Buy Versus Rent Analysis Introduction
This Excel workbook analyzes the benefit (or loss) of purchasing versus renting a home. Several assumptions need to be made in any analysis. After clicking the "Assumptions Page" button below, enter assumptions specific to the property being analyzed. (Enter assumptions in cells with a crimson border.) Other assumptions are imbedded within the program logic. These are summarized below. The file is provided on an "as-is" basis. The file is intended only to assist with financial decisions, is broad in overall scope, and does not consider the personal financial situation of the user. If the users personal financial situation is unique, then the information and advice may not be appropriate for the given situation. Therefore, before making any final decisions or implementing any financial strategy, Basis R/E recommends that you obtain additional information and advice from an accountant and other financial advisors who are fully aware of the individual circumstances of the scenario for which it is prepared. Overall Assumptions - Property is purchased on January 1st - No private mortgage insurance. Buyer uses a higher rate second mortgage instead. - Property is the buyer's primary personal residence - Parking is included within the home's purchase price - The following expenses are projected to rise at the rate of estimated inflation: - Property taxes - Utilities - Neighborhood/Condo fee - Maintenance, repairs, & misc.
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SUBMIT
Click Submit when all assumptions are entered.
Buy Versus Rent Analysis Assumptions
Purchase Details Purchase Price Down Payment Closing Costs Annual Property Tax Rate Annual Appreciation Rate Annual Maintenance, Repairs, Etc. Annual Homeowners Insurance Monthly Utilities Monthly Neighborhood/Condo Fee Costs at Time of Sale Buyer Agent Listing Agent Closing Costs Primary Mortgage Amount of Loan Amortization Schedule (yrs) Interest Rate? Select Product $100,000 $20,000 $1,200 1.00% 3.00% 2.00% 0.33% $0 $0 Buyer's Tax Rates Federal Rate State Rate Blended Rate Rental Monthly Rent Monthly Parking Monthly Utilities: Economic Variables Estimated Inflation Estimated Market Returns Invest Tax Savings? Invest Cash Flow Savings? Second Mortgage Amount of Loan Amortization Schedule (yrs) Interest Rate? Select Product 28.0% 0.0% 28.00%
$675 $0 $0
2.25% 2.25% 1.50%
3.25% 7.50% No No $0 0
$80,000 30 6.25% 30-year fixed rate
Applicable for ARM and interest only
Applicable for ARM and interest only
© Basis Real Estate Advisors, LLC info@basisadvisors.com
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Buy Versus Rent Analysis 10-Year Schedule
Year 1 BUYING Cash Flow When Purchasing Home Income Other Income Expenses Property Taxes 2 Insurance 2 Utilities 1 Neighborhood/Condo Fee 1 Assessment 1 Maintenance, Repairs, & Misc. 1 Net Operating Income Principal on Primary Mortgage Interest on Primary Mortgage Principal on Second Mortgage Interest on Second Mortgage Subtotal: Mortgage Payments Total Cash Flow When Purchasing Home Tax Benefits When Owning Home Mortgage Interest Deduction Property Taxes Deduction Subtotal: Tax Benefits When Owning a Home Return on Invested Tax Savings (M) Total Tax Benefits When Owning a Home Equity From Owning Home Property Value (appreciating at 3% (M)) Balance Primary Mortgage Balance Second Mortgage Realtor & Closing Costs on Sale Net Equity in Home Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
n/a ($1,000) ($333) 0 0 0 (2,000) ($3,333) ($937) (4,973) 0 0 ($5,911) ($9,244)
n/a ($1,030) ($343) 0 0 0 (2,065) ($3,438) ($998) (4,913) 0 0 ($5,911) ($9,349)
n/a ($1,061) ($353) 0 0 0 (2,132) ($3,546) ($1,062) (4,849) 0 0 ($5,911) ($9,457)
