How much you actually spend on house - my calculation

[Telugodura456]

5 minutes ago, Spartan said:

4k monthly which u pay...u r not getting it back ..its just drain...

ade nuvvu intiki 4K EMi kadite...after 30yrs..u or ur kids will have an asset.....

leda 15yrs ye unta anukunna...u can still sell home at profile for 100K-200K..which is still profit..rather than flushing out 4K everymonth and not getting back anything.

yes . so your assumption is 100k-200k profit. I assumed house keeps same value after 5 years. thats a good point. Also i assumed stocks gorw at 8% but they can gorw higher also. In the end we have to make our best assumptions.

[snoww]

5 minutes ago, Telugodura456 said:

ypu have made a total down payment of 110k for the house. If you rent you can keep the down payment and invest in to stocks. At 8% growth you can make 70k extra in 5 years. Also lets say you can rent a same house (usually rents cheaper) at 3,600 then there is another 1000 savings which is another 60k extra in 5 years.

So total wealth is in 5 years in renting is 130k. In house is only 80k(the equity part of the monthly payment).

There are Many such calculations which say renting is better sometimes if you reinvest down payment money. Some are logical too. But if you have kids , I feel they deserve to grow in big family homes for good memories. I guess you can manage renting big homes, but it's hard to do it over long term. 

[Telugodura456]

Just now, Spartan said:

probability of making money on stocks is less compared to house.

also after 30 yrs...with low risk..atleast kids wont end up homeless

there are many pros in owning home than cons for majority of people

Yea one thing i agree is that housing is much easier investment where downside is generally much lower and upside can be anything.

[Telugodura456]

Just now, snoww said:

There are Many such calculations which say renting is better sometimes if you reinvest down payment money. Some are logical too. But if you have kids , I feel they deserve to grow in their own home for good memories. I guess you can manage renting big homes, but it's hard to do it over long term. 

Eventually we all will buy houses (atleast majority) but i think these calculations still help knowing what our true cost is.

[Spartan]

US lo couple mentality ki...they can stay in big house rental until kids go to college..

and move or settle down in another state,,and then buy home...

but our mentality is always securing future for our kids....since manam tappa vallaki evaru leru chuttalu unlike in India...

Home is safe asset for them..

[Spartan]

2 minutes ago, Telugodura456 said:

Eventually we all will buy houses (atleast majority) but i think these calculations still help knowing what our true cost is.

the perspective changes as u get kids and they grow.

[snoww]

1 minute ago, Spartan said:

US lo couple mentality ki...they can stay in big house rental until kids go to college..

and move or settle down in another state,,and then buy home...

but our mentality is always securing future for our kids....since manam tappa vallaki evaru leru chuttalu unlike in India...

Home is safe asset for them..

Agreed. Seen many Americans who rent big homes. But desis either buy big family homes or live in small apartments. Very rare desis rent big family homes for long duration. 

[phatposts]

You calculation is like reading a book and trying to drive a car. Both are not same. 

So many factors you left out :

Can you "assume" a rental house to be your own for the next 7 years?

After 1 year lease renew cheyyaka pote malli poyi vere community lo dukanam start aa? Nee spouse/kids kodataru (if you are at that stage in life).

Will you buy furniture and put personal touches  on a rental?

What if the housing market appreciates @ 6-9% rather than 3-4%?

What if the investment (opportunity cost re-allocation) goes a bit south and the house cost goes out of your reach? Now your ability to buy something like that gets more and more foreign. Counter argument is also equally valid - what if house rates crash 15% over the next 2 years, my down payment vanishes if sold ani. 

Tax benefits vs increased utilities negate anukundam. In fact expense will be more. 

Konadam rule antoo emi ledu, kaani pure simple interest calculator vesinattu vesi conclusion ki raavaddu.

 

[8pm]

33 minutes ago, Telugodura456 said:

Data assumptions :

30 year loan at 2.6%, 15 year loan at 1.8%

House price 780k

Down payment 78k

Closing costs 30K

Taxes : 11k

HOA + insurance: 450 pm

Results:

Monthly Payment : 4600 (including PMI)

Scenario 5 year ownership (assuming house price does not decrease):

Total spent (assuming no repair costs) : 4600*60 = 276,000

Equity part = 80,000

Actual expense = 196,000

Opportunity cost of 110k (78k down plus 30k closing costs) total down (assuming 8 percent return in stock market) = 80k

So total expense = 196,000 + 80,000 = 276,000

Total expense  per month= 276,000 /60 = 4600

So cost of enjoyment of house = 4600.

Conclusion

So if you can rent a house for less than $4600 then you are better off than buying a house

[Telugodura456]

1 minute ago, phatposts said:

You calculation is like reading a book and trying to drive a car. Both are not same. 

So many factors you left out :

Can you "assume" a rental house to be your own for the next 7 years?

After 1 year lease renew cheyyaka pote malli poyi vere community lo dukanam start aa? Nee spouse/kids kodataru (if you are at that stage in life).

Will you buy furniture and put personal touches  on a rental?

What if the housing market appreciates @ 6-9% rather than 3-4%?

What if the investment (opportunity cost re-allocation) goes a bit south and the house cost goes out of your reach? Now your ability to buy something like that gets more and more foreign. Counter argument is also equally valid - what if house rates crash 15% over the next 2 years, my down payment vanishes if sold ani. 

Tax benefits vs increased utilities negate anukundam. In fact expense will be more. 

Konadam rule antoo emi ledu, kaani pure simple interest calculator vesinattu vesi conclusion ki raavaddu.

 

You have to draw a line at "reasonable" assumptions. what if you get neighbours you dont like ? if you own then you are more stuck than rent. 

Lot of houses you can easily execute leases for 2 years. 

Inka personal touches ante adhi vere vishayam.

Regarding housing market - appreciation is more in percentage at lower end of market but starts to decrease at upper end. so i assumed a house at 800k will preserve the value not increase it after 5 years.  what if interest rates increase in two years and your house value comes down ?

[jalsa01]

Good post...

[vokatonumberkurrodu]

if you can afford a home then go for it. no calculations needed. just dont go overboard.

[Abhagyudu]

Have seen people renting the same house for 15 years..Desi le..

[Anta Assamey]

[Shameless]

1 hour ago, Telugodura456 said:

"own" house ki rental house ki theda ? does child feel a special connection with the soil? children grow up in a neighborhood not a house. 

I can personally feel that the kids do have a special connection with their own house...I bought my house 2.5 years ago and before that we rented 2 floor of a house and I do know that restrictions and rules in the rented space and now I can proudly say that my wife, I, and my kids have enough freedom to enjoy every inch of our entire house...

the only difference renting a house and own house financially is $200...

$200 I am paying extra doesn't even come close the happiness we have in our own house...

By the way, I still have opportunity to rent some of the space I have and that can at least cover half of my mortgage...