Buy vs. Rent --- Harrisonburg Townhouse on Vine Street


Buy vs. Rent --- Harrisonburg Townhouse on Vine Street
By Scott Rogers • February 2, 2008
There are many perspectives on whether it is better to buy or rent --- let's pick one property type, in one imaginary buy vs. rent scenario, and start with a monthly cash flow perspective . . . The townhome pictured to the right, located at 904 Vine Street in Harrisonburg, is listed for sale with a price of $149,000. Since homes sell on average at 97% of their asking price, we'll assume that it may sell for around $144,530. We'll also assume that one might be able to rent it for around $825 per month. If we just consider monthly cash flow, we will discover that it takes a $17,000 down payment (plus closing costs) to keep the monthly mortgage payment in line with the projected $825 per month rental payment. Many buyers of townhomes in this price range do not have $17,000 to put into the transaction --- some only have the closing costs ($3,000 - $4,500). Let's take that angle --- which increases the monthly mortgage cost to $922 per month, or $97 extra each month. So why might someone consider purchasing this townhome rather than renting it? Let's assume, for a moment, that the conflicted buyer-tenant will stay in the townhome for three years. Here's the comparison: 1. The buyer pays $3,492 extra in monthly housing costs ($97 * 36 months) 2. The buyer pays down their mortgage $6,176 during the three years. 3. The buyer pays $23,366 of interest, which saves them approximately $5,841 on taxes (assuming 25% bracket). So far, the buyer is ahead of the tenant by $8,525 by the third year. If we then include a modest 3% per year appreciation, the buyer has gained an additional $13,402. (They don't get this until they sell). Thus, by buying, rather than renting, the net gain comes out to be: - $4,000 purchase closing costs - $3,492 extra monthly housing costs + $6,176 principal reduction + $5,841 tax savings + $13,402 appreciation --------------------------------------------------- + $17,927 net gain after three years One important note --- if the buyer then decides to sell after three years, some portion of their gain will be expended in seller closing costs. Receive Updates by Email Recent Articles: Will Your Offer Terms Cause The Seller To Say YES Or To Seek Other Offers? The Comfortable Feel Of An Established Neighborhood Might Come With, Surprise, An Older Home That Needs Some Updates Home Sellers And Buyers Will Often Disagree About Needed Updates You Cannot Hear Traffic On A Nearby Road By Looking At Photos Last Call (Just About) For Selling Your Home In 2024! Sometimes An Offer Is So Strong A Seller Will Not Wait For Other Imminent Offers If You Will Be Moving To Sunnyside, VMRC Or Bridgewater Retirement Community, We Should Talk Sooner Than Later Sometimes It Makes Sense To Just Adopt The Timetable The Seller Prefers Fewer And Fewer Resale, Detached, Homes Selling In City Of Harrisonburg The Next Owner Of Your Home Might Love Different Parts Of It For Different Reasons, And That Is OK!
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 01, 2024 (unless otherwise noted).
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