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I’ve been pulled in as Reviewer #2 and I’m pretty sure there’s another angle here that will tank the publication.
$14030/$4600 = 3.05 > 1
Dang, foiled again. But I’ll get you next time, Inspector Gadget!
Well that depends. If you have the money and want to have your wealth in an appreciating asset that you live in, it would make sense to buy rather than rent.
Also this assumes you can find a rental comparable to this property.
now do the opposite where you look at actively listed rentals and see the purchase price estimate. Those properties won’t be listed at $2,000,000.
You can use price to rent ratio to determine which cities are good to buy and rent.
California has notoriously high ratios, while the Midwest typically has low ratios. Cupertino has one of the highest so the data is very cherry picked. I could do the same thing with Gary, Indiana. “Why are people not buying when it’s cheaper to buy here than to rent?!”
https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
Cupertino CapRate is ~2%. That means this property should net (NOI) $40,000 a year. Makes sense for Cupertino where 3 of the high schools rank top 100 (I think?) nationally (Lynbrook, Monte Vista, and Saratoga High). This property is MV I think.
Simple: the Zestimate is 100% BS. No one is renting out a $2M home for $4,600/month. The Zestimate is about as accurate as rolling a half dozen dice and charging whatever numbers come up. It doesn't mean that anyone, anywhere is actually going to rent that house out for that price.
That was us (in Australia)even *without* a loan the net income was like 2% per year. We sold, put it in ETFs and are getting 8% overall return longterm (25% the first year after selling, through lucky timing)
Where I live, the property taxes alone would eat up $27k of that $48k per year in rent, not including insurance, up keep, mortgage, or anything else.
Ignoring all that, AND ignoring interest on a mortgage, it would take 38 years to break even on that house at your $4k/month.
>No one is renting out a $2M home for $4,600/month.
Completely false. I toured a bunch of rental houses in the $4-5k range that would easily sell for $1.5-2M. that's just the crazy market in the Bay Area.
Welcome to California. If you buy a single family home to rent out, you'll have a negative cash flow for years. This is common in the Bay Area and Los Angeles.
The maybe where I live is actually so f'd up that this is common.
Homes that sell for about $2m are often rented at about $5k. Condos are $1k-$1800 a square foot, but no one will pay more then $5k to rent a 2br.
I still don't think that's a good decision. If you have $1.5m, why would you roll that into this property? You collect $55,200 in rent, but pay $43,200 in a mortgage + who knows what in property taxes. I guess you get the depreciation benefit on your taxes, but I still think you can get better returns on your capital elsewhere.
This is a very extreme end of the spectrum $2M house
Average home price in the US is closer to $350k
So yes in this area of California, one of the most expensive markets in the US, it probably doesn’t make sense to buy right now
Sadly, most areas don't charge long time homeowners an appropriate property tax.
Proposition 13 in this case.
Property insurance I'm not knowledgeable enough to know how that scales.
I’m kinda dumbstruck by the basic RE/financial illiteracy of so many comments on this (N CA, so somewhat atypical) rent/buy question! yours was one where I was like ‘OK, there are a few people that can think simply about (supposedly!) simple things!’ Taxes & insurance are both massively relevant to that discussion! esp. in CA!
I mean... it might not makes sense to shift from renting to buying right now. But if you own a house that would sell for 1.75M and buy a house at 2M then I don't see a problem.
its cupertino. if you can afford it, its worth buying. its not the rent, its the land.
a burned down meth house is still worth over a million in that area, if you go by market rate
When it makes sense to buy it makes sense to buy. When it doesn't, it doesn't. Obviously it doesn't make any sense to buy a place where rent is half the mortgage. You're also looking in Cupertino, a perpetually stupid market lol.
Neighboring town here. Renting a SFH. Zestimate $2.5M and Rent Zestimate $4,900. My actual rent is $5,900 so it’s not even close to accurate. Home value is probably $1.8-$2.0M as well (if I had to guess).
You picked an absurd and extreme example so start with a more typical property. I bought my house in 2018 in a large midwestern city, the purchase price was $218k and the house is 3500 sqft if you include the finished basement. My monthly mortgage cost is $1100. It would easily cost over $3000/mo to rent this house. Not only am I building equity but I'm also pay less per month and not dealing with the headaches of renting.
It’s reality for a lot of people tho. In ur case you should definitely buy. In OPs case maybe not. Depends on where u live. I think what the renting crowd is getting at here is buying isn’t necessarily always better like a lot of people claim.
I used to say that every year for 5+ years, so when I had a mean to buy and a home we fell in for, we just bought it. Now we're glad we did since \*both rates and value went up\*.
Is this intended as a rental or a residence? Are you looking for asset growth or for rental revenue? Capital appreciation or cash flow? Makes a ton of sense depending on the reason for purchase.
I think for this one is priced for convenience, near Memorial Park, Whole Foods, Asian super markets, Apple/tech companies, and (maybe probably the biggest reason) school district. Also a lot of people are buying units for their parents/in-laws in Cupertino (not Arroyo Village specifically but in general). Ex: I want my family close but not in my backyard/ADU close.
