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Redfin Real Estate Forums :
Los Angeles :
Where can I get objective advice about the economics of home ownership?
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Re: Where can I get objective advice about the economics of home ownership?
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SoCalSearch
Contributor
Posts: 18
Registered: 07-19-2008
Message 2 of 12
Viewed 2,232 times
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I think you be the best judge for your self. Create a spread sheet with this data 1. How much do you make per month ( Pre Tax and Post TAx) 2. How much is your monthly expense ( Include every dollar / Cent you spend) 3. What kind of house you want buy ( Price, Size) 4. WHat woudl be your cost monthly (PITI , HOA, Mell Roose & Maintenance)and also down payment 5. How long doyou plan to keep the house 6. Calcuate when you will break even after all deductions and expected raise/fall in Real esatate prices. 7. How mcuh you want to save for emergency in addition to the above expences 8. What is your plan for the future. and may be more, probably some else can add ...
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08-12-2008 07:54 PM
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Re: Where can I get objective advice about the economics of home ownership?
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Belethedheliel
Visitor
Posts: 7
Registered: 03-31-2008
Message 3 of 12
Viewed 2,201 times
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Basically there are advantages of renting and advantages to owning, and you need to weigh them both to decide which is right for you.
As a renter, you get some benefits:
- no home maintenance costs
- cheap and easy to relocate
- no worries about taxes, etc. on the property
- less money tied up (you can move to a cheaper rental on relatively short notice if you have a major life change, such as if the primary money earner becomes disabled)
As an owner you get some benefits:
- can deduct the interest on your mortgage from your taxes (basically, this means you pay your mortgage mostly in pre-tax dollars; if you're in the 28% tax bracket, for example, and your mortgage is $2000 a month, for the first few years, it's mostly interest, you can can deduct nearly $2000/month from your taxes - that's $24,000 a year deducted which equals about $6000 in actual taxes paid - so you save $6000/year over paying $2000/month in rent).
- you can get money back out of the house when you sell, assuming the house has gone up in value. this means that unlike renting, at least some of the money is going to come back to you in the end.
- once the house is paid off (in 15, 30, 40 years depending on your mortgage) you have it free and clear - no more rent or mortgage ever!
As a renter you lose out on a few things - you don't ever get money back out of the rental, you can't deduct the expenses on your taxes, etc.
As an owner you may also incur additional costs over renting - home repair, mortgage insurance, property tax, additional home owner association dues or mello-roos (community taxes), etc. However, depending on these costs, they may be offset by the tax advantage.
For your specific situation, you should ask a tax professional (CPA, tax attorney, etc). However, as a rule of thumb, if your mortgage is the same or lower than your rent, it's a good idea. Once you get over rent, the amount over rent that makes sense to pay varies based on your tax bracket, the taxes and fees you must pay in addition to the mortgage, how much maintenance the house will need (fixer upper vs. in great shape) etc.
Finally, any big financial decision should be one with which you are emotionally as well as logically/financially comfortable. By this I mean that even if you are paying $2000/month in rent, if you're not comfortable paying more than $1500/month on a mortgage, then simply don't pay more than that - make a bigger down payment or get a less expensive home. Life is too short to stress every month over the mortgage payment.
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08-12-2008 10:43 PM
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Re: Where can I get objective advice about the economics of home ownership?
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Talyssa
Regular Contributor
Posts: 146
Registered: 03-31-2008
Message 4 of 12
Viewed 2,159 times
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forget where this was originally posted, but you can try this for rent vs buy analysis (and add columns to the calculation as needed). you can also try the NYT calculator linked off there, tis very slick.
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08-13-2008 09:53 AM
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