Renting vs owning a new 2-bedroom condo at 235 Van Buren

If you’re like many of the visitors to the condominium tower at 235 Van Buren, the new Ralph Johnson-designed condo at the edge of Chicago’s Loop, you’re wondering whether you should buy or rent. We’ve done some of the calculations for you.

Here’s the scenario for the purchase of Unit 2219, a 1,048 square foot 2-bedroom, 2-bath that also has a 35-square foot balcony. Assume a $285,900 purchase price, a 10% down payment, and a 30-year fixed-rate loan at 3.4% interest. Real estate taxes have not yet been fully assessed, but are estimated at 1.5% of the purchase price.

Condo purchase price $285,900
Down payment $28,590
Loan amount $257,310

Monthly cost of ownership
Principal & interest $1,141
Assessment $352
Real estate taxes $357
PMI $125
Total monthly cost $1,975

Based on actual rentals in the building, according to CMK Realty, the monthly rent for a comparable unit is $2,249. Buying is more advantageous than renting by $274 a month, before taking into account any income tax savings from the purchase. Income tax savings can vary widely based on individual circumstances, and so are not estimated, but may exceed $300 per month for higher-bracket taxpayers.

Early in the sixth year of ownership the loan balance would be less than 80% of the original purchase price, resulting in the elimination of the $125 monthly PMI (private mortgage insurance) premium.

This analysis disregards any imputed return on an alternative investment of the down payment, and any assumed return on investing the monthly out-of-pocket cash savings from owning rather than renting.

This analysis does not take into account principal reduction on the mortgage, which would approximate $29,000 over a 5-year period. It also ignores closing costs.

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

The video gives you an overview of the location’s convenient access to multiple modes of transportation. You can meet 235 Van Buren buyers, and learn what attracted them to the community, at its video page.

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