Rent Vs. Buy: The 25-Year-Old Lawyer With a Boyfriend

• April 12th 2013

by Shilpi Paul

In our third test drive of the Rent vs. Buy calculator from The New York Times, UrbanTurf is crunching the numbers for one of our readers.

Before we get to the details, a quick refresher as to how the calculator works. Users input their monthly rent and their desired home price point, in addition to a slew of variables like down payment amount, probable mortgage rate, property taxes, condo fees and the rate of home value appreciation and rent increases in their area. The calculator then creates a graphical representation of the time it takes for one to break even on their investment, and the return on that investment going forward. The calculator also lets you compare figures across a theoretical number of years lived in the property, so you can see the cumulative savings or loss.

The tool is not perfect, though, primarily because it does not allow you to enter a variable home price appreciation or rent increase percentage. In other words, if a user enters a home price appreciation rate of 5 percent a year, that level of appreciation is assumed for the entire period of the loan. Similarly, other variables, like increasing condo fees, are not taken into consideration in the analysis.

Our first case was a young woman who was putting 10 percent down and using conventional financing. Next, we looked at a 32-year-old journalist with a smaller budget who was using FHA financing.

Check out our third potential buyer, an UrbanTurf reader, and the three different scenarios, based on varying home price appreciation and rental rate changes, below. If you want to give the calculator your own test, click here, and if you want us to include you as our next subject, email us at editor2013@urbanturf.com.

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Colin — 25-year-old lawyer living with his boyfriend

Colin, a lawyer, and his boyfriend, a recruiter for the government, are currently paying $2,800 per month to rent a unit in Woodley Park. They are considering buying a two-bedroom in Columbia Heights, Shaw, the H Street Corridor, Eastern Market or Capitol Riverfront, and have a budget of $550,000. They can put down 10 percent of the total price, or $55,000.

Here are some of the other variables that we incorporated into the scenarios below:

• Condo fees: $300 a month
• Annual renovation costs: 0.5 percent of the purchase price
• Annual maintenance costs: 0.5 percent of the purchase price
• Homeowner’s insurance rate: 0.5 percent of the home’s value

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Scenario #1

Our first scenario assumes a home price appreciation of 1 percent a year, and a rental rate increase of 3 percent a year. Assuming these numbers, it would take Colin about 7 years to break even on his investment, according to the calculator. A graphical representation of the rent versus buy breakdown for this scenario can be seen below.

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Scenario #2

Our second scenario assumes a home price appreciation rate of 2 percent a year, and a rental rate increase of 2 percent a year. Assuming these numbers, it would take Colin 5 years to break even on his investment, according to the calculator. A graphical representation of the rent versus buy breakdown for this scenario can be seen below.

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Scenario #3

Our third scenario assumes a home price appreciation rate of 1 percent a year, and a rental rate increase also of 1 percent a year. Assuming these numbers, it would take Patrick 8 years to break even on his investment, according to the calculator. A graphical representation of the rent versus buy breakdown for this scenario can be seen below.

This article originally published at https://dc.urbanturf.com/articles/blog/rent_vs._buy_the_28-year-old_lawyer_with_a_boyfriend/6920.