This is a pretty snazzy 2004 mansion on Round Hill that didn’t sell a few years ago even though it was marked down from $13.9 to $9.999 million. But it’s got everything a young executive eager to impress should have: 6.5 acres of great lawns, huge, sweeping staircase, marble everywhere, pool, pool house, etc. etc. As of today, you can rent it for $30,000 a month. Just for a lark, I ran some numbers through the rent vs. buy calculator to the right of this blog and tossed in some top-of-the-head assumptions: selling price, $10 million, taxes, $45,000, mortgage, $1 million at 6.15%, rent, $30,000 per month. The calculator’s conclusion:
If you assume a 5% appreciation in value, buying is a better deal than renting after 6 years. At 4% appreciation, it will take 14 years for buying to make sense and at any rate below that, buying never makes (economic) sense. Never is a long time.
So depending on how you guess the market will perform and what your feelings are towards owning a nice house versus merely occupying it, you can choose as you wish. What I find interesting is that until 2006, I don’t think anyone would conclude that renting was the better deal. Now it could be.