To Rent or Buy: A Comprehensive Report and Analysis

2015.9.26: To Rent or Buy: A Comprehensive Report and Analysis

S: 12:30pm – 1:44pm +30 minutes for map

Location:

Location, location, location.  If I choose the wrong location, then all the other factors are mostly meaningless.  I want a location that is convenient for three of my major activities: worshipping, working, and shopping.  Since I have a bias on God, I placed more value on the location of my church, followed by my workplace, and finally, where I shop.  The squares are the ideal zones I am considering.  

To Buy:

+ Supernatural Church

            The church I go to is a very special church; It is an end-time, supernatural church.  I thought about moving out of El Paso but my mentor told me that since we are living in the end-times, we need to attend a supernatural church, which I agree.

+ Can form a HOP

            In addition to my church, by buying, I may even be able to form my own House of Peace or HOP. 

+ Can earn additional income by renting to others / help others by giving them shelter

            Please also read “Paying interest if I buy” note.  If I do this right, I can have renters in my house which can help me pay for my mortgage.  Additionally, I might be able to invite them to my church.  Also, and I had this idea since high school, one way I was thinking about helping the homeless is not just by giving them money or giving them a fish, but by housing them, taking care of them, and developing them so they can become self-sufficient.  The idealist side of me.  It’s far-fetched, but still possible.

+ Home ownership

            Owning a home makes me feel good.  I can have more freedom to do what I want with it, I do have big plans for my future house.  For one, I can plant fruit trees, just like what my dad did at his house in Los Angeles.  Also, I realize that any money I put in, whether though mortgage or improvements, goes to my house.  Of course, mortgage is more important and I will focus on that first.  I am also even thinking about dedicating a room just for God, like a temple in the old times.

+ VA Home loan advantage

            Can buy at zero-down, preferred rates

To Rent:

+ Desert land

+ Neutral outlook on job employment and salary

            Just found a job at Xerox, so far, it’s OK, enjoy helping people, but not fairly certain whether I will stay at this job.

+ Paying interest if I buy: current market rates for a 30-year loan fixed is about 4.25% (mostly lower but I want to give myself some slack for worse-case scenarios).  This means if I buy a $125,000 house, I pay a total of $221,373.  Finding the difference gives me $96,373 or $267.70 per month of total interest.  However, I do want to note that the average annual U.S. inflation is around 3% a year, so if I pay the $615 monthly payment that is required, I only pay around 1.25% in real interest (or $70 a month).  Obviously, I will get the 30-year fixed.  To note on the $70 a month in real interest, if I just rent out to one person, I am making up more than the difference.

+ Start-up fees.  This includes the commission costs, closing costs, and beginning innovation and maintenance costs.  It’s not as bad because the VA home loan forbids many of the costs but it’s still worth mentioning here.  This, however, happens to every homebuyer.  As for home maintenance, I see myself as a jack-of-all trades guy and if I can find how to do it on google, I most likely should be able to do it.

+ Low cash reserves: I do have some cash reserves, classified, but I feel with my current cash on hand, the safety cushion is a bit low.  It’s like driving behind a car but tailgating with only a 1 or 1.5 second gap.  Increase that to 2 or more seconds and I will feel better (increase current cash reserves by 25%). 

+ My home church may move: The pastors are talking about this a lot and I’m excited!  However, in terms of settling down for a permanent residence, this is not good news as it adds unpredictability. 

+ Student loans and obligations: Have to mention this but it’s not so bad because for student loans, I qualify for income-based repayment which, based from their calculations, I will pay a low amount.  The only other obligation is my universal life insurance indexed.  This is not so bad as the money I put in it will grow, I just need to give it time.  In 10 years, for example, from the average 7.2% return rate, I will break nearly even with my total payments and I can take interest-free loans (although I dare not).  The more time on this one, it may actually be an advantage to buy.

+ Property Tax: If I buy, I almost forgot to include, but I will also need to pay a property tax.  El Paso County in Texas currently has a property tax rate of 2.09%.  This means a $125,000 house will cost $2,612 annually or about $217 per month.  The annual fee reduces the influence of inflation.  This cost is prohibitive if I choose to live alone.  

Overall Prognosis: Rent (80% rent, 20% buy)

 The fact that I feel my cash reserves is low and my home church may change locations is the leading factor for this one.  The fact that I just landed a job with no tenure is also another factor.  Additionally, the property tax in Texas also discourages me from buying until I have enough cash reserves.  Once my church moves, once I increase my cash reserves, and once I feel more comfortable at my workplace, I will be ready to start buying.  By then, it should be 75% buy and 25% rent, with the 25% rent consisting of opportunities of better jobs (but I’m planning to move up), and the fact that El Paso is on unsustainable land.  But God can make springs from desert.

This report, of course, is the product of my analysis and reasoning and is thus, incomplete.  I did receive limited input from my friends and family and the report is influenced by a limited extent.

PS: This report is also incomplete.  It was an outline and I filled must of the body but I don't have time to completely finish it.  Also, much have happened since this report but I still trust in God.