Rent Vs Buy example

[RedHotLama]

So right now my fiance and I are looking to rent a house. We plan on staying up here for about another 4.5 years for sure, then after that who knows.

So right now we are looking at this place



They are duplex style townhouses. $340K now we don't have much saved, say $20k for this example.

Now 2 of these places are up for rest at $1400 per month.

Is there any possible way it makes sense to buy one of these. I can't figure it out.

My big this is that the everyone says you get to deduct interest. Which doesnt help much. I figure that loan would at 7.5%. So in a year youd pay like 25k in interest. And normally you get 10k deduction married so you only save taxes on 15K in interest, which at most would be 5k.

So is it all appreciation that people are banking on??????????????

[EastSider]

[small_far_ugly]

I don't put much by the rent vs buy calculations, because they all compare for 30 years. I'm 30 now -- so let's say I plan to live until 85. Any real calculation has to be 30 years for owning, and 55 years for renting.

I think there's a certain break point where it doesn't make much sense to get into a mortgage, because once you've paid it off you're nearing the age where people either die or move to assisted living, so you get minimal benefit out of having paid your house off.


To be valid, those calculations should count 30 years for owning, and compare against a lifetime of renting, in which case owning is always better.



P.S. - I currently rent.

[george]

RedHotLama:

First you have to make a guess about where you think the housing market is headed in the next few years. After that I think it depends a lot on what you do with your savings if you do decide to rent.

[vthokies]

[anforowicz]

[george]

[small_far_ugly]

[george]

Interesting tidbit on the price/rent ratio here from the Financial Times -

"Shiller's Case-Shiller house price indices show US house prices moved in line with rents for years. Then they exploded. During the past 10 years they have increased 182 per cent, while rents barely moved. Why?"

http://www.ft.com/cms/s/4c93a12a-f991-1 ... 10621.html

[deejayoh]

[RedHotLama]

[MrRational]

[Alan]

[Lake Hills Renter]

[rose-colored-coolaid]