Rent vs own calculation

This topic contains 0 replies, has 1 voice, and was last updated by  Jane Valasquez 2 years ago.

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    Jane Valasquez

    I created a spreadsheet for the cost of renting vs owning. This is for buying a $800k house with 20% down with 3.875% interest. The mortgage is roughly $3100/mo, property tax $800/mo, repairs $200/mo, insurance $100/mo. Estimated income tax was set to 40% (federal + state), and inflation 3%. Rent for an equivalent property was set to $3,100, same as the mortgage.
    I assumed rent, insurance, and repair costs go up with inflation, property tax goes up 2% per year allowed by prop 13, and mortgage interest and property taxes are deductible. I created a mortgage schedule to estimate the amount of interest during each year.
    If you buy, and invest the savings vs renting and get 3% ROI (keep up with inflation), you will have saved $610k vs renting overall.
    With regard to the initial $160k down payment, it is hard to say if it will be worth more put into a house vs put into investments. But if you rent and invest it, you will need to overcome the $610k advantage of buying plus the rate of return of the $160k put into the house.

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