Quote:
Originally Posted by TomDTV
I'm an annual renter for almost 2 years near Spanish Springs in 2 BR patio villa. I pay $1825 per month. Owner has decided to sell. Asked if I want to buy. Not a chance. At 20% down and 7% mortgage, principal and interest alone will be almost $1600. From other sites I've seen, taxes, insurance, etc will probably be close to that. So likely $3000 per month. That's a huge negative cash flow. Good luck with your decision
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I guess there are those who like to rent & those who like to own.
I think you may have had a great deal on your rental of $1,825. You didn't mention if that includes electric & internet, so I proceeded with the figures as if they are included. I looked for 2 bedroom, 2 bath patio villas in the Spanish Springs area & found some for sale. One was asking $255,000. If they got their asking price, & the buyer put 20% down, with the mortgage, property tax, amenity fee (including water, sewer, trash), insurance, electric, internet, I arrived at a monthly payment of $2,195.
But for that monthly payment, the buyer owns house & there are some tax breaks for mortgage interest & property tax. Also, it is the buyer's house for as long as he cares to keep it, at the end of which he or his heirs will have a substantial asset, that can be sold, rented out or lived in.
I also looked at the rent from a Villager site for a long term rental for a patio villa in the Spanish Springs area & today, renting for this next year, I only found 1 & it is asking $2,000. Electric, internet, gas not included. I don't have a price for gas, but if electric is $130 (average for the whole year) & internet is $50 (high speed fiber optic), then the monthly payment would be $2,180.
For a savings of $15 a month, but no tax break for the mortgage interest or property tax & it is not the renter's house, meaning the price can rise next year & or the owner can decide to sell the house & the renter has no ownership stake in the house.
The numbers can change based on different variables. The mortgage calculation site used an interest rate of 7.883%, hopefully a lower interest rate could be found & also the owner might accept a slightly lower price for the house.
In your example, you didn't say if you need to rent another place to live soon. If so, good luck in your search. If you don't need to find another place to live and were only giving an example of buying a property to rent out, then the numbers are not as hugely negative as first supposed. But as many have indicated, breaking even is a challenge, especially in the early years.