Final Project

Sidney Thorne

Costs of owning a house vs. renting

Imagine a 14 year old home on sale by the bank. Purchased for $150,000 but with a lot of work
that needs to be done to it over the years. After 15 years of ownership, the house needs serious
work before it is sold. What is the "worth" of owning a home verses renting? What is the better
value in a financial view?
For the purpose of this project, the house would be a 2600 square foot, 5 bedroom, 3 1/2 bath
home on a 1/4 acre lot. The Apartment costs calculated are from a 3 bedroom apartment nearby
to the location of the home, starting with the current cost of rent, and calculating backwards for
15 years with an annual rent hike of $20.
Imagine the house could sell for the current property value that the property is taxable for. The
selling price would be $208,000. Comparing the costs of the house, the "gain" from selling the
house, to renting, what would be the better financial decision to make?
Mortgage payments
$140,915
Rent 2001
755 x 12 = 9060
New Paint (3 times)
$2,500
Rent 2002
775 x 12 = 9300
Carpet Cleaning
$300
Rent 2003
795 x 12 = 9540
New Deck
$5,000
Rent 2004
815 x 12 = 9780
New Fence
$5,000
Rent 2005
835 x 12 = 10020
Put in yard
$1,800
Rent 2006
855 x 12 = 10260
New Roof
$8,500
Rent 2007
875 x 12 = 10500
New Furnace
$2,000
Rent 2008
895 x 12 = 10740
New Water Softener
$1,500
Rent 2009
915 x 12 = 10980
Swamp cooler
$500
Rent 2010
935 x 12 = 11220
Maintenance
Refinish Floor
$1,100
Rent 2011
955 x 12 = 11460
New sprinkler system
$1,700
Rent 2012
975 x 12 = 11700
Rent 2013
995 x 12 = 11940
Rent 2014
1015 x 12 = 12180
Rent 2015
1035 x 12 = 12420
Total

$170,815

Total

$161,100

Selling the house for $208,000 with $103,708 left on mortgage would leave a gain of $104,292.
After subtracting the "cost" of the house up to that point as shown on the table above, the "cost"
of the house would be $66,523 compared to the "cost" of renting which shown on the table
above, would be roughly $161,100. The actual savings would be $94,577 over the course of 15
years.
In this example, the cost of a house for 15 years is 59% less than the cost of renting a 3 bedroom
apartment for 15 years. An apartment would have to be roughly $396 a month with no cost
increase to match the cost of a home for the 15 years of owning the home in this example. That
is 56% less than the average cost of monthly rent at $894.
Using this example to draw a conclusion, if a home is held for a long period of time, the long
term benefits come from owning a home. The example shows that the cost long term is lower
with the owning of a home rather than renting.