Simple Math

By Thomas C. Schultheis
2019 President 
Santa Barbara Association of REALTORS® 

Over the past 10 months as SBAOR president I have covered a lot of topics surrounding home ownership. Today I would like to offer some simple math to help illustrate the long-term value of ownership.  

Let’s start with two realistic scenarios to compare:   

Scenario 1: You rent a Goleta 3 bedroom, 2 bath home worth approximately $850,000 for roughly $3,800/month.

Scenario 2: With 20% down you purchase that property and it costs you approximately $4,000/mo to cover the mortgage, taxes and insurance.

Let’s assume that in both scenarios you live in the property for 30 years.

With Scenario 1 you will have paid $1,386,000 in rent (assuming your landlord doesn’t increase your rent every year) .  This payment surely paid off your landlord’s mortgage or went into his/her pocket.  You deducted none of this expense and have nothing more than what you had when you started renting 30 years ago.

With Scenario 2 you will have paid off your entire mortgage of $680,000.  You would likely have deducted $734,000 off your income over that period of time and you would be left with a free and clear home that is likely worth much more than you paid for it.  Your payment hasn’t changed in 30 years and you never had to worry that it would unless you wanted it to.
Is this alone not enough evidence to persuade you to strive towards home ownership?

Let’s not forget that while it’s usually under one’s control to own a property for 30 years, it’s a rare occurrence to rent a property for 30 years.  The instability of payment amount and length of occupancy further make a case for homeownership.

Granted, it’s not always as simple as what I have illustrated above.  For some there are valid reasons to rent and there are some downsides to home ownership.  However it is important to recognize that there are huge advantages to home ownership that can change your life and help you plan for retirement.   

It’s also worth noting that some people reading this may have the potential and desire to buy, but cannot afford a property at the price of the example I’ve given.  The good news is that there are currently properties available in Santa Barbara and in surrounding areas for less than $850,000.  Getting your foot in the ownership door is possible with proper planning.  Interest rates are at historic lows, and just remember that every dollar you pay in rent is paying off someone else’s mortgage or expenses.   Why not change that and make that payment pay off your own mortgage?  

The Santa Barbara Association of Realtors recommends you call your Realtor to discuss whether home ownership is a good and possible choice for you.  Realtors will help you even if you determine renting is in your best interest.   We are here to help.

Thomas C. Schultheis is a Santa Barbara native and a Realtor with Berkshire Hathaway HomeServices California Properties. In addition to his work on the Board of Directors of the Santa Barbara Association of Realtors, Thomas holds a Broker’s license and additional designations. Thomas lives in Santa Barbara with his wife and their two-year old son. He can be reached at 729-2802 or  


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