Sweaty Equities

*AMAZON IN TALKS TO BUY $9B SATELLITE GROUP GLOBALSTAR: FT

BREAKING: Ships that want to transit through the Strait of Hormuz are being asked to pay fees in yuan to get a secret passcode, per Bloomberg

I'm doing some back of the envelope math on buying vs renting. Say you buy a $1M house with 20% down at about 6% mortgage rate and plan to stay there for five years. Your principal paydown in the first five years is about $57,000, but you've paid about $230,000 in interest. You've also paid roughly $100,000 in property taxes, insurance, and maintenance. Say the house appreciated 2.5% every year — so when you sell it's worth about $1.13 million. Your all-in costs to sell are about 7.5% — brokerage commissions, transfer taxes, attorney fees, title insurance, and the inevitable post-inspection negotiation. On a $1.13M sale that's about $85K in fees. So you net about $1.046M. You still owe $743K on the mortgage. You walk away with about $303K in cash — your $200K down payment back, your $57K in principal, and about $46K in net profit from appreciation. Your non-recoverable costs — interest, property tax, insurance, maintenance — were about $330K over five years, or about $5,500/month. That's your effective rent. But you "made" $46K selling, or about $770/month — so your effective rent was about $4,700/month. Not bad, but you tied up $200K for five years to get there. And if appreciation was 1.5% instead of 2.5%, that net gain basically disappears and you're paying $5,400+/month in effective rent. And this assumes there's appreciation at all — and that something doesn't go wrong with your house that needs a major remodel or repair. On a five-year horizon at 6% rates, you need everything to go right on appreciation just to make ownership competitive with renting. The transaction costs eat most of your upside. What am I missing? Anything?