Calculator needs to also have some kind of approximator to account for the usual tax advantages of buying.
And an area where you can input your Property Taxes, electricity bill, gas bill, water bill, etc

xoneinax said:Calculator needs to also have some kind of approximator to account for the usual tax advantages of buying.
And an area where you can input your Property Taxes, electricity bill, gas bill, water bill, etcIf you go to the right under "Advanced Settings," you can include "Additional Monthly Utilities," "Income Tax Rate," and "Rate of Return on Investments" among other things. It appears that Income Tax Rate calculates the tax advantage of buying. It doesn't, however, seem to differentiate between someone who itemizes and someone who takes a standard deduction. Someone buying an inexpensive home who takes the standard deduction is not likely to see as great a tax advantage as someone who itemizes and buys a very expensive home (the home buying tax advantage is far greater for the wealthy).

samko said:xoneinax said:Calculator needs to also have some kind of approximator to account for the usual tax advantages of buying.
And an area where you can input your Property Taxes, electricity bill, gas bill, water bill, etcIf you go to the right under "Advanced Settings," you can include "Additional Monthly Utilities," "Income Tax Rate," and "Rate of Return on Investments" among other things. It appears that Income Tax Rate calculates the tax advantage of buying. It doesn't, however, seem to differentiate between someone who itemizes and someone who takes a standard deduction. Someone buying an inexpensive home who takes the standard deduction is not likely to see as great a tax advantage as someone who itemizes and buys a very expensive home (the home buying tax advantage is far greater for the wealthy).

You could lower your investment rate of return and set the income tax level to 0. I agree about this calculator being sensitive on the appreciation of the house - it makes sense because the home value is a much larger source of capital (even if it is on margin) than the capital lost due to the down payment, mortgage interest, property taxes, etc. in the buy scenario.

samko said:I've used a few of these calculators and this one is definitely very powerful. But, ultimately what it seems to come down to is the "annual home price appreciation."

With my current parameters, if I set the appreciation to 4%, I get, "Buying is never better than renting over 30 years." However, if I change the appreciation to 5%, I get, "Buying is better than renting after 5 years." So, a 1% difference in appreciation makes all the difference in the world.

I'm sure there are situations that you would have to use an extreme level of appreciation to get this same result and this would imply that it's really never worthwhile to buy.

Now if the NY Times can tell me if real estate is going to increase by five or more percent a year for the next five years....

It tells me i should never buy when I use 4 and 5% depreciation.

One things these calculators don't factor in is the security factor of knowing you can't get kicked out by the landlord, having the rent increase, etc.

fasttimes said:One things these calculators don't factor in is the security factor of knowing you can't get kicked out by the landlord, having the rent increase, etc.

If you look at the calculator, it DOES factor in rent increases..

You can spin it either way regarding getting "kicked out." Not owning a place gives you more flexibility, which is important when you're still "young" imo. If you really move every ~7 yrs which is the national average, you're losing big money selling your home every 7 yrs and moving (just paying the realtor 6%). So, there are unmentioned advantages/disadvantages to renting/owning.

Besides, if you find a good landlord/rental place, moving generally is a non-issue, and it's all upto the choice of the renter (I don't have one friend that has ever been "kicked out by the landlord").

Zaos said:Rent increases are factored in. And I don't see why any sane landlord would kick me out anyway.

I read the methodology and the attached article and didn't see anything about factoring in rent increases (though if I missed it please point out where it is discussed).

The problem with this and most calculators is you are taking a wild guess about appreciation, future interest rates and investment opportunities. Further more, this calculator doesn't even take into consideration your tax bracket. I'm sure Jack Guttenburg's Mortgage Professor site has a better calculator on the subject. Assuming you are getting market rates, the time you plan on keeping AND living in the property is usually the best factor determining to buy vs. rent (and if to buy what mortgage to purchase).

Also, there are lots of times when landlords want their properties back for various reasons. Factor in moving costs and the pain associated with it. I'm not saying renting is bad -- a friend of mine has been getting an INSANE deal on a townhouse for the past 10 years because the landlord only cares about making enough to pay for taxes and that my friend keeps the house maintained. His situation is such that it makes financial sense to continue renting. However if he HAD purchased at the same time as I did he would have earned a lot of equity. Trying to predict the housing market is just like predicting the stock market -- a bad idea.

fasttimes said:Further more, this calculator doesn't even take into consideration your tax bracket.

Click "General" under Advanced Settings on the upper right. You can change your investment return, tax bracket and inflation rate.

This is a great calculator, I love the graph. Much more informative than the usual "yes" or "no" answer given by these types of things.

Even if it is a bit better to rent financially, who the heck wants to live in an apartment their whole life?

There's something to be said for privacy, a sense of ownership, stability, etc..

I like knowing I can change my dwelling. I like knowing I control everything about my place. I like the room.

I wouldn't give all that up to live like a college kid again just to save a few bucks.

/shrug

All I could think about while reading this post is wow why would these people want to live in a box with others, and even possibly raise a family in an apartment, with no yard, and most times no pets, etc.. Apartments would be boring for kids.

Now if you're renting a house, some of these go away. But a lot don't.