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New Orleans Condos, to purchase or rent? What works for you?

     There are several things to consider when you are thinking about buying.  The first is how long do you plan on being in New Orleans?  If your answer is more than 18 months then buying may be the best way to go.  Paying rent of $1200 per month is expensive and over 48 months its $57,600 and you have nothing to show for it. You will have a hard time finding a place that would sell for 200k that you could rent for $1200, but lets use the 200k price with zero down as an example.

1. Borrowing 200k at 6%, your note will be $1200 per month for principle and interest.  The interest portion of your monthly payment is $1000 and will decrease monthly as you continue to pay off the mortgage. The equity in the beginning starts at $200 and is that portion that you are paying dwon the mortgage.  It increases monthly.  At the end of four years you should have paid the loan down about $10,000 or you have $10,000 in equity if the value of the condo is the same.

2.  Your condo fees should run on the average between 200 and 300 per month.  You will not see this money again as it is insurance, maintenance and services.  This is gone but it protects your investment.  Your taxes will run about $1700 per year.  The combination of taxes and condo fees will run between $400 and $450 per month for each.  This is an expense of $4800-$5400 per year or about $20,000 over 4 years as an expense.

 3.  Interest Deduction.  You get to deduct interest and taxes from your federal and state  income tax.  If you pay 25%-30% in taxes the saving are between $300 and $350 per month or on a yearly basis between $3600 and $4320.  This is your saving forever.  The higher brackets will save much more. Saving about $4000 on your taxes is huge every year or $16,000 over 4 years.

4.  Appreciation.  The increase on your units value.  Picking the right unit in this market can still get you some appreciation.  At 2% per year appreciation of the sales price that is $4000 per year.  You get this each year and its yours to keep after 2 years, you pay no taxes on the gains if you have lived here 24 months.  That is huge after 4 years. $16,000 for you. This is a conservative figure based on past New Orleans History.  

Renting

Purchasing

4 years time

$57,600

$10,000

Equity

$20,000

Condo Fees

$16,000

Tax Savings

$16,000

Appreciation 2%

     You  can add the numbers up and see where you could be.  The rent is gone for good.  The $22,000 in gains is yours.   If you figure zero appreciation, you walk away with $6,000 in green using these assumptions.                                                

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Eric Bouler Realtor
Gardner Realtors
Metairie - New Orleans, La. USA