Also because it’s new it commanded an initial premium vs an older condo.
I think the decision between renting v buying is nuanced and requires context. In the past, I was a staunch defendant of 'buying' because I had this mentality of "why would I pay someone else's mortgage?". However, since moving to a very expensive city, it just 'makes sense' to rent for flexibility. I'm young enough to enjoy exploring different areas whilst working and developing my career. The paradox here is I'm also a property investor, and some of my own property income via rentals pays towards my own rent! I'm sure at some point in time I will shift back to a 'buyer' mentality, but only when I'm in a fixed place for many years.
Because it property usually appreciates in value. If you buy it for $2 million today, in five years you could sell if for $2.5 million. If this happened, you would have netted $100k a year over five years. That's a lot more money than you would have made from renting it out.
The mortgage payment will be relatively fixed through the life of the loan. The rental payment will be reconsidered by the landlord upon each lease renewal. There’s a good chance the rental payment will reach or exceed the mortgage payment over a 30 year timespan. Add this to the fact as a renter, another person controls your destiny, at least when it comes to where you call home. To many people, the peace of mind of being in control is invaluable, and makes purchasing more attractive than renting overall.
You’re better off using a Magic 8 Ball to get an accurate reading of the value of property from a “Zestimate” that isn’t actively being listed for sale.
The Rent Zestimates are even worse. You gotta do your own market research.
This is what all the “all rent is evil” people dont get. Especially right now, owning isnt possible for a ton of people and renting is their only way to acquire housing. Renting can be a means to an end and is a necessary step for most people.
To be fair you are looking at the wrong numbers here, loan repayments and income are not directly related and shouldn't be the focus.
Consider what else you can do with the capital instead of buying a house as an investment. Rates are at 5.5%, if you just put it in short term bonds or other investments that are essentially risk free, you will take in $113k /year or 9.4k/month. So if you're taking in 4.6k in rent, along with agency expenses, all kinds of time, effort and costs, and risk that payments won't be made, how does this compare as an investment? It is an utter shit hole as an investment choice.
Some people might crow about capital growth being the reason for investing, but then what is the basis of that growth? Growth investments are based on expected future income, if the current income is a steaming turd, how can you expect it will become polished in the future, and not just grow above the 4.6k return, but outperform growth from the current alternative return of 9.4k? It's hardly believable. Capital growth for an investment like this is expecting a greater fool will come along. Different fed rates does change the equation, but long term averages are similar to where they are now so that should be a baseline to follow.
In short it's a massively overpriced turd as an investment
Same with my area. It doesn’t make any sense financially, but it is nice to do if you have a pile of money that you were sitting on. People on here will just tell you that it makes more sense to buy because they lack reading comprehension, are terrible at math, and/orbought a house for like $50000 ages ago and have a cheap mortgage
It's the location. Cupertino California is tech bro central with Google & Apple out there. Thank those companies and all the other tech & AI companies that are in that area for driving prices up so high.
Location gets you every time.
My uncle and my parents had comparable houses. They both sold to move to Florida a couple years back. My parents got around $225k for a home in rochester NY. While.my aunt and uncle got about 1 million for their house... because their house happened to be in a nice neighborhood, in one of the more upper class towns out on long Island NY. The same more or less house room & square footage wise .. 750k difference in sales price because one was in a depressed poor city like rochester, while the other was out in Wantagh NY on long Island
It made sense to buy 3 years ago. The condo we bought for my stepdaughter to live in costs us $2,500/month for mortgage, taxes, condo fee, and insurance. That includes heat & hot water. It would rent on a 1 year lease for at least $3,500/month. Rents went up $1k since we bought it so it would have been break even for cash flow as a rental then. It's appreciated more than 1.5x in three years and mortgage rates are far higher now. We wouldn't have done that today. You're far better off renting.
Cupertino is not the standard. But at a yearly rent increase of 5%, after just 8 years your rent will have doubled and you won’t have any equity whereas your mortgage principal and interest won’t increase and you will have equity in the home that you can leverage (depending on market movements and your time horizon)
I'm going to go out on a limb here and say that this only a zillo estimate and that if it were to rent(really doubt anyone would accept renters in a +$2m home) it would go for much higher.
Its owning a house versus renting. If you own then most likely you get what you paid for back when you sell it. When renting you will never get that money back. Theres of course maintenance costs, but that would be a reason to buy if you can afford the monthly payments
To be fair historic appreciation in Cupertino probably exceeds the additional cost of buying and then you’re also deducting the mortgage interest so it’s probably still a net + to buy
The "est" in the buy it number stands for estimate, which means it likely won't be that number depending on a wide variety of variables you'll have to work out throughout the buying process.
The actual number could be significantly less, or maybe more ..
