Home > Blogs > Texas > Collin County > McKinney > Why are you flushing $20,000 or more down the toilet every year in rent?
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John Greer's Blog

By John Greer | Agent in Dallas County, TX

Why are you flushing $20,000 or more down the toilet every year in rent?


People, whatever you do, if for nothing more than knowing where you stand, get your true FICO score from www.myfico.com. If you are paying  $1500/month you are making a non tax deductable (for most) donation to paying the landlords mortgage down. In this "Landlords Market" people are choosing to rent for one reason or another, I am going to give ya'll a visual that will blow your minds and make you hopefully think a little differently!

If you rent for $1500/month and your rent never goes up for 10 years you have spent  $180,000!
No Deductions just money out the window!

If you purchase the equivalent home $150,000 your entire payment P&I as well as taxes and interest might be around $1200/month +/- over 30 years. If financed for 15 years your payment would be pretty close to the $1500/month+/- you are paying in rent.  

Now for the added bonuses:
1. Mortgage interest deduction lowers your tax liability. 
(example: Lets say $6500 of your first years payments is interest most are allowed the Mortgage deduction which would reduce your income taxes paid! Lets say in this example you make $30,000/yr, you instantly just received a $6500 reduction in your taxable income.)
2. Every year you live in the home you are building massive equity, Start thinking of your home like a huge piggy bank! Below is the example from above, 150,000 @ 4.5% for 15 years
-Year 1 Balance $142,923 Equity $7,077
-Year 2 Balance $135,517 Equity $14,483
-Year 3 Balance $127,766 Equity $22,234
-Year 4 Balance $119,654 Equity $30,346
-Year 5 Balance $111,164 Equity $38,836
-Year 6 Balance $102,280 Equity $47,720
-Year 7 Balance $92,981   Equity $57,019   
-Year 8 Balance $83,249   Equity $66,751
-Year 9 Balance $73,064.93 Equity $76,935.07
-Year 10   Balance $62,405.85 Equity $87,594.15
-Year 11   Balance $51,250.44  Equity $98,749.56
-Year 12   Balance $39,575.58  Equity $110,424.42
-Year 13   Balance $27,357.08  Equity $122,642.92
-Year 14   Balance $14,569.63  Equity $135,430.37
-Year 15   Balance $0    Equity $150,000

Plus any added appreciation if any...

I encourage all to purchase if able and if you are not sure contact me and I will put you in touch with lenders that can make things happen.

If you are interested in the reverse and want to invest in rental homes in this strong rental market the numbers work the same just the rate is a little higher.

***Disclaimer*** All examples are just that and should be verified, not intended to give financial and/or tax advice, This information is the opinions of John Greer solely.

Your Investment Realtor,

John Greer
Realtor/ABR/SFR
United Real Estate Dallas
214-460-8381 Cell/Text
jgreer@unitedrealestatedallas.com
www.johngreerhomes.com

The Seller whether individual,   bank, or builder has someone looking out after their best financial interests and since my services are at no cost to you, put me to work for you today!

 

Buying at the right price now could mean the difference between bringing money to the table or leaving with some in your pocket at the time of resale!

 

It is true you make your money when you buy!

 

EXPERIENCE:

Realtor (2006-Present)

Real Estate Investor (1997-Present)

Landlord/Property Management (1997-Present)

Property Tax Negotiation and Representation (2001-Present)

 

 


Comments

By Donna Ferrell, Broker,  Thu Jul 26 2012, 14:30
Great Info :P
By John Greer,  Thu Jul 26 2012, 14:49
Thanks Donna It's hard for us agents to impress this on our clients most of the time as you well know.
By Michael Brownstead ABR GRI SRS,  Fri Jul 27 2012, 07:04
John, excellent work; you did very well at outlining the true value of buying versus renting. In addition, we as professionals must do everything we can to help those renters who are credit-challenged, that means having all the right tools in our toolbox. Once again, great article, I appreciate it!
By John Greer,  Fri Jul 27 2012, 07:56
Thanks Michael I try my hardest to get people out of the mindset of not caring about credit or accepting that they will always have a house payment, car payment etc... The people that get this will not have the tremendous weight on their shoulders all their lives. There is nothing more exciting to me than seeing a young couple starting out finance a home for say 10-15 years and have a completely paid off home by 30-35! :)
By Zig Ziggler,  Tue Aug 21 2012, 13:47
Nice Job! Way to put it all out there for everyone. Makes me wish I would have bought 4 years ago.
No wait...had I done that, I might have been locked into a home worth less than I owed. It makes me wonder if renters are the real smart ones. They will never take a hit as so many did from 2008 until present. Short Sale Short sale short sale. It's a risk. But hey! You almost had me...truly convincing. You're kind of smart.
By John Greer,  Tue Aug 21 2012, 18:14
Sorry Zig but you missed the point! Bigtime! By renting when you don't have to you choose to voluntarily take the hit month after month! kind of like leasing a car, You can choose to have a car payment the rest of your life or own and only pay gas. Quite liberating to know you just gave yourself a $500-600 Raise doing away with a car payment, now try that with a house payment giving youself $1000-2000 Raise after paying off a home is awesome. I am not belittling those who are renting as everybody has different situations. just hoping to spark a thought as to what you could do with that extra money some would by a more expesive car, boat or other toys that depreciate and sink you financially or you can purchase income producing assets thus giving yourself a raise each and every year offsetting the costs of living that our failing government is raising on us both intentional and unintentional! I wish you all the best!
 
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