Rent or Buy In Double Diamond?


 

 

Buy or Rent? The above photos are from ads in today’s Craigslist.  The homes are located 1.3 miles apart in Double Diamond. The homes are similar style, similar age, with 3 bedrooms, 2 baths, and 1,443 square feet. The home on your left is located @ 1771 Trek Trail and is for sale for @ $180,000. The home on the right is located  @ 1835 D Arques Court and is for rent for  $1,325. per month. Let’s compare the cost of Owning vs. the cost of Renting.

 

 

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Although the monthly rent and the total PITI payment are nearly identical, Based on a 15% tax bracket, your tax benefit is $128 per month. Also, each month the amount you pay toward your principle balance will increase your equity. The benefit of ownership is $357 the first month. At the end of 5 years, you will have realized a $8915 tax benefit as compared to a $80,000 expense with rent.


 

 

 

The Benefits of homeownership can be illustrated over time. The table in this analysis reflect the cost savings as well as the equity you are building based on principle reduction and appreciation of your property. I have projected that both rents and home values will appreciate at a rate of 3% annually.

 

 

 

 

 

 

 

 

 

 

After 5 years, our cash outlay is the same but we have paid $15,359 in principle and had a tax benefit of $8,865. Hopefully, you are buying at or near the bottom of the market. If the home were to appreciate at a modest 3% annually, you will have over $50,000 in equity at the end of 5 years.

 

As we project out to 15 years, the tax benefit has increased to $22,826 and you have paid off $58,651 in principle. The cost of renting at that point will be will be well above $200,000. Even if the value of homes and rent didn’t appreciate, you would have a benefit of over $80,000 after 15 years.

 

 

Rent or buy? Invest and build equity or pay rent? To me the choice is clear. Please call me @ (775) 250-4421 and determine if buying is right for you.