Hi blind, I am back with an improved version of my (hacked together) buy vs rent net worth analysis notebook. main numerical changes: - Calculate actual mortgage payments principal vs interest - add 3% closing costs (adjustable) - raise default rent to 4k per feedback (adjustable) The new numbers indicate buying is even more costly compared to rent (on 1.6M house vs 4k rent), about 5.5M net worth difference in 30 years, or ~3M current money at 2% inflation. The net worth gap is a bit surprising to me, but I couldn't find any bugs when I looked. Please let me know if you find any errors. Here is the code. Feel free to play around and leave any feedback. https://colab.research.google.com/drive/106ipdsZXtpRPvCwmcTPoVAMBn6Y-JMdl?usp=sharing Here is the plot:
Doesn’t feel like 1.6M is comparable to 4k. Wouldn’t 4k get you like 600k in house?
I think that is about right for SF, but SF is an absurd market. But the biggest variable is whether the house goes up 15% each year or down 2% each year.
About right for many places in Bay Area
U gotta add the worth of land and house in too no?
It’s added in there in net worth calculation
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
Everything makes sense, when you use a value for inflation thats lower than the average US inflation by about 1.8%
I just use the fed inflation target
We’re currently 5x the target. Its not close to reality.
A 1.6M house can be rented for 4K? Or, are you comparing a 2000 sqft house on a 6000 sqft land with a 1200 sqft condo in a high rise?
I based the numbers on a listing we liked in Kirkland. Listing price 1.6M rent estimate 3.5k
In seattle I live in a ~900K townhome and the rent is 4K. It will easily be 6K minimum for a 1.6M house.
1.6M and 4k rent are apples and oranges. I’m trying to buy a $400k townhome 1600sq ft and I currently pay $1,700 month rent for a 700sq ft apartment. Can’t time the market but rates are only going up so either lock in a lowish rate now or wait 5 years to buy if rates can get back to 3%
Depends on what you get for the price. In the bay area, 1.6M could be like a condo in the city and 4k rent could be a house.
Sadly this is not the kind of thing that is easy to calculate. You are taking a snapshot of a single market at a single date and extrapolating for 30y. Truth is that it's not accurate for everyone who's not in your market, and it'll never be realistic anyway. It's as if I said because stock X went +15% today, it'll go +15% everyday from now on.
The biggest confirmation bias study I have seen in my life
Any feedback? I am trying to get an accurate picture
You were given feedback in the other thread.