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Renting is Expensive!

How expensive can simply renting be? It could cost you up to 50% more to rent than to own. Would you like to put some of that back into your pocket? Follow through the example below to see why with so many people losing their homes and being forced to downsize, they are looking to simply rent. This is so expensive when you have better options available to you. Just because you lost your overpriced home to a short sale or, even worse, a foreclosure, you can still have the benefits of home ownership! Even if you add in a bankruptcy.

For this example let us assume you are paying a lease of $1,800/mo on a home. Do you realize that without the advantages of being able to write off interest and taxes, you need to earn $2,700/mo to pay that lease? The IRS and your state will tax you about 33% of your money (assuming you are in the 33% tax bracket). Take out 1/3 of the $2,700 you earned for income taxes and $1,800 is left. Yes, just enough to pay your rent

How much would it cost you in 36 months, at 1800/mo? About $64,800. But, you would have to earn $97,200, over 36 months, to pay that amount in lease. (Note: That figure will be higher, when lease increases are included.)

There is a better way. This method is like having the home in a really long escrow account where everyone and the property is protected from each other. It is know as the Equity Holding Trust Transfer method

Now look at Equity Holding Trust Transfer method, your new payment would be around $2,100/mo. You will get interest and tax deductions, so, you could save about $18,000 in extra income taxes over 36 months. Your net lease payment would be $2,100 minus tax savings of about $900 per month would equal a net payment of $1,200. You would only have to earn, in 36 months, $75,600 to pay the $43,200 in net lease. You will save 21,600. That is like giving yourself a $7,200 a year pay raise!

***Note, this is just an example of how it might save you money. You need to discuss this with your tax advisor before entering into a this kind of a lease agreement.***

This does not include any principal buy down or appreciation.

In this example, your principal reduction would be about $300 per month. That would make you net payment $900.

Add in some modest appreciation, say 3% per year, and you would be gaining $300 per month, making your net payment $600 per month.

Now that is a better way!