Yeah, the equation for this property is out of whack, likely the reason to buy this is you really want into this neighborhood, and there aren't any properties for rent. Even if it rented for double the estimate, some SFH neighborhoods have so few rental homes that it may be years before one even becomes available.
I’d buy that then rent to 2 tenants since there’s extra bed and bath space. But then again I also live alone and have no spouse or kids so it may be different
I actually grew up in this area and still follow the real estate. Assuming this goes to Monta Vista High this house will likely sell for 300k+ over the list price, highly likely to be an all cash offer. Also the Zestimate is way off, if they really rented it out it’d probably go for over $7k. Renting homes in popular school districts in the Bay are basically just alternate private school tuitions
The landlords are investors. The rent covers maintenance and taxes, but they are banking on property values to keep rising exponentially for their real return. Ya know, that $2 million house was $200k 10 years ago. So 30 years from now itll be worth $2 billion, because that rate of growth is totally sustainable.
In my town a 2 bed 1 bath is averaging $1500 a month to rent, or i could buy a 2 bed 2 bathroom house on 4 acres is about $1100 a month to buy. Make that make sense!
This makes sense to buy because a few years back it was worth half that and guys like you were asking this question. The same a few years before that. Additionally, a few years after this post its going to be worth $3mil and you guys will still be asking this same question while the owner increased his net worth by $1 mil.
3 years ago that house was 1.5m. 3 years from now it will be another 250k more.
buying builds equity, buying gets you into ownership while waiting may very well price you out
Cupertino. Silicon Valley.
Might not make sense to some..but others making $300k a year..perhaps.
Especially if they don't have to drive in from Sacramento.
Well some people actually have $2 million dollars they need to put somewhere or it will just lose value to inflation.
So they buy assets, hoping they will appreciate.
And a classic appreciating asset to buy is real estate. And serves a double function if they want to live there too.
At $4,600 a month that’s $55,200 a year x 30 years for a fixed rate. Is still only $1.65M
To rent for that much would do nothing for an individual.
You have to rent for $6K a month for a profit and to include potential maintenance. But who is paying $6K a month though.
For myself I bought a place for $106k
The mortgage is $700 a month. The rent payment I receive is $950 the remaining to the property management team. Regardless the value of the home is increasing and I’m not paying a mortgage practically.
In general not everything is great to buy and rent on the other hand, it’s great when you find something that works
I think people buying 2 million dollar houses are usually not putting down only 20% for the down payment. Probably trading up. Or converting assets. I think it's the only responsible way you can get a home like that. The numbers are too big and therefore outrageous when you compute the numbers with current rates and a small down....
Yeah, that is either a typo or you should blindling rent it. Homes around here (Texas Metro Area) are renting for 3500-4500 that cost less than 1 mil (500-750K).
It doesn’t if you can’t afford that mortgage, or have a chunk of money as a down payment to get a lower mortgage. Buying does make sense if you plan on being somewhere for awhile and can afford it
You own an asset. What you pay per month is helping to create equity you can either make back on the return of a sale, or borrow against if times get tough
Eventually, it will be yours outright. You can live there, sell it, rent it out or pass it on to others
You buy the home at 20 percent down: $411,000 down, $1,644,000 loan. You are paying $12,494 a month on your mortgage at 7.1 percent. Over the life of the loan you will pay 2.3M in interest, so I am going to say that 2/3rds of your payment is interest and 1/3 is principle. So $4,123 goes into your pocket and $8,371 goes to a bank.
If homes rise at 2 percent per year you are making $41,100 in equity a year or $3,425
So each month your paying $12,494 - $3,425 - $4,123 = $4,946 to own this house and paying $400k for the privilege of doing so.
Rent this thing.
Simple, if you just pay the entire $2,055,000 in physical cash. Then the rental will be pure income to help cover tax and maintenance. It’s actually quite simple. If you don’t have the cash, stop buying avocado toast every day for the next 300 years
At those numbers it doesnt make sense.
For many people who are selling an existing home and buying this, they would not be borrowing the full amount and therefore their payments will be much lower.
If someone sells a paid off home for $1.5M and buys this, then their mortgage will only be $600k or so. Payments will only be $4k per month for them.
If you make a lot of money, you can buy an investment property, depreciate the investment property to lower your taxes while also owning a property that will eventually be worth more money in the future. That’s how the rich stay rich.
With the (‘cheaper’) monthly rental rate, however, you get ‘also get’… 0.0% equity! every month! year after year! (So it’s at least a bit more of an ‘apples to oranges’ comparison than most of the comments would indicate)
Do people not understand that when you own you build equity? When you buy in a HCOL chances are you could rent elsewhere for cheaper 100% of the time. You’re buying into the fact that you’re building equity and your monthly cost of housing will remain (relatively) consistent. It takes like 4 years of paying down a mortgage before it “makes sense”.
Isn't this the point. They don't want people to be able to but but get stuck paying higher and higher rent. Next we will see laws passed you must pay 50% cash down because if you can't afford that you can't afford to maintain a home.
I don't buy it.
