Let’s compare two sample residents.
- Resident A rents an apartment for $1,000/month, pays renter’s insurance of $20/month and plans on a typical 4% rent increase per year.
- In 4 years Resident A will pay $51,917 in apartment rent.
- Resident B purchases a home for $150,000 with no down payment at 4.5% interest with a payment of $948/month (this includes 1.5% for property taxes, homeowner’s insurance, etc.) that is fixed for the time the resident plans to own the home.
- Using the low appreciation of 2%, the home will be worth $162,365 an equity increase of $12,365. These numbers do not reflect any tax deductions to which the Resident may be entitled.
- In the final analysis, Resident B comes out $5,788 better than Resident A after paying all expenses, and Resident B owned their own home!!!