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130 Section 12: Real Estate and Lending
File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 130 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
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
fCLEARÎ
00-
t
34- 31
M
01- 15
d
35- 33
M
†
02- 15
:n
36- 45 11
:7
03- 45 7
z
37- 10
b
04- 25
:4
38- 45 4
-
05- 30
-
39- 30
:n
06- 45 11
:.0
40-45 48 0
?0
07- 44 0
b
41- 25
:$
08- 45 13
:P
42- 45 14
fCLEARG
09- 42 34
:4
43- 45 4
*
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.