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Again want to say thank you for all the info, really good stuff and we’ve poured over school info, housing, areas, etc, etc. I think we’re looking to stay around the west springfield, falls church, burke, or reston areas. All seem to have good schools, commutes don’t look to be too outrageous, little but of a hike but doable and keeping with our 1 car policy.
Renting vs home ownership even for only 5 to 6 years, I keep crunching numbers and home ownership keeps coming up as the winner. Lemme throw some numbers out there and please once again offer rebuttals, agreements, more info. Looking at any of these areas sees rent for what we want/need is going to run about 2300 to 2500 a month or more. Times that by 5, the shortest time frame we’re looking at, right now.
So 2300x12x5=138,000 I’m giving that to somebody to pay off their mortgage and not getting diddly do in return, except a hopefully safe place to live with all maintenance covered.
So now I buy say for 400,000.00 Using the VA loan at 5%= a 30yr note my monthly payment is 2147.29. Add in 500 per month for HOA, now my payments are 2647.29 per month. The bank is going to get it’s interest over the first 10 years of the note but if I pay, which we plan on doing, 1 extra payment a year in 5 years that’s 10,736.45 that I’ve invested in a home plus the 128,837.40 I’ve paid monthly over the course of 5 years.
Lets go high on this and say the interest I’ve paid amounts to 100000 over 5 years, that leaves me with 28,800.00. Take out 10,00.00 for home repairs misc stuff, again in my mind that’s high but will keep it at that. So now I’m down to 18,000.00 plus my 10,736.45. So I’m back up to 28 almost 29,000.00 that I’m getting returned to me when I sell. From what I can tell the DC market truly never tanks, not compared to the rest of the country, oh and I’m writing off the house every tax year, say that’s another 2500 to 5000.00 per year. Even if I sell my house for 400000 I’ve saved 30Gs plus 25G in taxes, where if I rent I don’t get any of this,………………………….yes some of the monies are not likely to be hard currency at the end of the day but dang I like 50Gs vs nada
Foreclosures are a possibility and splitting the closing costs is possible as well. Maybe I’m on a pipe dream here but I can’t see giving somebody else 138,000.00 over 5 or 6 years.
You're missing 5 years of property taxes and insurance, plus selling expenses. And $2000/year of maintenance is not a high estimate for a $400,000 house.
You can't really count the extra mortgage payment every year in your calculations. You could just as easily rent and put that same amount of money in a savings accounts or other investment.
I agree with acgood's points too. You didn't factor in closing costs or costs associated with selling the house - 6% commission plus some costs to get the house ready for sale. Most homes in your price range in those areas are going going to be 40 years old or more, and I think $2,000 per year for maintenance is a low estimate (unless you're incredibly handy and can do a lot of things yourself). Honestly, I'd probably double it for purposes of a hypothetical calculation.
Personally, I think you're going to have a tough time doing anything but breaking even. Owning a home and paying a mortgage might make you feel like you're not throwing money away, but all you're really doing is forcing yourself to set aside money in a "savings" account by way of your principal payments. If you forced yourself to save all the costs associated with a house that you don't incur renting, you'd be in the same boat, but a mortgage does force you to do that.
From what I can tell the DC market truly never tanks, not compared to the rest of the country
Good luck thinking the DC market doesn't tank. If the market goes down we may tank less than Ohio but that doesn't help you much in your buy/rent scenario. As previous poster noted you're missing property taxes/insurance. That adds a good $500-600 per month to my mortgage. And yeah $2k/month in maintenance for a SFH isn't high. I'd say that's what you can expect in a good year with no major issues. But then the HVAC system blows out or you roof fails...
Again want to say thank you for all the info, really good stuff and we’ve poured over school info, housing, areas, etc, etc. I think we’re looking to stay around the west springfield, falls church, burke, or reston areas. All seem to have good schools, commutes don’t look to be too outrageous, little but of a hike but doable and keeping with our 1 car policy.
Renting vs home ownership even for only 5 to 6 years, I keep crunching numbers and home ownership keeps coming up as the winner. Lemme throw some numbers out there and please once again offer rebuttals, agreements, more info. Looking at any of these areas sees rent for what we want/need is going to run about 2300 to 2500 a month or more. Times that by 5, the shortest time frame we’re looking at, right now.
So 2300x12x5=138,000 I’m giving that to somebody to pay off their mortgage and not getting diddly do in return, except a hopefully safe place to live with all maintenance covered.
So now I buy say for 400,000.00 Using the VA loan at 5%= a 30yr note my monthly payment is 2147.29. Add in 500 per month for HOA, now my payments are 2647.29 per month. The bank is going to get it’s interest over the first 10 years of the note but if I pay, which we plan on doing, 1 extra payment a year in 5 years that’s 10,736.45 that I’ve invested in a home plus the 128,837.40 I’ve paid monthly over the course of 5 years.
Lets go high on this and say the interest I’ve paid amounts to 100000 over 5 years, that leaves me with 28,800.00. Take out 10,00.00 for home repairs misc stuff, again in my mind that’s high but will keep it at that. So now I’m down to 18,000.00 plus my 10,736.45. So I’m back up to 28 almost 29,000.00 that I’m getting returned to me when I sell. From what I can tell the DC market truly never tanks, not compared to the rest of the country, oh and I’m writing off the house every tax year, say that’s another 2500 to 5000.00 per year. Even if I sell my house for 400000 I’ve saved 30Gs plus 25G in taxes, where if I rent I don’t get any of this,………………………….yes some of the monies are not likely to be hard currency at the end of the day but dang I like 50Gs vs nada
Foreclosures are a possibility and splitting the closing costs is possible as well. Maybe I’m on a pipe dream here but I can’t see giving somebody else 138,000.00 over 5 or 6 years.
