renting vs buying a home

Posted by Greg Hancock

West Chester Renters, a Brand New Tesla (in 5 Years)? 

My 5-year Tesla Plan is fanciful, but based on what could be the situation some West Chester renters can probably relate to.

The imaginary 5-year Tesla Plan participant could be any gainfully employed West Chester renter who has been living comfortably in a nice rental for the past few years. It’s either a comfortable home or a nice apartment: that doesn’t matter. But - buying a home for sale in West Chester, Ohio instead of renting may just make that new Tesla affordable; crazy math?

west chester homes for lease

Homes for Sale in West Chester, Ohio

What’s important is that the average monthly rent has been rising. It’s now $1,570. This is now gobbling up just about every spare dollar of the West Chester renter’s income, perhaps leaving only an annual $6,000 bonus for savings, which the tenant has banked religiously for the past five years. The renter is driving a seen-better-days Subaru, newly paid-off. In fact, the renter has recently been tempted to take that $30,000 bonus savings and buy a brand new Tesla Model 3 sports sedan—but so far, prudence has won out (besides, the trove is $5,000 short of the Tesla’s price tag).

The 5-year Tesla Plan gets started with a call to my office (actually, any West Chester REALTOR® could be called—but this is my Tesla Plan, after all!) The object is to find a suitable West Chester home to buy. This we accomplish with a spacious 3-bedroom 2 ½ bath in an out-of-the way location. Its asking price is low because the motivated seller has been absent for months and now, in July, the yard looks terrible. So it’s a real buy at the just-reduced asking price of $210,000. (Whether the actual number is $210,000 or $2,100,000—the logic remains).

Rent vs Buy a Home in Southern Ohio

Consider Homes for Sale in West Chester, Ohio. Quit Renting!

The average nearby comps come in at $240,000, so the bank has no trouble offering a home loan at that week’s rate of 3.835%. The bonus trove will cover nearly 15% as a down payment (saving those annual bonuses instead of buying the Tesla was certainly a good idea)! Because the down payment was less than 20%, the new homeowner will have to add about $65 a month extra for private mortgage insurance (PMI)—but even so, it’s still a great deal. There are lots of good deals in these Cincinnati real estate markets.

The bottom line is a monthly mortgage payment of $1,137 including property tax, house insurance, and the PMI insurance. So the proud new West Chester homeowner is now saving $433 every month. This might seem to be an annual saving of $5,200—but that’s not so! There are two other financially lucrative things going on that weren’t available to renters.

First is the appreciation in the value of the house once the yard is back in shape. But that’s not part of the 5-year Tesla Plan—it’s just a long-term bonus. Need a mortgage calculator?

The second advantage most definitely is: a hefty income tax break. During those first five years, the mortgage interest paid equals $32,636—the entirety of which is a federal income tax deduction. So is the $3,900 in PMI payments. In the 25% tax bracket, that comes to $9,134 less headed to Uncle Sam. When you add everything together, during the first five years, the new homeowner will have pocketed about $35,134.

That’s good because it just so happens that the Tesla Model 3 is being advertised at a starting price of $35,000. So who needs to even trade in the now-rusty Subaru?

That’s my fanciful 5-year Tesla Plan—which gets you your new Tesla at the same time you are establishing a long-term West Chester real estate investment. Individual tax situations differ, and should be always be referred to a tax professional—but you don’t have to be driving a rattletrap Subaru to benefit from the moral of this story—which is the undeniable financial advantage in store for West Chester renters who make the arithmetic work for them when they choose to become West Chester owners. Also, it’s easy to start: just give us a call!

greg hancock, realtor ohio

Greg Hancock

Realtor, Webmaster, Social Media 513 360 7061

Greg@SWOhiorealestate.com

Contact my business partner Marty Snyder Cell: 513 292 9374

Marty@SWOhiorealestate.com

3 Responses to "renting vs buying a home"

Tara wrote: Now that is crazy math, I thought at first you were joking but so my situation. Like your website by the way. Do you guys work in Blue Ash / Cincinnati? I'm looking at buying a home, but not sure about this year.

Posted on Monday, July 31st, 2017 at 7:28am.

Greg Hancock wrote: Hi Tara, :) glad you liked my article. A lot of real estate blogs are a bit dry so I do try some humor or fun stuff here and there but yes, it is crazy math but sound if you work it on out. We do help sellers and those buying homes in Cincinnati real estate markets including Blue Ash. (see Communities at the top of the site).

I also suggest looking through the buyer resource links up top too. I sent you an email with a few basic questions. If you could answer those my business partner, Marty Snyder, and I will help you get off to a great start. Thanks for saying hello!

Posted on Monday, July 31st, 2017 at 7:37am.

Marty Snyder wrote: LOL - Greg, while true and I get the "Tesla-Theory" - this was also a funny post. It does make perfect sense though. Home owners do enjoy upwards of 30x more net worth than renters and benefits like lower auto-insurance. Owning a home responsibly can do might things for one's finances if one buys a home wisely.

Posted on Tuesday, August 1st, 2017 at 9:00am.

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