Although currently a renter, at some point I would like to buy a home. Which is why I’m relieved the housing bubble is finally collapsing, and at an accelerating rate at that.
Because I do plan to buy at some point, I decided to make a rent/buy comparison spreadsheet. I know there are already a lot of these out on the internet (nytimes has a very nice one), but nothing that lets you see year-by-year calculations and/or modify any parameter you want. Plus I was bored. Because really, who doesn’t dick around in excel when they’re bored?
UPDATE: I made it a little prettier, changed the some of the decimal entries to percentage entries, and corrected calculation of rent deposit–I had the deposit as negative and the return of deposit as positive, but should be opposite since this is the value of buying a house—you don’t have to make a deposit and by the same token don’t get one back.
UPDATE 2: a couple more cosmetic changes, and I changed the property taxes so the the value on which they are calculated is based on annual 2% growth or annual nominal growth of the home price, whichever is smaller. This reflects California tax law (prop. 13). If you are using this for another state then you will have to make your own modifications.
It uses Net Present Value calculations, which means that anytime the orange box labeled “NPV Buying House” is positive, then buying a house is a good investment, and vice versa. Because I use NPV, the calculations are fairly sensitive to your required return, which is rate of return you expect to earn on your non-housing investments.
Finally, there’s a very good chance I made some errors when constructing this thing (besides it just looking hideous). Let me know if you see any, or if you have any good ideas for changes.
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