ChicagoDowntown / Loop

Owning cheaper than renting at Loop’s 235 Van Buren

by Joe Zekas on 9/14/11

When I met with CMK Realty the other day I left with case studies comparing the costs of ownership and rental for 1- and 2-bedroom units at 235 Van Buren.

Here’s the scenario for the purchase of Unit 1419, a 1,048 square foot 2-bedroom, 2-bath that also has a 35-square foot balcony. The case study contemplated a 3.5% down payment and a 5-year FHA ARM at 3.174% interest. Real estate taxes have not yet been fully assessed, but are estimated at 1.5% of the purchase price.

Condo purchase price $249,900
Parking price $ 35,900
Subtotal $285,800
Down payment $ 10,003
Loan amount $275,797

Monthly cost of ownership
Principal & interest $ 1,189
Assessment $ 403
Real estate taxes $ 357
Total monthly cost $ 1,949

Based on actual rentals in the building, according to CMK, the monthly rent for a comparable unit is $2,200. Buying is more advantageous than renting by $251 a month, before taking into account any income tax savings from the purchase. Those savings can vary widely based on individual circumstances, and so are not estimated, but may exceed $400 per month for higher-bracket taxpayers. The monthly cost advantage is still over $200 if the buyer takes a 30-year fixed FHA loan at 3.5%.

This analysis does not take into account principal reduction on the mortgage, which would approximate $25,000 over a 5-year period. It also doesn’t include the FHA upfront mortgage insurance premium payable at closing.

If rents rise, as many expect, ownership becomes more advantageous over time, since the bulk of ownership costs – principal and interest payments – are fixed for a 5- or 30-year period.

Anyone willing to dispute this analysis?

You can meet 235 Van Buren buyers in the above video, and meet more of them at the building’s video page.

Share: