The differences between owning and renting in simple terms

           You’re renting a unit at $900.00 all inclusive of heat generated via oil. The land lord is paying $3.35 (on average) per gallon, and say the tank is 300 gallons.  300 gallons x $3.35 per gallon totals $1,005.00 per month to heat say a three unit apartment house. $900.00 per unit x 3 equals $2,700.00 per month minus $1,005.00 per month for oil leaving the land lord $1,695.00 per month. He/She has a mortgage on the property that’s roughly $900.00 per month (average statistics) subtract that from the equation to total $795.00 per month. Now take the annual insurance rate of $2,700 (which is higher than a single family because of liability) divide that by 12 to receive a monthly payment of $225.00 Now add in the annual taxes of $4,800.00(on average) divided by 12 equals $400.00 per month Take the income of $2,700 per month and subtract the following basics for owning rental property.

o       $2,700.00 minus

o       $1,005.00 oil

o       $$900.00 mortgage

o       $225.00 Property insurance

o       $400.00 monthly taxes

o       $2,530.00 Total monthly property expenses

o       Profit $170.00 Not great but something’s better than nothing

·        Now lets run this same equation with oil at $5.00 per gallon (latest prediction)

$2,700.00 Minus

o       $1,500.00 per month = 300 gallons of oil at $5.00 per gallon

o       $900.00 Mortgage per month.

o       $225.00 Property Insurance per month

o       $400.00 Taxes per month

o       $3,925.00 Total monthly property expenses

o       Profit -1,225.00 Do you see an issue here?

• $1,225.00 divided by 3 = $408.33 per unit increase PER MONTH
  • Your new rental unit is now $1,308.33 rounded for profit $1,400.00 per month.

• Let’s say you own a home with a mortgage of $911.14 per month (based on purchase price of ($165,000.00), you’ll still have that same oil bill every month of roughly $1,500.00. Your taxes would roughly be $3, 600.00 that’s $300.00 per month and your homeowners insurance roughly $67.00 per month.
  • $911.14 per month Mortgage
  • $1,500.00 per month oil
  • $300.00 per month Taxes
  • $67.00 per month homeowners insurance
  • $2,778.14 Your monthly expenses – Yikes that’s a lot more than what the rent was going for.

• Let’s say we buy a house with perhaps a wood burning stove, fire place or better still, heats by natural gas or electric (electricity has become cheaper with the introduction of deregulation) So lets take the above numbers and apply them to this equation. Now I know for fact that I can personally purchase wood for my wood stove at the high end price of $200.00 per cord, 6 cords in total equating to $1,200.00 that will heat my total home for 6 months, interesting fact, approximately one month of oil is $300.00 more per month, take that to 6 months and you’ve got a whopping $1,800.00  I do this every year and pellets stoves are just as good and I believe the material burned, may be cheaper don’t quote me on that though. So, now that we’ve got the heat part of this wrapped up lets do the math once again.
  • $911.14 Per month mortgage based on a $165,000.00 purchase price
  • $100.00 per month fire wood or pellets (you’ll only need to heat for 6 months remember)
  • $300.00 per month taxes
  • $67.00 per month homeowners insurance
  • $1,378.14 Your monthly expenses to own a home