n/a ($1,093) ($364) 0 0 0 (2,201) ($3,658) ($1,130) (4,781) 0 0 ($5,911) ($9,569)
n/a ($1,126) ($375) 0 0 0 (2,273) ($3,773) ($1,203) (4,708) 0 0 ($5,911) ($9,684)
n/a ($1,159) ($386) 0 0 0 (2,347) ($3,892) ($1,280) (4,631) 0 0 ($5,911) ($9,803)
n/a ($1,194) ($398) 0 0 0 (2,423) ($4,015) ($1,363) (4,548) 0 0 ($5,911) ($9,926)
n/a ($1,230) ($410) 0 0 0 (2,502) ($4,141) ($1,450) (4,461) 0 0 ($5,911) ($10,052)
$1,393 280 $1,673 n/a $1,673
$1,376 288 $1,664 n/a $1,664
$1,358 297 $1,655 n/a $1,655
$1,339 306 $1,645 n/a $1,645
$1,318 315 $1,633 n/a $1,633
$1,297 325 $1,621 n/a $1,621
$1,274 334 $1,608 n/a $1,608
$1,249 344 $1,593 n/a $1,593
$103,042 (79,063) 0 (6,167) $17,812
$106,176 (78,065) 0 (6,355) $21,756
$109,405 (77,003) 0 (6,548) $25,854
$112,733 (75,873) 0 (6,747) $30,113
$116,162 (74,670) 0 (6,952) $34,540
$119,695 (73,390) 0 (7,164) $39,142
$123,335 (72,027) 0 (7,382) $43,927
$127,087 (70,577) 0 (7,606) $48,904
Equity From Investing any Cash Flow Savings When Buying Instead of Renting Return on Cash Flow Savings When Buying, if any (M) n/a Net Equity When Buying a Home $10,241
n/a $14,071
n/a $18,052
n/a $22,189
n/a $26,489
n/a $30,960
n/a $35,609
n/a $40,445
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Buy Versus Rent Analysis 10-Year Schedule
RENTING Cash Flow When Renting Home Rent 2 Parking 1 Utilities 1 Total Cash Flow When Renting
($8,100) 0 0 ($8,100)
($8,343) 0 0 ($8,343)
($8,593) 0 0 ($8,593)
($8,851) 0 0 ($8,851)
($9,117) 0 0 ($9,117)
($9,390) 0 0 ($9,390)
($9,672) 0 0 ($9,672)
($9,962) 0 0 ($9,962)
Equity From Investing Down Payment any Cash Flow Savings When Renting Instead of Buying Invested Assets (M) $22,846 $24,619 Return on Cash Flow Savings When Renting, if any (M) n/a n/a Net Equity When Renting $14,746 $16,276 Net Savings/(Expenses) From Purchasing Home (Pre-Sale) Net After-Tax Savings/(Expenses) From Purchasing Home (Pre-Sale) Net Savings/(Expenses) From Purchasing Home (Post-Sale) Gain on Sale Exclusion Taxable Gain Tax Net After-Tax Savings/(Expenses) From Purchasing Home (Post-Sale) Net Savings/(Expenses) and Internal Rate of Return Summary (Post-Sale) Year Sold NPV IRR 0 1 ($3,437) -13.49% -$21,200 2 $338 4.08% -$21,200 3 $4,137 9.72% -$21,200 4 $7,960 12.12% -$21,200 5 $11,807 13.25% -$21,200 6 $15,676 13.80% -$21,200 7 $19,567 14.04% -$21,200 8 $23,479 14.12% -$21,200 9 $27,411 14.11% -$21,200 10 $31,364 14.04% -$21,200 ($1,144) $529 $17,812 ($3,125) $0 $0 $0 $17,812 ($1,006) $658 $21,756 ($179) $0 $0 $0 $21,756
$26,531 n/a $17,937 ($864) $791 $25,854 $2,857 $2,857 $0 $0 $25,854
$28,590 n/a $19,739 ($718) $927 $30,113 $5,986 $5,986 $0 $0 $30,113
$30,810 n/a $21,693 ($568) $1,066 $34,540 $9,209 $9,209 $0 $0 $34,540
$33,202 n/a $23,812 ($413) $1,208 $39,142 $12,531 $12,531 $0 $0 $39,142
$35,779 n/a $26,107 ($254) $1,354 $43,927 $15,954 $15,954 $0 $0 $43,927
$38,557 n/a $28,595 ($90) $1,503 $48,904 $19,481 $19,481 $0 $0 $48,904
1 $18,341 $529 $529 $529 $529 $529 $529 $529 $529 $529
2 $22,414 $658 $658 $658 $658 $658 $658 $658 $658
3 $26,645 $791 $791 $791 $791 $791 $791 $791
4 $31,040 $927 $927 $927 $927 $927 $927
5 $35,605 $1,066 $1,066 $1,066 $1,066 $1,066
6 $40,350 $1,208 $1,208 $1,208 $1,208
7 $45,281 $1,354 $1,354 $1,354
8 $50,407 $1,503 $1,503
Net Savings/(Expenses) Cash Flows and Internal Rate of Return Summary (Renting) Year NPV IRR 0 1 1 ($5,810) -25.05% -$21,200 $15,890 2 ($3,881) -6.97% -$21,200 $1,144 3 ($2,067) -0.41% -$21,200 $1,144 4 ($363) 2.77% -$21,200 $1,144 5 $1,239 4.54% -$21,200 $1,144 6 $2,746 5.60% -$21,200 $1,144
2 $17,282 $1,006 $1,006 $1,006 $1,006
3
4
5
6
7
8
$18,801 $864 $864 $864
$20,457 $718 $718
$22,261 $568
$24,224
