Could It Cost Less To Own A Condo Compared To Renting One?

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Mortgage and Lending with Stearns NMLS #232164 CA BRE #01380812 BRE 01380812 NMLS 232164

Could It Cost Less To Own A Condo Compared To Renting One?

If you are a renter, or a Real Estate Agent, you'll want to watch this short video.

 

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Mortgage / Finance
Location:
California
Groups:
Mortgages
Bananatude
Tags:
rent versus own condo purchase buying a condo prequalify

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Rainer
7,974
Ryan Boyer
San Diego's Finest Real Estate - La Jolla, CA
La Jolla Homes & San Diego Real Estate

Generally a nice presentation.  However, it appears as if there are a couple of missing items / incorrect assumptions.

You said this was a condo, but I did not hear any mention of homeowner association fees.

If you are married and making $70,000, then you are effectively only in the 15% tax bracket.  Only if you are single could you consider the 25% tax bracket

Rents are NOT increasing at 5% per year in most places.  Generally they are going to rise at a rate near CPI.  5% is excessive.  For a fair comparison, you should probably use the same rent increase as you do for appreciation rate.

You might want to check out the APOD at this Investment Property Search site.  Generally, if it is good for the landlord, it is good for the homebuyer.  However, the landlord also gets to write off their homeowner association dues.

Aug 07, 2010 08:59 PM #1
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

Hi Ryan,

Thanks for the feedback.

HOA is included in the "other", just not spelled out on the narrative and this is for a single person. 

I would say rent increases vary widely depending on what kind of property you rent.  If you're renting from a private party, your rent could stay static for years, because many private landlords don't want to risk losing a good tenant by raising the rent and although rent control is not widespread, that's another  scenario that would keep rents low for years.

However, the foreclosure situation and demographics are actually fueling the rental market right now:  http://www.propertywire.com/news/north-america/us-rental-property-market-201007284353.html.

We look at each client's situation in detail and this analysis is intended to introduce clients to the benefits of home ownership.  While rates are so low and deals are plentiful, I think it's a great time to become a first time homebuyer, don't you?

I appreciate your comments and will check out the Investment Property Search site.

Now, get some sleep!

Mary Anne

Aug 08, 2010 05:45 AM #2
Rainmaker
46,031
Carol West
Carol West Real Estate, LLC - Hillsboro, OR
Real Estate Agent, Hillsboro, Beaverton, Portland

Good video and stats on owning versus buying! Thanks for your post.

Aug 08, 2010 06:04 AM #3
Rainer
106,672
Rob Magnotta
Huntington Beach, Newport Beach, Seal Beach, Irvine REALTOR - Huntington Beach, CA
Huntington Beach & Newport Beach Coastal Specialist

Not here in Southern California, but I have no doubt there are plenty of areas in the country where the answer is YES! And if you live in those places, please go buy something!!!

Great video too, Mary Anne!

Aug 08, 2010 06:05 AM #4
Rainmaker
156,354
Carolyn Kolba
Serving Mentor, and all of Lake County, Ohio - Mentor, OH
Keller Williams Realty- Mentor, Ohio

I would guess that once you factor in the condo fee... some of which can be huge, it might be tough to rent a condo for more thatn the total payment, including the condo fee, would be.

Aug 08, 2010 06:11 AM #5
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

Thank you Carol & Rob and Carolyn.  The condo fee is in there, it's $233 of the $787. 

I left out some other benefits, you won't be asked to move when the landlord decides to move back in or rent to their niece, and you won't be told you can't have pets, unless you're raising a baby tiger, LOL.

I'm always a fan of "running the numbers" when it comes to owning real estate. 

By the way, FHA Up front mortgage insurance will come down in September and monthly MI will go up, but that's another blog post.

 

Aug 08, 2010 06:33 AM #6
Rainer
38,665
Blaine Williamson
McClain-Williamson Realty - Cambridge, MD

Great Post. I use this with all my clients that are looking for rentals. It has helped me sell a few more homes.

Aug 08, 2010 06:36 AM #7
Ambassador
3,049,464
Anna Banana Kruchten CRS, CRS, Broker, Instructor
HomeSmart Real Estate BR030809000 - Phoenix, AZ
602-380-4886

Hi Mary Anne!  Great to see you!  This is a great video and helpful to folks considering whether to buy or rent.  Makes sense to me.

Aug 08, 2010 11:31 AM #8
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

Hi Anna!  Great to see you too!  Thanks for the feedback :)

Aug 08, 2010 07:18 PM #9
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Rainmaker
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Mary Anne S. Daly

Queen of the Loan & Radio Broadcaster
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