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From: canopus@amdahl.UUCP (Frank M. Dibbell, III )
Newsgroups: net.taxes
Subject: RE:  Buying vs renting
Message-ID: <3922@amdahl.UUCP>
Date: Fri, 10-Oct-86 17:25:31 EDT
Article-I.D.: amdahl.3922
Posted: Fri Oct 10 17:25:31 1986
Date-Received: Sat, 11-Oct-86 20:45:18 EDT
Organization: Amdahl Corporation
Lines: 51
Keywords: Lies, damn lies, and statistics

Mike Fulford posts an extract from Consumer Reports magazine, May 81,
regarding an analysis of buying vs renting

> <... main text deleted>

> General terms- these are national averages from 1970-1980 and are not
>              to be used as a comparison with your own situation.
-------------------------------------------------------------------------

The above line says it all.  There is no "average" situation where this
might apply.  Also, the article had a few inaccuracies in it, some of
which can have a profound effect on the outcome:

    1.  The average home price in 1975 was closer to 40,000 than 50,000
        (I bought mine in 1975 for 37,000)
    2.  The interest rate in 1975 was 9%, not 13% as used in the article
        (Payments are around $300.00 as opposed to 425.00 per month)
    3.  175.00 per mo average for utility bill seems a bit high even
        for today, much less 10 years ago.  I didn't even spend that
        much for the whole year of 1976 for my gas & electricity!
    4.  The "time as money" is a red herring.  The fact that you might
        spend 400 hrs per year at a "cost" of 10.00 per hour working/
        maintaining your real property does NOT mean that you would
        have 4000.00 to invest if you were renting.  This was an
        assumption made in the original analysis.
    5.  Timing.  Are interest rates up or down?  Is real property
        appreciating or stagnant?
    6.  Length of analysis.  You stopped after 10 years.  What about
        years 11 through 20?  When I bought my house, rents were on a
        par with my mortgage in 1975.  Today, rents are greater than
        three times my current mortgage.

Other things that are intangible, but nevertheless need to be assigned
a "dollar" value:

    1.  Raising children in an apartment environment vs home env.
    2.  Willingness to live next to/below/above slobs, noisy people
    3.  Willingness to be considerate of neighbors (no loud music/
        parties etc after certain hours)
    4.  Willingness to deal with intransigent apartment owners in
        getting leaky roofs fixed, broken plumbing repaired, etc.
    5.  Your own personal priorities (money == happiness?)

And finally, the biggest assumption of all:  that you would actually
*invest* all that extra cash rather than buying a fancy car, taking
a Caribbean cruise, etc. etc. (Be *real* now - if someone gave you
$5,000 you'd invest it all???)

-- 
Frank M. Dibbell III (408-746-6493)  ...!{ihnp4,cbosgd,sun}!amdahl!canopus
Amdahl Corporation, Sunnyvale CA     [This is the obligatory disclaimer..]