Realtor® to Buyers and Sellers in Encino | Sherman Oaks | Studio City | Van Nuys | Tarzana

Rent or buy in Valley Village

house mathIt’s chilly outside, so let’s cuddle up next to our computer screens and crunch some numbers.  The question of the day is… Could you buy a home in the Sherman Oaks/Valley Village area for the same price as renting?

Let’s take a look.

I invite you to take a gander at exhibit A: 12658 Cumpston – a 3-bedroom, 2-bath, 1,740 sq ft home in a nice neighborhood.  As you can see from the pictures, it’s not the newest or flashiest house out there, but it’s currently listed for rent at $3,300.

Now I present to you exhibit B: 6249 Whitsett – a 3-bedroom, 2 bath, 1,777 sq ft home just a few blocks north of exhibit A.  This home has a great open floorplan, updated kitchen and even room for your RV in the back.  It’s listed for sale at $485,000.

Let’s do the math.

Rent Exhibit A

You can rent exhibit A for $3,300. At the end of the year, you will have paid $39,600 in rent. You will have $0 in equity in the home, and $0 in tax savings, bringing your grand total out of pocket to $39,600. This number does not include insurance. Odds are, each year that number will increase with inflation.

Buy Exhibit B

Or… You can buy exhibit B for $485,000.  You will need to put down a minimum of 3% for the down payment ($14,550).  Your monthly payments, including principal, interest, taxes and insurance will come out to roughly $3,092.47, which equals $37,109 for the year.  At the end of that year, you will have paid down $8,085 of your home loan and paid $19,324.36 in interest, which is tax deductible!  Odds are your home will have increased in value over the course of the year, so the home that you purchased for $485,000 is probably going to be worth closer to $500,000 (at a rate of 3% per year).  

Here’s the math:

$14,550 (down payment)
+ $37,109 (total monthly payments)
– $4,831 (tax deductions — $19,324 x 25%, your current tax bracket)
– $23,085 (the amount of equity you’ve built, between the value of your home increasing and the amount you paid off)
————–
$23,743 total out of pocket for the year!  which averages out to $1,978 per month!

I know what you’re saying… equity doesn’t equal money in your pocket. Ok… fair enough.  Take the equity and the down payment out of the equation (since the down payment is a one-time thing), and your monthly payments, including taxes and insurance, minus the tax savings is $2,689!  That’s a whole lot less than renting for $3,300!  Plus, in 30 years you pay nothing per month and own a $700,000 property!

Now I ask you, which one is more appealing? If you can come up with the small down payment (*cough* ask your parents *cough* tell them it’s a good investment *cough*), we should talk!  Let’s get you in your starter home right now, before prices and rates go up! 

Call me at (310)926-2386 and I will have my mortgage specialist help figure out exactly what you can afford.  It’s free. You have nothing to lose, and so much to gain!

 

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