BUY OR RENT?
Let’s compare two families with 25,000 to invest. They are identical in that the two parents both work, have one child and $60,000 annual income. Here’s the result of the two case studies:
Case Study #1: PURCHASE A HOME $250,000
|
Down Payment |
$25,000 |
|
|
Length of Loan Term (years) |
30 |
|
|
Interest Rate |
5.1% |
|
|
Years You Plan to Stay in This Home |
10 |
|
|
4% |
|
|
Yearly Property Tax Rate |
1% |
Own a Home...Make Money: $186,332 After 10 Years -- Good Investment
|
Price of Home After Appreciation |
$370,000 |
|
Remaining Balance After 10 years |
$183,668 |
|
Equity Earned: |
$186,332 |
Case Study #2: PURCHASED $25,000 TREASURY BILL
|
Treasury Bill Term |
10 Years |
|
Amount |
$25,000 |
|
Rent (they don't own) |
$11,800 Annually |
|
Annual Interest Income |
$1,044 (4.1%) |
|
Rent Paid for 10 Years |
$118,000 after 10 Years |
|
T-Bill Value |
$37,644 |
Rent a Home...Lose Money: $80,366 After 10 Years -- Bad Investment
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