Rent vs Purchase for Condos Downtown

Downtown San Diego Condos can actually pencil out very well for purchasing rather than renting. The key is that you are planning on living in the downtown condo for at least 3 years or you are willing to rent it out if something comes up and you need to relocate.

The numbers show that with a twenty percent down payment, you can own a downtown San Diego Condo for substantially less than renting…pencils out anywhere between 10-20% less per month. First let’s take a look at renting a one bedroom condo vs. buying the same downtown San Diego property.

Rent vs. Buy 1 Bedroom Condos Downtown San Diego

Downtown Condos___________________La Vita 1 bed ____ Treo 1 bed _____M2i Loft

Purchase Price _____________________ $ 225,000 ______ $ 235,000 ____ $ 330,000

20% down payment ________________ $ 45,000 ________ $ 47,000 _____ $ 66,000

Mortgage Amount __________________ $ 180,000 _______ $ 188,000 ____ $ 264,000

Est. mortgage at 5% ________________ $ 966 __________ $ 1,009 ______ $ 1,417

Property taxes _____________________ $ 212 __________ $ 221 _______ $ 311

Home Owner Association _____________ $ 402 __________ $ 394 _______ $ 380

Total Monthly Obligation _____________ $ 1,580 _________ $ 1,624 ______ $ 2,108

Rent on identical floor-plan ___________ $ 1,750 ________ $ 1,800 ______ $ 2,250

Property Tax & Int. Deduction ________ $ 2,487 ________ $ 2,598 ______ $ 3,648

Monthly Savings – Deduction __________ $ 207 __________ $ 216 _______ $ 304

Monthly cost to own _________________ $ 1,373 ________ $ 1,408 ______ $ 1,804

Months to recoup down payment _______ 119 ___________ 120 __________ 148

The property tax and interest deduction used in the above model are based on an individual or couple being in the 27% tax bracket. This represents a wage earner that would be considered low to moderate income by San Diego median income. If you are in a higher tax bracket, which is likely, your savings would be greater.

We tend to lean towards the side of caution as we would rather under-promise and over-deliver. You can see by the last line that it could take approximately 10 years to make back your initial down payment via the savings of owning, however, this does not include the benefits of appreciation of the property values nor the rising of rents which we are really starting to see right now.

Condos Downtown San Diego – Rent vs. Buy

For 2 bedroom condos… if you are considering the rent vs. own scenario for 2 bedroom condos, this is a similar scenario. All of these 2 bedroom condos include 2 parking spaces and both La Vita and Treo have swimming pools and Spa. They were all built within the last 8 years and are in good condition.

Downtown Condos____________________ La Vita 2 bed _____ Treo 2 bed _____ Metrome 2 bed

Purchase Price _______________________ $ 400,000 _______ $ 375,000 ______ $ 380,000

20% down payment ___________________ $ 80,000 ________ $ 75,000 _______ $ 76,000

Mortgage Amount _____________________ $ 320,000 _______ $ 300,000 ______ $ 304,000

Est. mortgage at 5% __________________ $ 1,718 __________ $ 1,610 ________ $ 1,632

Property taxes _______________________ $ 377 ___________ $ 353 _________ $ 358

Home Owner Association _______________ $ 452 ___________ $ 395 _________ $ 380

Total Monthly Obligation ________________ $ 2,547 _________ $ 2,358_________ $ 2,370

Rent on identical floor-plan ______________$ 2,500 _________ $ 2,450 ________ $ 2,450

Property Tax & Interest Deduction _______ $ 4,422 _________ $ 4,145 ________ $ 4,201

Monthly Savings for Deduction ____________ $ 368 __________ $ 345 _________ $ 350

Monthly cost to own ____________________ $ 2,178 _________ $ 2,013 _______ $ 2,020

Months to recoup down payment __________ 249 ____________ 171 ___________ 177

Due to the nature of the larger down payment, it takes longer to recapture the initial investment on the 2 bedroom condos, but it is likely the 2 bedroom condos will have a greater appreciation as the San Diego Real Estate market leads the nation out of the housing downturn of 2006-2011.

What if you don’t have 20% to put down?

Well, in this case you may still purchase with FHA, VA or conventional financing, but the numbers won’t work out quite as well. Generally with less of a down payment, rates are higher and you have to factor in Mortgage Insurance (except for VA or Home path). For specific numbers regarding your situation, give us a call and we’ll connect you to the right properties and will show you if buying is a good option for you.

Cheers from your friendly downtown neighborhood real estate experts!

Chad Dannecker is an expert on condos in Downtown San Diego. His primary focus is helping people buy and sell downtown real estate. Chad lives in Downtown and his office is located in the middle of Downtown San Diego’s Marina District. Let’s start a conversation about San Diego Real Estate.

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