Answer:
net annual cost of renting is less than that of purchase
so we can say it is beneficial to rent the property
Explanation:
we know that that Costs Associated with Buying a Property
Annual Mortgage Payment = $ 9800 ( out of $9575 is interest payment)
Property Taxes = $ 1780
Down Payment = $ 4500
Insurance / Maintenance = $1050
Total Costs = 17,130
minus here Tax Savings on Mortgage Interest = $2,681
that is ( 9575 × 28%)
Tax Savings on Property Taxes = $498.40 i.e (28% of 1780)
Growth in Equity = $225.00
Estimated Annual appreciation= $ 1,700.00
Net Annual cost on purchase= $ 12,025.60
Costs Associated with Renting a Property
Annual Rent = $ 7,380.00
Security Deposit = $ 650.00
Insurance = $ 145.00
Total Costs = $ 8,175.00
Less
Interest receivable on
Down payment amt invested = $ 270.00
i.e (4500 6% after tax rate)
Net Annual Cost on Renting = $7,905.00
so that here net annual cost of renting is less than that of purchase
so we can say it is beneficial to rent the property
