Buy vs Renting Research Paper

Buy vs Renting Research Paper Housing Decision: Should we rent or own a house Sugandha Amatya Narayan Deshar Rajesh Maharjan Suman Shrestha Bibek Tulachan Table Of Content (Jump to) Background Should Mr. X stay in a rented house or buy a house? Calculation of Rent Calculation of Cost of Buying House Calculation of Value Appreciation of Property Analysis of Gain or (Loss) between Staying in Rented House or Buying a House Conclusion    Background The Decision Problem The home ownership analysis to follow is intended to represent as realistically as possible as 2014 current market conditions in the areas two core cities of Kathmandu: – Jahmsikhel and Harisiddhi where the price is relatively low comparing to the first one. A quick survey/sampling of property in several housing areas in Jahmsikhel indicated that a house with market value of Rs 3.1 corer could be rented for approximately Rs 60,000 per month and the house with the market value of Rs 1.01corer in Harisiddhi could be rented for appro ximately for Rs 20,000 per month. Assuming that, there are two couples, each with Rs 40,000 per month. All two have the same gross income in salary and the filing status for income tax purposes. The first couple, designated as Owners,† purchases a home. The second couple, Renters†, decides to rent. The home buyers (Owners and Capita lists) are married and file joint returns. (Their income will be itemized later.) The market costs of their houses at Jhamsikhel is 3.1 corer and in Harisiddhi its 1.09 corer. (For tax purposes in Jhamsikhel Rs 75000 per year and for Harisiddhi it is allocated Rs 18,750 per month for the building.) In addition to that for the building insurance for Jhamsikhel @ 0.12% Rs 1500 per month and Rs 750 per month, Rs 5000 per month at Jhamsikhel and Rs 2000 per month at Harisiddhi, for maintenance cost at Jhamsikhel Rs 3000 per month and at Harisiddhi Rs 1000 per month is allocated. The Renters invest their Rs 20,000 in a money fund that yields 6% yearly. They reinvest the interest income into the fund each year. In the initial year, the Renters pay rent of same amount which is not changed of Rs 20,000. Throughout the 20-year period of the analysis, all variables increase annually at the 6% annual inflation rate. These variables include the couples’ salaries, loan service charge, and loan processing charge, property valuation charge, and mortgage loan payment, building insurance premium, maintenance cost, electricity, water and other utilities costs, depreciation on building, property tax and rental expenses. When discounting after-tax cash flows, we use a 6% interest rate that represents these couples’ market interest rate under inflation. Research Methodology: Research in common parlance refers to a search for knowledge. Once can also define research as a scientific and systematic search for pertinent information on a specific topic. Methodologyis the systematic, theoretical analysis of the methods applied to a field of study, or the theoretical analysis of the body of methods and principles associated with a branch of knowledge. In short, the search for knowledge through objective and systematic method of finding solution to a problem is Research Methodology. Research Objectives: The main objectives of conducting the following research are as follows: