i read a book that says a 1800 per month rent payment is equal to a
2600 per month mortgage payment if you are in the .4 marginal rate. I
have don't know where they got the figures..

"asdf" <qjohnny2000[at]yahoo.com> wrote in message
news:1138788336.880381.267170[at]o13g2000cwo.googlegroups.com...
- quote -

You left out an important parameter. What do you expect rents
to do in the future, with respect to the inflation rate that the
house appreciation is tracking? This could swing my vote on
which way to go.

asdf wrote:
- quote -

You left out the annual cost of property insurance and maintenance for
the condo, which should be included in the calculation. I am going to
assume an average of $100/mo for maintenance and $40/mo for insurance.

One rough answer is $218,000. This number is the what the condo should
cost if you want your total monthly expenses to be $2000 a month. I
calculated this as follows:

Prop tax $333/mo
Condo fees $250/mo
Maintenance $100/mo
Ins $40/mo
Total expenses before mortgage $723/mo

That leaves $1276 left over for mortgage payments. Assuming 5.76% and
30 year mortgage, you could borrow $218,000 for this payment.

If you were making this comparision in relation to your primary
residence (and not an investment property) you would have to include
the value of the mortgage interest deduction to you, which depends on
your income bracket and whether you are married or single, and your
other deductions (the value of the mortgage interest deduction is the
difference between your itemized deductions and your standard deduction
times your marginal tax rate).

The other thing my calculation doesn't take into account is the forced
savings element, i.e. you will be slowly accumulating some equity if
you buy instead of renting. However, if you crunch the numbers you
will find that your total accumulated equity after 5 years of a 30 year
mortgage is not very exciting, so if you are planning to move in the
next 5 years the forced savings element is not very important.

Andy

In article <1138788336.880381.267170[at]o13g2000cwo.googlegroups.com> ,
"asdf" <qjohnny2000[at]yahoo.com> wrote:

- quote -

In general, a property owner needs to get at least 1% of the
value of the property in rent each month. If they don't, they
normally can invest the money and get a better rate of return.
That means that the maximum price for that condo is $200,000.
If the landlord pays more than $200,000, then they are not
getting much of a return on investment, or they are going in
the hole each month. Many landlords are in that situation
right now, gambling that wild increases in price will bail
them out in the end. This is often called the greater fool
theory. This is also what makes rental property such a
great deal for the renter at the moment.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Here is a question:

Suppose you find an Apt that costs $2000 a month to rent. Suppose you
find the exact same condo in the exact same area where your property
tax is 4k a year and condo fees $250 per month. If you expect house
appreciation to run in line with inflation and that you can get a good
mortgage rate ( and you must mortgage the whole condo ). What would
you pay for the condo ? I know there are other "scenarios" involved
but I'm asking more or less ballpark what would you pay for the condo ?
Condo fees expect ro rise at inflation rate, rent expects to rise at
inflation rate.