Monday, January 14, 2008

Rent vs. Own

Quite a productive day of writing. I feature one house then I stumble upon another piece of information that reminds me of something else.

For example, when researching comparable rents for another post, I found a 2 bed, 2 bath rental in downtown Long Beach for $1,500. Decent rent. Later, when skimming through Redfin, I noticed a place for sale in the same building as the rental. What a perfect opportunity to discuss the supposed advantages to purchasing a condo in this "buyer's market."

First, the condo for sale:

Address: 1187 East 3rd St. #103, 90802

Asking Price: $260,000

Size: 1 beds, 1 baths, 778 sq. ft. (built in 1969)

$/Sq. Ft.: $334

Purchase price: $60,000

Purchase date: 6/3/1994

MLS#: R800186

On Redfin: 8 days

Description: Rarely on market, Whitley Bay one bedroom condo - very spacious. Gated complex with parking space in gated garage. Walking distance to beach. Close to downtown area with great entertainment and restaurants. Close to the Blue Line and other public transportation. Fantastic square footage for a one bedroom unit. Nice sized rooms. Lot's of potential!!!

Unneccesary apostrophe, meet excessive exclamation points: "Lot's of potential!!!"

"Potential," by the way, is realtor-speak for "absolute sh*thole."

Also, my favorite realtor language of all time is "this won't last!!!!!!11!!" The statement "rarely on market" is in the same ball park. Makes the place seem exclusive, doesn't it? Or, if you're really skeptical, that statement means it's practically a retirement community and the reason they don't come on the market very often is because the residents are on fixed incomes.

Down Payment: $26,000.

Monthly Payment: $ 2030 ($1810 + 220 HOA fees)

Income Requirement: $65,000/yr.

* * * * * * * *

And now the rental in the same building:

Address: 1187 East 3rd St., 90802
Asking Rent: $1,500
Size: 2 beds, 2 baths, ??? sq. ft. (built in 1969)
Description: This wonderful 2 bedroom 2 bathroom aprtment has an expanded kitchen with peninsula which is great for entertaining. It also has a private balcony. There is a very nice common area patio and gated parking for one car plus storage.

Down Payment: $1,500
Monthly Payment: $1,500

Well, that's pretty close, right? $1,500 to rent it, or just $500 more per month to buy it. I'd say we're pretty close to a healthy buy vs. rent ratio, no?

Oops! The rental is for a two bedroom, two bath.

So not only do you pay $500 less per month for an extra bedroom and bath (and the square footage that comes with it), but you have the opportunity to split the rent with a roomate--an option not available if you buy that tiny studio. So, factoring a roomie situation, you just saved yourself $1,250 a month by living in a bigger place that you are not tied to for the next 30 years.

Not to mention, you could have socked away that $26,000 in a 5% E*Trade savings account yielding 5%. That's $1,300 a year, my friend. Not much, but it sure beats dumpint it into a 780 square foot "investment" that will bleed cash to the tune of $500+ a month for the forseeable future.

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