With the mortgage payment you calculated above, it appears that you'll have 20% down and you thought to include taxes & insurance.
The DC market does hold pretty steady. You may be able to negotiate splitting the closing costs when buying, but you'll have closing costs again when you sell. Unless you plan to do FSBO, don't forget to subtract the 5%-6% realtor's commission when you sell. The closing costs alone are going to eat up a good chunk of your equity.
Leaving at what time? I doubt someone is getting from Ashburn to their office in DC in an hour if they leave at 7:30 or 8 especially if driving alone where they can't use 66 inside the beltway. If they leave at 6am sure it's doable.
Okay, I haven't actually done that commute. I have done an hour to Aspen Hill near Rockville many times. I used to commute down the GW Parkway before that from Gaithersburg. I know things get heavy, but putting them together tells me an hour is possible. Yes, it's easier before 6:30 am, but it's not impossible after that. If I understand right, the OP isn't commuting to DC. Am I wrong about where they would be commuting to? Somehow I got the impression they said Arlington.
Okay, I haven't actually done that commute. I have done an hour to Aspen Hill near Rockville many times. I used to commute down the GW Parkway before that from Gaithersburg. I know things get heavy, but putting them together tells me an hour is possible. Yes, it's easier before 6:30 am, but it's not impossible after that. If I understand right, the OP isn't commuting to DC. Am I wrong about where they would be commuting to? Somehow I got the impression they said Arlington.
OP said slight chance of Rosslyn but more than likely downtown DC. I didn't mean to imply it was impossible to do Ashburn to DC at peak rush hour, but I think you're looking at well over an hour. I haven't done it either but I know the choke points well. Obviously Ashburn is jammed with people trying to commute eastward. Another major issue is that 66 east inside the beltway is HOV after a certain time(6:30 I think?). So if you're driving alone you have to go a different(longer) route. I'm guessing most people who drive from Ashburn to DC do it super early to avoid that issue. People should preface their commuting time posts with that info though. "The commute is only an hour(if you leave at 6am)"
Wait, you say USDA 5% loan on a $400,000 for a monthly payment of 2147.29. That's a $0 down payment. Is that what you really plan to do? I assume the 5% interest rate means no PMI?
Please make sure you have enough cash reserves to cover any significant maintenance items that come up. Are you OK writing a $10,000 check in year 1 if something goes wrong?
Also, if you're buying a SFH, how are you getting $500 in HOA?? That's crazy high. I would think < $100, right?
Total interest over 6 years: 114,345... which IF you're already able to hit the standard deduction limit, then you could take all 25% (don't know your marginal rate) off that, so best case scenario: ~86,000.
Property taxes - currently $1.13 / $100, so about $4,500 per year. Again, IF you're actually already past S.D., then take off 25% again, so 3375. Insurance might be $1000 per year ? And HOA say $1000 as well. So (3375+1000+1000) * 6 = ~$32,000.
Now figure closing costs between buying and selling are at least 5% (I'm assuming maybe you can get a realtor discount down to 4.5%, plus all the other taxes, stamps, fees, etc. from the govt. and title company). There's $20,000.
Now, as others have said, you're not over-estimating maintenance. Say $2,500, so $15,000 for 6 years.
Let's add up all your "sunk cost" (i.e., I've excluded equity built from this number):
32,000 + 15,000 + 20,000 + 86,000 = $153,000.
You were at (2300*12*6)= $165,000 at 6 years of renting.
But, that's with a lot of favorable assumptions, and also w/ an $83/mo HOA - you claimed $500 which would would add $30,000 over 6 years, but that sounds like condo HOA prices, which if that were the case, would offset a lot of the maintenance number above.
I could say $3,000 a year on maintenance, 6.5% on closing costs, and $2000/year on HOA, and that the mortgage interest only got you up to the S.D. limit and now it's $196,000. So there's some wide swings here depending on your inputs/assumptions.
Last edited by snowdenscold; 02-09-2017 at 10:05 AM..
Wait, you say USDA 5% loan on a $400,000 for a monthly payment of 2147.29. That's a $0 down payment. Is that what you really plan to do? I assume the 5% interest rate means no PMI?
A mortgage calculator I used, indicated roughly a $2100-$2200 payment on a $320k loan (20% down on a $400k house) at 5% APR inclusive of taxes and insurance.
Zero down payment on a $400k loan at 5% pushes it to roughly $2800 inclusive of taxes, insurance, and PMI.
Quote:
Originally Posted by snowdenscold
Also, if you're buying a SFH, how are you getting $500 in HOA?? That's crazy high. I would think < $100, right?
In the areas OP is targeting, his max budget of $400k is likely to get him a townhome or condo which depending on the amenities, the fees can get pretty expensive. I recall looking at townhomes in Springfield when we were househunting 6 years ago, and was astonished to see some HOA fees up to $350-$450 a month.
Just pulling these as random examples in FFX County:
He said $2147.29, which is the exact amount for a P+I payment on a $400,000 loan at 5%. That can't be a coincidence, so I assume he was NOT including property taxes and insurance.
I understand there's a wide variance in HOA prices, but usually there's a [negative] correlation between HOA cost and what maintenance is assumed by the HOA vs. having the burden upon yourself.
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