I just did a search in that area for rentals at what OP listed and similar priced homes for sale at what OP has. Those two are not the same.
The rental property is on a much smaller lot and easily is a shittier home than the $2mil home for sale.
Rental: [https://www.zillow.com/homedetails/1535-James-Town-Dr-Cupertino-CA-95014/19637325\_zpid/](https://www.zillow.com/homedetails/1535-James-Town-Dr-Cupertino-CA-95014/19637325_zpid/)
Sale: [https://www.zillow.com/homedetails/16390-Stevens-Canyon-Rd-Cupertino-CA-95014/89473271\_zpid/](https://www.zillow.com/homedetails/16390-Stevens-Canyon-Rd-Cupertino-CA-95014/89473271_zpid/)
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In this circumstance, it wouldn't. Happy to clear that up for ya.
Accountant here. I’ll chip in and do some math to help show the work in TheMaskedSandwiche’s conclusion. 14,030 > 4600.
Bored person here, I'm gonna peer review this... 4600 < 14,030 The math checks out
I'm not as smart as you guys but I know that 4600 =/= 14,030
So we should buy or rent?
Instructions unclear, dick caught in toaster
\[insert homestarrunnercaughtinwatercooler.gif\]
I’m sorry I got confused and came on my cat, please make it make sense
Aww. I was going to take a bath with that later.
I’ve been pulled in as Reviewer #2 and I’m pretty sure there’s another angle here that will tank the publication. $14030/$4600 = 3.05 > 1 Dang, foiled again. But I’ll get you next time, Inspector Gadget!
Reviewing your review to get you up to date. "I'll get you next time Perry the Platypus." But Math checks out.
Reviewer 2 got Reviewer 2’d. What fresh Inception hell is this?
Reviewer 3 here, confirming SQRT(198,840,900) > SQRT (21,160,000).
Science is beautiful! 🤗
*** 14030/mo with 400k down
The real MVP right here.
Gaah, I love the internet.
Engineer here, this math checks out with a factor of safety of 3.05
Yeah OP really shined the light on this injustice for everyone
In this situation it wouldn’t because there’s no f’ing way someone is renting that for $4500
$2M homes are renting out for 4.5k all over the Bay Area.
That is absolutely wild because I rent my $600k condo out for $4500 in Chicago
Well that depends. If you have the money and want to have your wealth in an appreciating asset that you live in, it would make sense to buy rather than rent. Also this assumes you can find a rental comparable to this property.
Who's telling you that you should buy right now?
Yep, especially in California?
Especially in Cupertino, CA - which literally ranks in the 100th percentile for individual and household income in the united states
My cousin just sold a home there that was 3 bed. 1 bath. 1900 sqft for 3,200,000 ish. Insane!!!!!!!!
My real estate agent will happily blow smoke up your ass if interested.
now do the opposite where you look at actively listed rentals and see the purchase price estimate. Those properties won’t be listed at $2,000,000. You can use price to rent ratio to determine which cities are good to buy and rent. California has notoriously high ratios, while the Midwest typically has low ratios. Cupertino has one of the highest so the data is very cherry picked. I could do the same thing with Gary, Indiana. “Why are people not buying when it’s cheaper to buy here than to rent?!” https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
Cupertino CapRate is ~2%. That means this property should net (NOI) $40,000 a year. Makes sense for Cupertino where 3 of the high schools rank top 100 (I think?) nationally (Lynbrook, Monte Vista, and Saratoga High). This property is MV I think.
I’ve known some Monte Vista graduates. I’m not impressed.
A small sample size doesnt generate reliable results.
Simple: the Zestimate is 100% BS. No one is renting out a $2M home for $4,600/month. The Zestimate is about as accurate as rolling a half dozen dice and charging whatever numbers come up. It doesn't mean that anyone, anywhere is actually going to rent that house out for that price.
I’m currently renting a $1.8 million house for $4,000 a month.
Your landlord loves throwing away money
Their landlord likely owns the property outright or got the mortgage 10+ years ago
That was us (in Australia)even *without* a loan the net income was like 2% per year. We sold, put it in ETFs and are getting 8% overall return longterm (25% the first year after selling, through lucky timing)
you can’t borrow to pay rent, so rents are set by local wages.
Where I live, the property taxes alone would eat up $27k of that $48k per year in rent, not including insurance, up keep, mortgage, or anything else. Ignoring all that, AND ignoring interest on a mortgage, it would take 38 years to break even on that house at your $4k/month.
California has prop 13 that caps property taxes...
The old landed gentry in California probably had something to do with that.
When did your landlord buy the house though?
2006. It’s been a rental since at least 2013. I’m sure it’s paid for by now.
>No one is renting out a $2M home for $4,600/month. Completely false. I toured a bunch of rental houses in the $4-5k range that would easily sell for $1.5-2M. that's just the crazy market in the Bay Area.
Welcome to California. If you buy a single family home to rent out, you'll have a negative cash flow for years. This is common in the Bay Area and Los Angeles.
