Saturday, August 15, 2009

Buying real estate is still the worst thing you can do today

Here is a fantastic example of why buying real estate right now is still foolish.

The same house on

For rent:

For sale:

Asking price rent: $2500
Asking price sale: $789,000

Some quick math.

Say you put down $100K. That's a $689K mortgage. Best jumbo rate you can get today is 5.5% assuming perfect credit. Mortgage payment on $689K is $3912. But wait, there's more. The actual property tax isn't listed, but I would say conservatively speaking, at least $5000. Probably a lot more, but let's stay with $5000. Add insurance - remember this is Florida, and this is right on the water at $1500. Again conservative estimate. That's another $6500 a year or $541 a month. Bringing the grand total to $4453 a month. And you haven't spend a dime yet on any maintenance or repairs which as anyone who has ever owned a home knows adds up fast. But let's put that aside for the time being. Plus that $100K is not earning any interest. Even a piddly little CD is offering 2% right now. Which means the $100K down payment is costing $2000 in foregone interest, at a minimum. $2000 a year is $166 a month. Bringing the final, final total to $4619.

$2500 to rent vs. $4619 to own....THE SAME HOUSE. What to do? What to do?

I'll have to give this a lot of thought. Let's see on the one hand if I rent, I'll be a loser. I won't be living the American Dream. That's what the media keeps telling me. As far as I can tell - according to CNN - if I rent I might as well have a big "L" stamped on my forehead for loser.

On the other hand I get to keep an extra $2100 a month while living with the indignation of not living the AMERICAN DREAM.

Who in their right mind would buy this thing right now? Answer obviously is nobody. And remember this next time some ass wipe on CNBC or Fox Business or CNN tells you the housing crash is over.

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