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Buy Versus Rent Analysis 10-Year Schedule
7 8 9 10 $4,166 $5,505 $6,770 $7,968 6.25% 6.66% 6.91% 7.06% -$21,200 -$21,200 -$21,200 -$21,200 $1,144 $1,144 $1,144 $1,144 $1,006 $1,006 $1,006 $1,006 $864 $864 $864 $864 $718 $718 $718 $718 $568 $568 $568 $568 $413 $413 $413 $413 $26,361 $254 $254 $254 $28,685 $90 $90
Notes: 1. Assumed to increase equal to the rate of inflation. 2. Assumed to increase equal to the rate of property appreciation. 3. All figures are compounded annually, unless indicated with a (M). © Basis Real Estate Advisors, LLC info@basisadvisors.com
This electronic file may not be copied, reproduced, modified, published, displayed, uploaded, posted, reposted, distributed, transmitted, used to create a derivative work, or otherwise used for public commercial purposes in part or in its entirety without the prior written permission of Basis Real Estate Advisors (Basis R/E).
The file is provided on an "as-is" basis. The file is intended only to assist with financial decisions, is broad in overall scope, and does not consider the personal financial situation of the user. If the users personal financial situation is unique, then the information and advice may not be appropriate for the given situation. Therefore, before making any final decisions or implementing any financia strategy, Basis R/E recommends that you obtain additional information and advice from an accountant and other financial advisors who are fully aware of the individual circumstances of the scenari for which it is prepared. Basis R/E does not make any representations, warranties or guarantees, express or implied, regarding the accuracy, correctness, or completeness of the file, nor the safety reliability, title, timeliness, completeness, merchantability, conformity or fitness for a particular purpose of the file. It is your sole responsibility to independently evaluate the accuracy, correctness or completeness of the file.
Year 9
Year 10
n/a ($1,267) ($422) 0 0 0 (2,583) ($4,272) ($1,544) (4,367) 0 0 ($5,911) ($10,183)
n/a ($1,305) ($434) 0 0 0 (2,667) ($4,406) ($1,643) (4,268) 0 0 ($5,911) ($10,317)
$1,223 355 $1,578 n/a $1,578
$1,195 365 $1,560 n/a $1,560
$130,952 (69,033) 0 (7,838) $54,082
$134,935 (67,390) 0 (8,076) $59,469
n/a $45,477
n/a $50,712
($10,261) 0 0 ($10,261)
($10,569) 0 0 ($10,569)
$41,550 n/a $31,289 $78 $1,656 $54,082 $23,115 $23,115 $0 $0 $54,082
$44,776 n/a $34,207 $251 $1,812 $59,469 $26,859 $26,859 $0 $0 $59,469
9 $55,737 $1,656
10 $61,281
9
10
$31,211 ($78)
$33,956
ork, or otherwise used for public or
al situation of the user. If the ns or implementing any financial al circumstances of the scenario eness of the file, nor the safety, e the accuracy, correctness or
Total Mortgage/Rent Comparison of Buying Vs. Renting a Home Mortgage/Rent Payments Tax SavingsEquity in Home/Investment Ownership/Rental Expenses Total Equity In Buy ($59,109) #REF! $16,230 $50,712 Year 10 #REF! $60,000 $50,712 Rent ($92,857) $0 $0 $34,207 ($58,650)
$40,000 $20,000
$0 $16,230 $0 $0 $34,207
$0
($20,000) ($40,000) ($60,000)
($59,109)
($80,000) ($100,000) ($120,000)
($92,857)
Buying a Home
Mortgage/Rent Payments Tax Savings
Renting a Home
Ownership/Rental Expenses Equity in Home/Investment
Net Equity Comparison Buying vs. Renting a Home
$60,000 $50,000 Year Buy Equity $40,000 Rent Equity $30,000 $20,000 $10,000 $0
1 $10,241 $14,746
2 $14,071 $16,276
3 $18,052 $17,937
4 $22,189 $19,739
5 $26,489 $21,693
6 $30,960 $23,812
7 $35,609 $26,107
8 $40,445 $28,595
9 $45,477 $31,289
10 $50,712 $34,207
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4
5
Years
6
7
8
9
10
Equity When Buying a Home Equity When Renting a Home