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...call them A and B. A buys the duplex with closing 60 days in the future. A rents out the other unit to B, and both move in the day of the closing.
Thirty years later, A throws a party to celebrate paying off his mortgage, and A and B compare notes. B's total costs exceeded A's total costs, meaning that A lived in the duplex for free, and B paid for it.
A (manages his skills, income and resources for X years and then) buys the duplex...
A rents out the other unit to B (who then remains with no apparent change or growth in his life)
Thirty years later... Owner and Tenant compare notes.
Did B get (value for his outlay)?
Doubtless.
Even if/when the rent continued to rise on par with the market over those 30 years.
Quote:
What would you say to B?
If you're stable enough enough to stay put and pay $X regularly...
it's rather silly not to buy rather than to rent.
...call them A and B. A buys the duplex with closing 60 days in the future. A rents out the other unit to B, and both move in the day of the closing.
Thirty years later, A throws a party to celebrate paying off his mortgage, and A and B compare notes. B's total costs exceeded A's total costs, meaning that A lived in the duplex for free, and B paid for it.
Did B get a good deal? What would you say to B?
Tell B the rent is going up 5% next year?
In a low interest market this could happen:
1. 150K loan on a duplex that is 2/2 on both sides (850 sq ft each side, rents for $850 a month)
2. 150K/30 years at 4% is $716 a month. So if the tenant B pays $850 a month he covers the whole mortgage and the landlord (A) is on the hook for the taxes/insurance/maintenance minus the $135 excess he clears with the tenants rent money after paying the mortgage. Figure 2k in taxes/2k insurance in a Florida market. $4800-$1620 ($135 X 12)= $3180 annual net cost for the owner ($265 a month). So owner pays about 31% of what it costs the renter in this scenario.
Double the interest rate to 8% and it seems like more of a struggle to break even if the rent stays the same (mtg payment jumps to $1100).
...call them A and B. A buys the duplex with closing 60 days in the future. A rents out the other unit to B, and both move in the day of the closing.
Thirty years later, A throws a party to celebrate paying off his mortgage, and A and B compare notes. B's total costs exceeded A's total costs, meaning that A lived in the duplex for free, and B paid for it.
Did B get a good deal? What would you say to B?
I would say that someone is fudging the math. No way would B's total cost exceed those of A, and no way would A have been living for free. Did you go to the Ayn Rand school of economics?
I would say that someone is fudging the math. No way would B's total cost exceed those of A, and no way would A have been living for free. Did you go to the Ayn Rand school of economics?
Explain why this is impossible? Maybe "A" didn't live for free, but his expenses could be considerably less. Let's say that the rent is 60-70% of the mortgage. "A" is only contributing 30%. With rent increases over the 30 year period, "B" could end up paying the entire mortgage by the end. "A" also get's to deduct the taxes and interest that "B" is paying for him... as well as other expenses. As long as "A" got a god deal upfront (that's where the money is made) this is very feasible.
I would say that someone is fudging the math. No way would B's total cost exceed those of A, and no way would A have been living for free. Did you go to the Ayn Rand school of economics?
It would be unlikely, but possible. If A bought when the market bottomed out, and raised rent accordingly over the years.
If you also include home value appreciation, I don't think it's even that unlikely. Obviously depends on original home price and interest rate, rent and rent increases, etc. but it could happen.
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