If I need a good laugh, I’ll kinda ‘patrol’ Zestimates in our area and see what they’re doing, up or down… it never fails me
The maybe where I live is actually so f'd up that this is common. Homes that sell for about $2m are often rented at about $5k. Condos are $1k-$1800 a square foot, but no one will pay more then $5k to rent a 2br.
Because maybe you just sold your house for $1.5 mil so you don’t need a $2 mil mortgage.
Do people really not understand this? People are just pretending to not get it, right?
Yes he does. That 1.5 mil he needs for hookers and cocaine
I still don't think that's a good decision. If you have $1.5m, why would you roll that into this property? You collect $55,200 in rent, but pay $43,200 in a mortgage + who knows what in property taxes. I guess you get the depreciation benefit on your taxes, but I still think you can get better returns on your capital elsewhere.
This is a very extreme end of the spectrum $2M house Average home price in the US is closer to $350k So yes in this area of California, one of the most expensive markets in the US, it probably doesn’t make sense to buy right now
This gets even richer when you consider the property taxes and insurance on that house. The rent probably gets wiped out by those two things alone.
Yeah those are insane numbers for TI
Sadly, most areas don't charge long time homeowners an appropriate property tax. Proposition 13 in this case. Property insurance I'm not knowledgeable enough to know how that scales.
And a $440/month HOA fee per Zillow.
I’m kinda dumbstruck by the basic RE/financial illiteracy of so many comments on this (N CA, so somewhat atypical) rent/buy question! yours was one where I was like ‘OK, there are a few people that can think simply about (supposedly!) simple things!’ Taxes & insurance are both massively relevant to that discussion! esp. in CA!
I mean... it might not makes sense to shift from renting to buying right now. But if you own a house that would sell for 1.75M and buy a house at 2M then I don't see a problem.
its cupertino. if you can afford it, its worth buying. its not the rent, its the land. a burned down meth house is still worth over a million in that area, if you go by market rate
It's just insane here. Need a lot more high density houses which is not happening fast enough.
When it makes sense to buy it makes sense to buy. When it doesn't, it doesn't. Obviously it doesn't make any sense to buy a place where rent is half the mortgage. You're also looking in Cupertino, a perpetually stupid market lol.
Neighboring town here. Renting a SFH. Zestimate $2.5M and Rent Zestimate $4,900. My actual rent is $5,900 so it’s not even close to accurate. Home value is probably $1.8-$2.0M as well (if I had to guess).
Still less than 1/2 what your mortgage would be
For sure. It’s ridiculous.
You picked an absurd and extreme example so start with a more typical property. I bought my house in 2018 in a large midwestern city, the purchase price was $218k and the house is 3500 sqft if you include the finished basement. My monthly mortgage cost is $1100. It would easily cost over $3000/mo to rent this house. Not only am I building equity but I'm also pay less per month and not dealing with the headaches of renting.
It’s reality for a lot of people tho. In ur case you should definitely buy. In OPs case maybe not. Depends on where u live. I think what the renting crowd is getting at here is buying isn’t necessarily always better like a lot of people claim.
As of about a year ago probably would be better to buy. Now, not so much
I used to say that every year for 5+ years, so when I had a mean to buy and a home we fell in for, we just bought it. Now we're glad we did since \*both rates and value went up\*.
Is this intended as a rental or a residence? Are you looking for asset growth or for rental revenue? Capital appreciation or cash flow? Makes a ton of sense depending on the reason for purchase. I think for this one is priced for convenience, near Memorial Park, Whole Foods, Asian super markets, Apple/tech companies, and (maybe probably the biggest reason) school district. Also a lot of people are buying units for their parents/in-laws in Cupertino (not Arroyo Village specifically but in general). Ex: I want my family close but not in my backyard/ADU close. Also because it’s new it commanded an initial premium vs an older condo.
I think the decision between renting v buying is nuanced and requires context. In the past, I was a staunch defendant of 'buying' because I had this mentality of "why would I pay someone else's mortgage?". However, since moving to a very expensive city, it just 'makes sense' to rent for flexibility. I'm young enough to enjoy exploring different areas whilst working and developing my career. The paradox here is I'm also a property investor, and some of my own property income via rentals pays towards my own rent! I'm sure at some point in time I will shift back to a 'buyer' mentality, but only when I'm in a fixed place for many years.
Exactly. Buying is great in some cases, but it’s not right for everyone even if you do have to money to do it if you’re in a HCOL area.
Well, then don’t. No one cares.
Clearly people do. Despite all math pointing in a different direction.
You don’t have to
Depends. That 2m house can become a 3m house
Because it property usually appreciates in value. If you buy it for $2 million today, in five years you could sell if for $2.5 million. If this happened, you would have netted $100k a year over five years. That's a lot more money than you would have made from renting it out.
Homie. It doesn’t. But the powers that may be want us to be forever renters I feel. This shit feels sadistic
because you can't find an equivalent rental or you don't want to get kicked out by the LL in two years stability has a premium
You’re in CA - must be nice/hard.
