US: to buy or to rent

Example

1. The hypothesis

this example is inspired from real digits, there are no (or few) houses to rent in Larchmont (north of New York City) for less than $3,500. On the other hand, there are houses to buy on the market for less than $500,000.

- The lenght of the stay is 3 years
- Federal taxes 38%
- Interest rates 7 %
- Appreciation rate of the house3% / an (can varie and even became negative...)
- Saving rates 4%

The expat has at its disposal a fund of $100,000. Don't take this digit to the word but you have to know that you need at least 20% of the price. On the countrary, you will have to pay an insurance.

Rent:
Charges : $3,500 / month (simple house in the Larchmont area)
Insurance Tenant : $ 400 / year

Buy:
Price of the house : $500,000
Owner insurance : $900 / year
Housing taxes : $15,000 (very high even for expensive areas)

 

2. The results

Buying will cost you $55,000 less on 3 years.


Calcul

If you are the owner..
Taxes reduction
 $46,630
Usual care $6,000
Selling price $547,026
Capitalization (the value of the house that you don't owe to the bank) $160,118
Cost of the transaction
(Agency...)		 $27,351

Bills (monthly)
Tenant Owner
Main + interests NA $2,661
insurances and taxes NA $1,075
Total $3,550 $3,736



Warning   THIS EXAMPLE SHOULD NOT REPLACE PROFESSIONAL ADVICEIS GIVEN AS IT DOESN'T TAKE INTO ACCOUNT ANY CHANGES IN :
      Housing market,
      A TAX VARIATION
      ANY other economical, political, social, natural catastrophe.
We don't take any responsabilities. Please seek professional advice.