In my area one bedroom condos do sell for about 300K and one bedroom co-ops for around $160K. But in my area, the rents for one bedroom are in $1300-1800 range with properties more similar to co-ops renting for $1300 and condos renting for 1800 which is a lot more similar to what it would cost to buy a similar property.

however, i wonder if its really accurate. It doesn’t consider closing costs, upgrades or maintenance.

plus people have a bad habit of refinancing every few years and wasting a ton of money on the refinancing.

This has been the case in my area for the past 5+ years now. Rents have ranged from 1/2th to 1/3rd of total owning costs. Anybody who bought property to rent is bleeding money every month. I’m sure they all certainly want to increase the rents to cover their owning costs but simply can’t.

My mom experienced this firsthand. She wanted $850 for a small unit but the rental applicant offered $800. She said no and then the place sat empty for 9 months as comparable rents dropped even lower. It’s going to take her 12 years to break even on her stubbornness to get that extra $50 a month.

I don’t view my primary residence as an investment, only as a place to live. I am even reluctant to include it into my net worth, even if it is paid. You have to live somewhere and living in your own place is a whole lot nicer than renting. In addition, as it was pointed out in 9. above, the numbers in the program cannot be right – there is no way you could rent a $282,000 property for $751 a month. Imagine you own this property – would you rent it out for $751? The rent one would charge has to cover your mortgage, taxes and repairs – you have to be in charity business to rent a 282,000 property for $751 a month. Even with rent – renting a house is more expensive than renting a studio, if you rent a studio you’ll save money. If you live in a car, you’ll save even more. So if you want to compare renting a one bedroom to buying, maybe you should compare renting one bedroom to buying a one bedroom condo or even a co-op since co-ops are closer to rentals in quality.

In Canada we don’t have tax deductible mortgage interest but there is not tax on capital gains from the sale of your principal residence.

Interesting differences!

Assuming such an anomalous rate for the next 30 years, especially through the near term turmoil, would be very dangerous.

You don’t “roll it over” anymore. This changed in the late 1990s, IIRC. There are residency requirements. There are now (large) limits on capital gain amounts that are excluded from taxation, such that most people pay no capital gains as long as they meet the residency requirements.

Anyone considering selling a house, or who anticipates a large gain if they did sell (250k single or 500k married) should become familiar with current law.

[...] Get Rich Slowly: House Math 2.0, A Real Estate Analysis Tool [...]

E.g., it’s assuming my monthly payment as a full $1,000 more than it actually is. Plus, it suggesting a comparable rental unit for only $750 when, in actuality, something similar to our house in Chicago would be in the $2,000 per month range.

Also, in my experience buying three homes, only once did the seller pay closing costs. Most of the time it is the default that the buyer pays.

Perhaps I just misread it, since both of these things seem like common sense…

Also, the investment totals are a (bit) misleading, because you are paying tax as you go on a house, which lowers your investible value naturally.

However, they assume no taxes nor withdrawls of the investment, and no withdrawls while it growing is a fine assumption, but by not including taxes at the end, (which if you are comparing a house payment, it is above the Roth IRA max)it’s a bit unfair.

So my humble suggestion to balance it out:

Assuming tax is kinda difficult, but if they are going to force a home sale after 30 years, why not force the investment to be regularly exercised for the 30 years after the home sale, and figure the tax rate on that. So in year 31, you’d get ( current investment value / 30 ) * (effective tax rate) and so on for 30 years.

That’d be a more fair comparison.

But those are minor quibbles. Cool tool.

Also, if it asked how much your rent is, it could do a nice little comparison.

Anybody seen a good spreadsheet with all this stuff in it?

(Interestingly enough, I helped a friend look for apartments in that range here in Redmond a few years ago. If you’re happy with 500 sq ft or less and no washer/dryer in the unit, you might find one. Or you could live further away from jobs, spend more on gas, and another couple sq ft.)

I do wonder why it’s coming up with federal capital gains taxes for the sale. The estimated profit on sale after 10 years is $185,000, which is well under the $500,000 married-filing-jointly exclusion from the federal capital gains tax.