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Rent vs Buy

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Loan Information Loan-to-value ratio Loan amount Interest rate Loan term (years) Payments (per year) Prepayment Penalty,% Discount Points 80% $384,000 9.60% 30 12 3.50 4.00 Property Information Purchase price $480,000 First Year Rent Year $42,280 First Year Rent/ Month $3,523 Rental growth rate 3.00% Property growth rate 2.70% First Year Insurance $2,200 First Year Maintenance $2,700 Expense growth 2.40% Marginal tax rate 50.00% Property tax % 2.75% Selling expenses (not tax deductible) ? Capital Gains tax % 0.00% Alternative After-Tax Return, % 5.40 Property Tax is calculated based on the BOY Property Value. Property Tax and Interest are tax deductible. Expecting to Sell the Property at EOY: Discount Fees are eligible for tax deduction at the time of purchase (time o) of this property. Adequte cash is available for down payment and payment of dicount fees. Prepayment Penalty % is applied to the loan balance at the time of prepayment. 2 Break-Even Rent/Year for Year 1 $42,280 Buy (Own) versus Rent: After-Tax IRR, % rounded to 2 decimal places: Decision (RENT, BUY, OR INDIFFERENT): ? ? ? ? Monthly Mortgage Payment Annual debt service (payment) Down Payment Discount Fee Charge After-Tax Discount Fee Charge Equity Investment ? ? o (Now EOY 1 EOY 2 Loan Amortization: End of year Payment Balance Interest Principal EOY o (Now) EOY 1 2 ? ? Property value Property taxes Insurance Maintenance Principal and Interest Cash Outflows before taxes Property taxes Interest Total tax deductions Tax savings After tax cost of owning Rents Incremental AT CF, Operating ? ? Sales price ? Selling Costs Mortgage balance Prepayment Penalty Benefit from sale (own - rent) Year Sold 2 o (Now (Now EOY 1 ? EOY 2 ? ATIRR ? Incremental AT CF, Owning Decision (RENT, BUY, OR INDIFFERENT): ? ? Loan Information Loan-to-value ratio Loan amount Interest rate Loan term (years) Payments (per year) Prepayment Penalty,% Discount Points 80% $384,000 9.60% 30 12 3.50 4.00 Property Information Purchase price $480,000 First Year Rent Year $42,280 First Year Rent/ Month $3,523 Rental growth rate 3.00% Property growth rate 2.70% First Year Insurance $2,200 First Year Maintenance $2,700 Expense growth 2.40% Marginal tax rate 50.00% Property tax % 2.75% Selling expenses (not tax deductible) ? Capital Gains tax % 0.00% Alternative After-Tax Return, % 5.40 Property Tax is calculated based on the BOY Property Value. Property Tax and Interest are tax deductible. Expecting to Sell the Property at EOY: Discount Fees are eligible for tax deduction at the time of purchase (time o) of this property. Adequte cash is available for down payment and payment of dicount fees. Prepayment Penalty % is applied to the loan balance at the time of prepayment. 2 Break-Even Rent/Year for Year 1 $42,280 Buy (Own) versus Rent: After-Tax IRR, % rounded to 2 decimal places: Decision (RENT, BUY, OR INDIFFERENT): ? ? ? ? Monthly Mortgage Payment Annual debt service (payment) Down Payment Discount Fee Charge After-Tax Discount Fee Charge Equity Investment ? ? o (Now EOY 1 EOY 2 Loan Amortization: End of year Payment Balance Interest Principal EOY o (Now) EOY 1 2 ? ? Property value Property taxes Insurance Maintenance Principal and Interest Cash Outflows before taxes Property taxes Interest Total tax deductions Tax savings After tax cost of owning Rents Incremental AT CF, Operating ? ? Sales price ? Selling Costs Mortgage balance Prepayment Penalty Benefit from sale (own - rent) Year Sold 2 o (Now (Now EOY 1 ? EOY 2 ? ATIRR ? Incremental AT CF, Owning Decision (RENT, BUY, OR INDIFFERENT)