When you see the title of this post, I bet you are going to say: It’s too good to be true.
It is really good and it is true. Here are my numbers and facts for you.
A two bedroom, two bathroom condo is rented for about $2100 to $2400 in North San Jose, from where with about 15 to 20 minutes driving you pretty much can reach up north to Palo Alto, down south to Evengreen, northeast to Fremont. Willow Lake is one rental complex in this area. Here are their rent amount published on the website http://www.essexapartmenthomes.com/apartment/willow-lake-san-jose-ca-301608561068/floorplan
2 BR | 2 bath 1015 sq ft$2,167 – $2,392
2 BR | 2 bath 1150 sq ft$2,342 – $2,362
3 BR | 3 bath 1303 sq ft$2,979 – $3,004
A five year new, 2 bedroom, 2 bath room house in the same area (about five minutes apart by walking to the above complex) is listed at $498,000 It’s not only much newer, better quality and built by high-end builder Toll Brothers, it also has better amenities: better swimming pool, tastefully furnished club house, outdoor fireplace and pool side BBQ.
Here is the virtual tour: www.1431MarcelloDr.com
At price of $498,000 and a loan amount of 373500, with current rate for 30 years around 4.125%, monthly payment for mortgage which includes principle and interest is only $1810. Of this payment of $1810, only about $1284 is initially for the interest payment which is your expense. This expense is getting less and less when you pay down your loan every month. The tax credit you get by deducting your interest payment and your property tax from your own income can mostly offset your property tax. With a low HOA fee of $273 per month, your monthly expense for having this house is $1557.
The principle you paid and the down payment are your equities and will be back to your years later when you sell it. On top of that, you may even have a capital gain if the price of houses go higher when you sell it, which is highly likely when you keep the house for a longer time frame.
So here you are for this really good and really true deal: pay $1557 per month for this house with $1307 sqft living area, attached car garage, almost new and beautiful. This is almost half of what you pay for the above rental apartment in the same neighbor.
Now you know why there are so many investors buying houses to generate rental income and let you pay for their house.
Do not be that renter who help others to accumulate wealth. Be the one who builds your own wealth. Here is your first step: check this house in person on Saturday or Sunday afternoon from 1-5 and do your math to see if you can get it for yourself.
