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Buying puts money in your pocket in long run even without equity gain

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POSTED December 18, 2008 9:31 p.m.
What is the better value: Three bedrooms, one bathroom with 800 square feet of living space for $855 a month or three bedrooms, two bathrooms with 1,012 with 1,296 square feet of living space for $790 a month?
It’s a no brainer — or at least should be.
That is why long-time Realtors are working overtime to educate people about the Manteca housing market especially renters with relatively low debt load and fairly decent credit.
The $855 a month figure represents renting an apartment in Manteca. The second figure represents buying with 3.5 percent down on a home (the example just closed escrow at 1167 Pine Street for $117,500) with a fixed FHA loan at 5.5 percent and includes property taxes and all insurance
Yes, when you own you will have to pay for your own sewer, water and garbage. Even if that adds $100 a month, your monthly housing cost is $890 meaning you are paying $35 extra a month for the privilege of owning instead of renting. But that’s before income tax advantages are factored into the equation. Even in the worst-case tax advantage scenario, the $35 comes off.
So for the same price as renting, you get a home that has one more bedroom, one more bathroom and 212 more square feet plus your own two-car garage and a yard.
In a year’s time you can pay $9,480 to a landlord or pay $9,480 to own your own home.
Buying means no need to worry about rent increases.
That apartment back in 1993 — the same time homes in the Pine Street neighborhood sold for around $117,000 — rented for $450. The odds are the apartment 15 years from now will easily rent for $1,300 while the housing payment for the Pine Street home closing escrow this month will remain at $790 — plus any tax increase at a 2 percent annual cap when values start moving upward again.
So who cares if there is no major equity gain — even though that will happen again? Your housing costs will go down in the long run if you buy today. That’s better than equity growth since it puts actual money in your pocket.
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