Came across this interesting video on trying to objectively calculate the difference buying and renting, thought I'd try and work out my own figure. Spot any errors?
A rated / new build | Amount / % | Comment |
Overall Value | € 875,000.00 | |
Equity | € 465,000.00 | |
Debt | € 410,000.00 | |
Scenario 1: Using a tax free (eg Pension) return on Equities | ||
Property Tax | 0.11% | |
Maintenance & home improvements | 0.33% | new build thus low figure, will increase the older the house gets |
Cost of debt | 1.22% | 2.6% rate, applied to the Debt, then expressed as a % of the overall value |
Cost of equity (no tax applied) | 1.59% | 3% rate, applied to the Equity, expressed as a % of the overall value |
TOTAL | 3.25% | |
Scenario 2: Using a taxable (top rate 52%) return on Equities | ||
Property Tax (from 2022) | 0.11% | |
Maintenance & home improvements | 0.33% | new build, this figure will increase the older the house gets |
Cost of debt | 1.22% | 2.6% rate, applied to the Debt, then expressed as a % of the overall value |
Cost of equity (after tax) | 0.77% | 1.44% (3%*48%) rate, applied to the Equity, expressed as a % of the overall value |
TOTAL | 2.42% | |
Market Rent | € 4,000 | Monthly mortgage payment is ~€1,800 |
Scenario 1 | ||
Calculated rental maximum | € 2,368 | per month |
Calculated property price based on market rent | € 1,478,028 | |
Scenario 2 | ||
Calculated rental maximum | € 1,764 | per month |
Calculated property price based on market rent | € 1,984,666 |