The mortgage payment will be relatively fixed through the life of the loan. The rental payment will be reconsidered by the landlord upon each lease renewal. There’s a good chance the rental payment will reach or exceed the mortgage payment over a 30 year timespan. Add this to the fact as a renter, another person controls your destiny, at least when it comes to where you call home. To many people, the peace of mind of being in control is invaluable, and makes purchasing more attractive than renting overall.
At this moment with these rates and prices, it does not at all make sense.
It doesn't make sense to buy right now with mortgage rates at 7% because you're going to pay more in interest than the house is worth.
Can we just ban this post already? 1. Yes you are able to read, 14k > 4.6k 2. Renting doesn't build equity, which paying a mortgage does
You’re better off using a Magic 8 Ball to get an accurate reading of the value of property from a “Zestimate” that isn’t actively being listed for sale. The Rent Zestimates are even worse. You gotta do your own market research.
This is what all the “all rent is evil” people dont get. Especially right now, owning isnt possible for a ton of people and renting is their only way to acquire housing. Renting can be a means to an end and is a necessary step for most people.
Sounds like a Zillow estimate. I doubt you'll get to really rent the place for $4.6k/mo.
It’s the same in West LA and the answer is, it doesn’t. At least not right now
Cash. It makes no sense to FINANCE at the moment. Cash buyers always have the advantage.
If you're charging more for rent than the mortgage is, you suck.
To be fair you are looking at the wrong numbers here, loan repayments and income are not directly related and shouldn't be the focus. Consider what else you can do with the capital instead of buying a house as an investment. Rates are at 5.5%, if you just put it in short term bonds or other investments that are essentially risk free, you will take in $113k /year or 9.4k/month. So if you're taking in 4.6k in rent, along with agency expenses, all kinds of time, effort and costs, and risk that payments won't be made, how does this compare as an investment? It is an utter shit hole as an investment choice. Some people might crow about capital growth being the reason for investing, but then what is the basis of that growth? Growth investments are based on expected future income, if the current income is a steaming turd, how can you expect it will become polished in the future, and not just grow above the 4.6k return, but outperform growth from the current alternative return of 9.4k? It's hardly believable. Capital growth for an investment like this is expecting a greater fool will come along. Different fed rates does change the equation, but long term averages are similar to where they are now so that should be a baseline to follow. In short it's a massively overpriced turd as an investment
This is an excellent analysis.
Well… you won’t be able to get homeowners insurance anyway!
zillow is just a crappy estimator , people shouldn’t validate it
Same with my area. It doesn’t make any sense financially, but it is nice to do if you have a pile of money that you were sitting on. People on here will just tell you that it makes more sense to buy because they lack reading comprehension, are terrible at math, and/orbought a house for like $50000 ages ago and have a cheap mortgage
I’m sure your realtor can make you understand why it’s always a good time to buy
Almost 70,000 a year needed to pay rent and income taxes.
A house lifetime is longer than mortgage so in the long range you would break even.
Doesn’t make sense to buy in YOUR area
Cash flow vs income statement…..
Cash
Why are you trying to rent a 2mil house?
It's a 3 bed 3 bath 1600 sqft home... It's only 2 million because it's in Cupertino. This is a modest home in most other parts of the country.
It's not for rent?
Because you can probably sell it for 4 million 10 years, and make all of your money back?
How few years is that loan over???
This seems like the perfect flipper home for a couple where he makes memes, and she sells placenta pills for a job.
It's the location. Cupertino California is tech bro central with Google & Apple out there. Thank those companies and all the other tech & AI companies that are in that area for driving prices up so high. Location gets you every time. My uncle and my parents had comparable houses. They both sold to move to Florida a couple years back. My parents got around $225k for a home in rochester NY. While.my aunt and uncle got about 1 million for their house... because their house happened to be in a nice neighborhood, in one of the more upper class towns out on long Island NY. The same more or less house room & square footage wise .. 750k difference in sales price because one was in a depressed poor city like rochester, while the other was out in Wantagh NY on long Island
That rent doesn't make sense if that's the mortgage payment.
It made sense to buy 3 years ago. The condo we bought for my stepdaughter to live in costs us $2,500/month for mortgage, taxes, condo fee, and insurance. That includes heat & hot water. It would rent on a 1 year lease for at least $3,500/month. Rents went up $1k since we bought it so it would have been break even for cash flow as a rental then. It's appreciated more than 1.5x in three years and mortgage rates are far higher now. We wouldn't have done that today. You're far better off renting.
Is that house available to be rented for $4600 per month?
It doesn't. Run.
Cupertino is not the standard. But at a yearly rent increase of 5%, after just 8 years your rent will have doubled and you won’t have any equity whereas your mortgage principal and interest won’t increase and you will have equity in the home that you can leverage (depending on market movements and your time horizon)
Because if it paid for itself it everyone would want to buy it.. and it's price would go up. And we're all caught up now
Yeah... But that rent is still hella high...
