So, took the car to the shop on friday and decided to use the downtime to answer the age old question of rent vs. buy. Interestingly, this marked the first time i’ve found a spreadsheet to be useful and hence, the first time i’ve created an actual spreadsheet.

It’s kinda staggering the amount of money you put into this thing. my first time running the calculations everything actually looked,well, good. and I was like, “wow, it really is better to own than buy.” I was kinda in shock, so i checked the numbers again and low and behold, i forgot to add the downpayment and renovation costs in. doh.

So, anyway, the final calculations took into account the down payment, the monthly mortgage payment, renovation costs, insurance costs, property tax, and tax savings on interest. I used a n amortization table to calculate interest paid per year to account for the shrinking tax benefit and did some five and ten year projections. I didn’t factor in living costs such as water, gas, electric, and cable since those are more lifestyle oriented and aren’t appraisal based. It turns out that if we sell in five years, we need the property to appreciate by 23% in order to break even, and if we sell in ten years, the break even point is 41% which means 3.67% and 3.24% annual appreciation, respectively.

so, is it doable? well, i guess i’m about to find out.

This entry was posted on Monday, January 2nd, 2006 at 3:48 am and is filed under Life. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.