stay 10 yrs
4.0% home price growth (long-term avg is 5-6% depending on specific area)
4.0% rent growth
7.0% investment return
1.03% prop tax
36% marginal rate
$200 monthly utilities
$100 common fees
This returns $1,420/mo ($17K/year) and below as where to rent. We are spending $15-18K/year on rent for 6-8/weeks in the location now. And would like to spend more time (ie that 15-18K would go up). So if we could buy a $500K place that meets our needs--even if that price is lower than what the place we rent would sell for--why would we not? As I stated in an earlier post, the $500K place we might buy is more inland from the ocean but there aren't many/any short-term rentals in these more inland areas.
It seems the most obvious risk is the 4% appreciation (even though it's marked down 20% from historical). Each 1% below 4% increases the annual break even by $3,600/year.
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