130 Section 12: Real Estate and Lending

The Rent or Buy Decision

The question of whether to rent or purchase a residence is not always easy to answer, especially when the time period over which you would own or rent a house is short. This program performs an analysis which could be helpful in reaching a decision. Essentially, it calculates a yield or rate of return on the proposed investment. This yield may be compared with the yield obtained by renting a residence and investing the down payment and monthly payment differences in a savings account or other investment opportunity. This program takes into account the tax advantages obtained by a home owner on property taxes and mortgage interest.

First the program computes the Net Cash Proceeds upon Resale (NCPR),* next the yield on the investment in the house and then the value of the hypothetical savings account at the end of the investment period. A comparison of the NCPR and the final balance of the savings account and a comparison of the yields should aid in determining whether to rent or buy.

KEYSTROKES

 

DISPLAY

 

KEYSTROKES

DISPLAY

 

 

 

 

 

 

 

 

 

fs

 

 

 

M

33-

 

15

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t

34-

 

31

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02-

 

15

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11

 

 

 

 

 

 

 

 

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03-

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37-

 

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*The Net Cash Proceeds upon Resale (NCPR = sales price – commission – mortgage balance),

is the pre-tax proceeds. The program assumes that the buyer reinvests in like property and is not subject to capital gains tax.

†FV is repeated in the program twice to ensure that it is computed and not stored.

File name: hp 12c_user's guide_English_HDPMBF12E44

Page: 130 of 209

Printered Date: 2005/7/29

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