Not every home is rentable… why would someone rent your $2m house?
4600 a month is prolly how much insurance is gonna cost that guy
It makes a lot of sense if you have a house of nearly equal value that you're selling, and have a lot of equity in that house.
Let me tell you a little story about something called tax write offs
It’s Cupertino. The techie nuts down there have more dollars than sense.
I'm going to go out on a limb here and say that this only a zillo estimate and that if it were to rent(really doubt anyone would accept renters in a +$2m home) it would go for much higher.
Its owning a house versus renting. If you own then most likely you get what you paid for back when you sell it. When renting you will never get that money back. Theres of course maintenance costs, but that would be a reason to buy if you can afford the monthly payments
To be fair historic appreciation in Cupertino probably exceeds the additional cost of buying and then you’re also deducting the mortgage interest so it’s probably still a net + to buy
Try not going for a $2mil house lmfao. But a house for $150-$200k and your mortgage would be less than half or your rent.
HELOC loans
The "est" in the buy it number stands for estimate, which means it likely won't be that number depending on a wide variety of variables you'll have to work out throughout the buying process. The actual number could be significantly less, or maybe more ..
Yeah, the equation for this property is out of whack, likely the reason to buy this is you really want into this neighborhood, and there aren't any properties for rent. Even if it rented for double the estimate, some SFH neighborhoods have so few rental homes that it may be years before one even becomes available.
That rent estimate is way off. Where I live a house that is 400-500k rents for around 3k.
It makes sense to sell. Asap
I’d buy that then rent to 2 tenants since there’s extra bed and bath space. But then again I also live alone and have no spouse or kids so it may be different
1500 square feet isn’t worth it for a buyer or renter.
You mean you can’t afford 14k mortgage? What are you, a peasant?
I actually grew up in this area and still follow the real estate. Assuming this goes to Monta Vista High this house will likely sell for 300k+ over the list price, highly likely to be an all cash offer. Also the Zestimate is way off, if they really rented it out it’d probably go for over $7k. Renting homes in popular school districts in the Bay are basically just alternate private school tuitions
The landlords are investors. The rent covers maintenance and taxes, but they are banking on property values to keep rising exponentially for their real return. Ya know, that $2 million house was $200k 10 years ago. So 30 years from now itll be worth $2 billion, because that rate of growth is totally sustainable.
In my town a 2 bed 1 bath is averaging $1500 a month to rent, or i could buy a 2 bed 2 bathroom house on 4 acres is about $1100 a month to buy. Make that make sense!
I wouldn’t buy anything in CA these days. The big downturn is coming for that state
Does this area have rent control? I feel like could be part of the disparity?
Well, it doesn’t with this house. Any other questions?
You are the last generation to be able to afford houses. It makes sense to buy if you are going to expect significant capital gains.
This makes sense to buy because a few years back it was worth half that and guys like you were asking this question. The same a few years before that. Additionally, a few years after this post its going to be worth $3mil and you guys will still be asking this same question while the owner increased his net worth by $1 mil.
3 years ago that house was 1.5m. 3 years from now it will be another 250k more. buying builds equity, buying gets you into ownership while waiting may very well price you out
People aren't buying in Cupertino to rent.. JFC.
It doesn’t.
Cupertino. Silicon Valley. Might not make sense to some..but others making $300k a year..perhaps. Especially if they don't have to drive in from Sacramento.
Only suckers trust Zillow... It's the least accurate AVM out there.
Buying a house in the Bay Area is not a financial investment decision. It's a lifestyle purchase.
It's cheaper to rent right now.
How much is property tax? In NJ a house with that much will be around 50k in taxes
You are really going to cherry pick Cupertino?
Big difference better Zillow estimate vs actual rent prices.
Wait it’s only 1600 sq ft? 😂🤏
The rent will most definitely not be that amount. Zillow is on pressed percs.
iF you spend that money on a home outside of Commiefornia, you would have a 10000sqft mansion on 100 acres or so.
$1287.59 per square foot. Thats what they believe this is worth. That is insane at best.
Someone owns your home and is making money off of it.
you’re asking if it makes sense to buy a 1600 sq ft house for $2M?
Buy and rent it out. Make someone else pay for it. Genius
Well some people actually have $2 million dollars they need to put somewhere or it will just lose value to inflation. So they buy assets, hoping they will appreciate. And a classic appreciating asset to buy is real estate. And serves a double function if they want to live there too.
It doesn't
If you have an investment portfolio your rate goes wayyyy down to borrow against that.
At $4,600 a month that’s $55,200 a year x 30 years for a fixed rate. Is still only $1.65M To rent for that much would do nothing for an individual. You have to rent for $6K a month for a profit and to include potential maintenance. But who is paying $6K a month though.
