okay here goes: assuming you make 160k, ur paying 40 grand tax for fed only.

815k mortgage at 6.44% interest yields ~avg 3200 interest a month 4100k morgage payment w 20% down

so about 40k in interest u can deduct. basically saving u 15 grand a year.

4100 mortgage - ~1000 tax savinges - 2000 rent cost = ~1000

so bascially you are really only negative 1k a month vs renting

lets assume ur house appreciates at 3%. that equals 24k per year appreciation or +2k a month. so factoring that in you would be up 1k a month.

if you sell after a year ur up money! now wheres my $1000 check, u can come to harrys bar on pine and filmore to drop off my money.

and no i will not do the discounted cash flow analysis break down for u.

 

I thought the top tax rate kicked in at significantly over $160K and isn't it 35%? I'm not sure on that, though, but I thought it was over $300K (but not if you're single I guess).

Your analysis needs to take into consideration the $163K you put in a down payment. That money could have returned $13K per year at a conservative 8%. There's also the income that the $2K per month rent savings could have earned over a year. It's about $100 a month but still.

So I think you're almost dead even in year one. Then there's closing costs which will basically put you deep in the red.

 

And then there's year 2 -7 (when the average person sells) and then there's the ability to have/modify/make in your image (taste), pride of ownership, braggin rights, etx.

If you can rent an $800,000 house for $2,000 then jump all over it. I did not understand you were giving a real life situation, only an example.

Well I say jump all over it, but then again be prepared to move rather quickly when the house is foreclosed on because the owner hasn't been making the house payments.

And then there's the fact that you will be living in a ghost town full of crack houses when most of the houses are empty because no one wants to live in an area that's depreciating $200,000 a year (I think that was your figure). And then there's the local economy.

If there are those kinds of issues then there are usually massive job layoffs and companies moving out of that part of the country. The housing market is "reflective" of the economy in general of a given area. It follows the market trend and doesn't make them.

 

My area has decreased almost 25% since last year. And it's still to expensive. Given the supply here is well over a year prices will only come down more.

 

I am familiar with the West Palm Beach area since I own real estate there and it has decreased significantly in the past 2 years as well. BUT it was one of those areas that rose far beyond real values and the market is now coming down to where prices ought to be.

Fortunately I bought before the stupid fast price increases. Now I just wish I'd sold when prices were far beyond real value.

One thing you have to learn in this business is that price increases far beyond the norm are bad news. You know that soon, very soon there will be a price correction and all the moaning and bad press will begin.

The moaning doesn't mean something's wrong, it means something's right. The free market is working and people are putting their money elsewhere when prices get too high. Which keeps the capitalists from gouging us all unmercifully.

Just got news a few minutes ago another major Prime lender was shutting it's doors. It truly amazes me how wrong the Sub Prime market was and how many fingers it had in the legitimate lending world.

Worry? Who me? Not me, I've seen this before. The guys who look at business long term (whether they are the lenders or the buyers) are the ones that survive and prosper. The flash in the pan, get rich quick people usually get poor quick.

 

I understand the relationship that you guys are talking about in reference to a rent vs mortgage margin. I personally won't and don't care to look at houses in that price range. I'm targeting a 250k(ish) property, now if I could rent for 500 a month then this relationship may continue to be valid but from my perspective a mortgage continues to be the intelligent choice.