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31k down the drain if you can get mortgage at zero interest, pay zero property tax, no other ownership expenses whatsoever, otherwise the “down the drain” portion is 31k minus all those expenses, which can even be higher than 31k, I’d just rent
Exactly this. People forget that when you buy you fork over an arm and a leg in closing costs and the amount financed you’re blowing the interest, property taxes, homeowners insurance etc. If you don’t have 20% to put down you’re blowing money on PMI. The amount actually going toward the principal is your DP and then a minuscule portion of your monthly payment. And when you rent you have to account for potential months of vacancy (where the mortgage still needs to be paid), repairs, listing fees, etc.
Subject Expert
What market? Real estate is very market specific, and even neighborhood specific. The same house 10 blocks away might not pencil out as a house in the right school district
Subject Expert
Do your market analysis then make a decision
Really just depends on the location, property taxes, long term growth of the area, etc.
Would the appreciation in value over time offset any of the negative cash flow?
I guess if it’s a decent area it would only work if I held the property as an investment over long term and able to maintain the rental income.
Unless you are buying cash you need to run numbers and analyze the data, after that you may decide if you buy or is better to put your money somewhere else, specially if you are thinking to sell before 5 years. Selling is “expensive” due to agent fees.
I’m in the same boat. Planning to rent. Having closing costs on a new home a couple years in would just be a major financial loss even with some market appreciation. Better off to invest the principal with the current 4-5% fed rate and use that to cover some of the rent.
What happens after two years? You’ll move away and then manager 1 rental with limited cash flow, long distance? Think twice.
By comparison, rent would be say $1300/mo for example which is essentially $31k just down the drain over two years
Yeah but with a house, you have closing costs (which is down the drain) and what about maintenance? Factor those in and the gap tightens.
Try to rent for at least 6 months first
Buy a townhouse and rent it out. 75% of the projected rental income could qualify as income and get you a lower rate