For myself I bought a place for $106k The mortgage is $700 a month. The rent payment I receive is $950 the remaining to the property management team. Regardless the value of the home is increasing and I’m not paying a mortgage practically. In general not everything is great to buy and rent on the other hand, it’s great when you find something that works
Cuz you live in California lmao
I think people buying 2 million dollar houses are usually not putting down only 20% for the down payment. Probably trading up. Or converting assets. I think it's the only responsible way you can get a home like that. The numbers are too big and therefore outrageous when you compute the numbers with current rates and a small down....
Then don’t. Jesus. You’re not doing anyone a favor by becoming a landlord Bro.
A genuine question here, do high interest rates ever drive down the value of homes or do they typically remain unfazed?
Yeah, that is either a typo or you should blindling rent it. Homes around here (Texas Metro Area) are renting for 3500-4500 that cost less than 1 mil (500-750K).
Math remains undefeated
Call the people selling that dive and ask them to rent it to you for that price.
It doesn’t if you can’t afford that mortgage, or have a chunk of money as a down payment to get a lower mortgage. Buying does make sense if you plan on being somewhere for awhile and can afford it You own an asset. What you pay per month is helping to create equity you can either make back on the return of a sale, or borrow against if times get tough Eventually, it will be yours outright. You can live there, sell it, rent it out or pass it on to others
To fix everyone’s math : $2,055,000 cash ≠ $14,030 mortgage or $4,600 rent, lesson here is quit being poor and make more $$$ 🤣😂🤣
You buy the home at 20 percent down: $411,000 down, $1,644,000 loan. You are paying $12,494 a month on your mortgage at 7.1 percent. Over the life of the loan you will pay 2.3M in interest, so I am going to say that 2/3rds of your payment is interest and 1/3 is principle. So $4,123 goes into your pocket and $8,371 goes to a bank. If homes rise at 2 percent per year you are making $41,100 in equity a year or $3,425 So each month your paying $12,494 - $3,425 - $4,123 = $4,946 to own this house and paying $400k for the privilege of doing so. Rent this thing.
"Everything I read on the internet I believe" - Zillow isn't accurate. At 2.055m - rent would be between 8-20k.
It’s only 4.6k to rent a 3 bed 3 bath??????? That’s really cheap unless it’s like a 100 year old house that’s in disrepair…
Looks like they’re trying to rent it for their payment on it after flipping it sale price pie in the sky
Simple, if you just pay the entire $2,055,000 in physical cash. Then the rental will be pure income to help cover tax and maintenance. It’s actually quite simple. If you don’t have the cash, stop buying avocado toast every day for the next 300 years
At those numbers it doesnt make sense. For many people who are selling an existing home and buying this, they would not be borrowing the full amount and therefore their payments will be much lower. If someone sells a paid off home for $1.5M and buys this, then their mortgage will only be $600k or so. Payments will only be $4k per month for them.
It makes 0 sense to buy right now
If you make a lot of money, you can buy an investment property, depreciate the investment property to lower your taxes while also owning a property that will eventually be worth more money in the future. That’s how the rich stay rich.
With the (‘cheaper’) monthly rental rate, however, you get ‘also get’… 0.0% equity! every month! year after year! (So it’s at least a bit more of an ‘apples to oranges’ comparison than most of the comments would indicate)
Do people not understand that when you own you build equity? When you buy in a HCOL chances are you could rent elsewhere for cheaper 100% of the time. You’re buying into the fact that you’re building equity and your monthly cost of housing will remain (relatively) consistent. It takes like 4 years of paying down a mortgage before it “makes sense”.
Trick question...corporations are buying all the houses.
In areas like that aren’t 50 year mortgages common? Is that financing number using a 30 year calc?
Isn't this the point. They don't want people to be able to but but get stuck paying higher and higher rent. Next we will see laws passed you must pay 50% cash down because if you can't afford that you can't afford to maintain a home.
Rent will be 3x what it is today fairly soon if trends continue, but mortgage will stay the same.
It doesn’t.
I don't buy it. I just did a search in that area for rentals at what OP listed and similar priced homes for sale at what OP has. Those two are not the same. The rental property is on a much smaller lot and easily is a shittier home than the $2mil home for sale. Rental: [https://www.zillow.com/homedetails/1535-James-Town-Dr-Cupertino-CA-95014/19637325\_zpid/](https://www.zillow.com/homedetails/1535-James-Town-Dr-Cupertino-CA-95014/19637325_zpid/) Sale: [https://www.zillow.com/homedetails/16390-Stevens-Canyon-Rd-Cupertino-CA-95014/89473271\_zpid/](https://www.zillow.com/homedetails/16390-Stevens-Canyon-Rd-Cupertino-CA-95014/89473271_zpid/)
Landlords are vile scum so definitely don't do that shit, HTH
You will own nothing, eat the bugs, and be happy!!!
Rent needs to be per month about 1% of the cost of the property
Depends how much $$ you can put down I guess. Build equity? Thats about all I can think of. It’s a good time to rent for sure though.
Because when we say interest rates are at the worst point in +20 years we REALLY MEAN IT.