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Simple Investing Method: Buy a Home or Rent and Invest

Simple Investing Method: Buy a Home or Rent and Invest

Simple Investing Method: Buy a Home or Rent and Invest cover
Number: P-039
Published: Not specified
Pages: 7
Source filename: 大道至簡投資法-買房或租房投資.pdf
Original PDF: Open PDF

Related Materials

  • Previous presentation: There Must Be a Limit to Human Pessimism
  • Next presentation: Safe Asset Allocation for Retirees With No Income Who Use Pledged Stock Loans and Have Already Borrowed a Large Amount! rev. 2.0

Document Text

Simple Investing Method, PC Huang

1

Simple Investing Method, PC Huang

Line ID: 886919965624

eMail: [email protected]

2024/11/23

Simple Investing Method: Buy a Home or Rent and Invest - figure 1-6: 2024/11/23 Simple Investing Method: Buy a Home or Rent and Invest - figure 1-7: 2024/11/23 Simple Investing Method: Buy a Home or Rent and Invest - figure 1-8: 2024/11/23

Buying a Home or Renting and Investing: Sample Scenario

2

Buying a home or renting and investing: sample scenario

  • Home price and loan terms
  • Total price: NT$4,000,000
  • Down payment: NT$1,200,000 (30%)
  • Loan: NT$2,800,000 (70%)
  • Loan term: 30 years
  • Mortgage rate: 2%, amortized principal and interest
  • Calculation assumes self-use, not rental or investment property

2024/11/23 Reference: Simple Investing Method - Buying a Home or Renting and Investing

Simple Investing Method: Buy a Home or Rent and Invest - figure 2-6: 2024/11/23 Reference: Simple Investing Method - Buying a Home or Renting and Investing

Taxes and Fees Excluded; Management Fees Paid by Tenant; Utilities Needed Either Way; Repairs Paid by Owner

3

Sample assumptions:

  • All taxes and fees excluded.
  • Management fee paid by tenant.
  • Water, electricity, gas, and phone are needed whether owning or renting.
  • Home repairs are paid by the owner.
  • Annualized home appreciation: 5%.
  • Taiwan house tax: 1.2%.
  • Taiwan mortgage rate: about 2%.
  • Taiwan home price index annual growth rate: about 7.26%.
  • Rent: NT$15,000 per month, rising 2% per year. Taiwan inflation over the past decade was about 2% to 3%.
  • 00662 annualized return: 14%.

Final Net Assets: NT$17.29 Million; Annualized Return: 4.33%

4

Buying result:

Home price: NT$4,000,000. Loan-to-value: 70%. Mortgage: NT$2,800,000. Down payment: NT$1,200,000. Monthly payment is about NT$12,400. Over 30 years, total interest is about NT$840,000, total principal and interest is about NT$3,640,000, and total invested cost is about NT$4,840,000.

Final net assets: NT$17.29 million, annualized return 4.33%.

Simple Investing Method: Buy a Home or Rent and Invest - figure 4-6: Final net assets: NT$17.29 million, annualized return 4.33%.

Renting and Investing Result

5

Renting and investing:

Inflation setting: 2%, consistent with Taiwan's past decade of about 2% to 3%.

Rental period: 30 years, matching the mortgage term.

Initial monthly rent: NT$15,000, rising 2% annually. Total rent over 30 years is NT$608,500.

Initial investment: NT$1,200,000 down payment invested instead.

Monthly investment: NT$8,400, calculated from the same total outflow as buying after subtracting rent.

Investment return: 14%, using 00662 as the assumed annual return.

Total investment amount: NT$4.23 million. Ending investment assets: NT$97.12 million. Net total after rent: NT$96.51 million. Annualized return: 10.49%.

Figure 5-6: Summary table of the renting-and-investing scenario, showing an annualized internal rate of return of 10.49%.

Comparing Buying Net Assets of NT$17.29 Million With Renting and Investing in 00662 at NT$96.51 Million, the Difference Is NT$79.22 Million

6

Conclusion:

  • We often hear the myth: the mortgage is NT$12,400 per month, while rent is NT$15,000 per month; after 30 years the house still belongs to someone else, so why rent instead of buy?

  • Comparing buying net assets of NT$17.29 million with renting and investing in 00662 at NT$96.51 million, the difference is NT$79.22 million. Which would you choose?

  • Can NT$4,000,000 buy a new house today? After another 30 years, will that old house really be valuable?

  • Another myth is that young people can use a 40-year mortgage. That makes the gap even larger.

  • Buying net assets: NT$28.16 million, annualized return 4.16%.

  • Renting and investing net assets: NT$326.88 million, annualized return 10.95%.

  • The difference reaches NT$298.72 million.

Q&A 7 2024/11/23

Simple Investing Method: Buy a Home or Rent and Invest - figure 7-6: Q&A 7 2024/11/23

There Must Be a Limit to Human Pessimism

There Must Be a Limit to Human Pessimism

Safe Asset Allocation for Retirees With No Income Who Use Pledged Stock Loans and Have Already Borrowed a Large Amount! rev. 2.0

Safe Asset Allocation for Retirees With No Income Who Use Pledged Stock Loans and Have Already Borrowed a Large Amount! rev. 2.0

Table of Contents

Related MaterialsDocument TextSimple Investing Method, PC HuangBuying a Home or Renting and Investing: Sample ScenarioTaxes and Fees Excluded; Management Fees Paid by Tenant; Utilities Needed Either Way; Repairs Paid by OwnerFinal Net Assets: NT$17.29 Million; Annualized Return: 4.33%Renting and Investing ResultComparing Buying Net Assets of NT$17.29 Million With Renting and Investing in 00662 at NT$96.51 Million, the Difference Is NT$79.22 Million