Michael Long's analysis is completely bogus. He concludes that
"Now...let's say you sell it for the EXACT SAME PRICE you bought it for 4 years from now. $400,000 minus commission and closing costs would put you around $375,000. Pay off your mortgage and you put $40,488 in your pocket not to mention all the money you saved from tax deductions. So, your initial investment of $40,000 and you break even...IF you sell for exact same price. So basically you lived in your condo for free on top of all those other perks of buying."
The suggestion that you're living there "for free" is absolute ridiculous because he's ignoring the monthly payments, simply waving his hands and saying that you get to write them off. Well, if you're in the 28% marginal tax bracket, that means you're writing off 28% of the payment, but you still have to pay 72% out of pocket.
Here's a quick and dirty analysis:
Assume a $400,000 purchase price with 10% down. That gives you a monthly P&I payment of $2,121.73 at an effective annual rate of 6%. Add in monthly costs of $200 for assessments, $50 for insurance, $125 for PMI, and $500 for taxes. So your total cash outflow over 4 years is:
$40,000 down payment
$143,843 in monthly payments
What do you get in return?
When you sell the house, assuming a $400K sales price, you net $376,000 after a 6% commission. When you pay off the mortgage of $340,080 after 48 payments, you're left with $35,920.
On top of that, you get the tax benefits from the interest you paid and, I'll assume, the PMI and taxes. At a 28% tax rate, the savings are $31,338.
So you've paid a total of $183,843 over 4 years, and gotten back ($35,920 + $31,338), so your net out of pocket is $183,843 - $67,259 = $116,585.
What you're also getting in return in a place to live. You're paying out a net $116,585 to live in a place for 48 months, so you're paying $2,428 per month for that privilege. If you could rent a comparable place for $1,800 a month, you would save ($2,428 - $1,800) * 48 = $30,184 over 4 years by renting.
This ignores things like:
- the opportunity cost of the downpayment
- present value factors more generally
- future rent increases/decreases
- home repair costs
- value of living in a place that you can alter to your needs
- lots of other stuff
But to pretend that you'd live in the house for free under the assumptions given by Michael Long is ridiculous.