00100	This addresses the cost benefits of buying a house
00200	and what amount of capital investment is optimal.
00300	
00400	
00500	The house: Yorick's house
00600		187.77	first mortgage principal, interest 5.75%,tax,insurance
00700		145.54  2nd mortgage Stanford Credit Union, 9.6%
00800		------
00900		333.31 per month payments
01000	
01100	closing costs	$100
01200			$190 on second mortgage
01300	
01400	
01500	Where does the return on capital come from?
01600		difference between appreciation and (closing costs+selling costs)
01700		for Yorick's case, he gets about $4.5k on $7k.
01800		I would do much worse because of probable agent's fees on selling
01900		and because of more pessimistic market prospects for appreciation.
02000	Estimate of appreciation
02100		Appreciation is at least as fast as inflation, and now can continue
02200		to be slightly faster, because replacement cost is rising (houses
02300		are more expensive to build) and perhaps the area is becoming more
02400		desirable.  At least for now, 10% seems reasonable.
02500	Estimate of closing costs+selling costs
02600		Closing costs $300 = 1% of selling price
02700		Selling costs 	     6% agent's fees
02800		Closing costs on selling  1%
02900		Any costs paid to agent on buying to make sure everything is in order
03000	
03100	
03200	
03300	Incremental gain from putting up more money.
03400		Suppose I put up more money now.  What costs do I save?
03500		What is the return on the money?  Can I do better?
03600		The incremental gain from putting up all of the money
03700		not covered in the first mortgage is the second mortgage
03800		closing costs plus monthly payments.  The first guess is
03900		that there is marginal advantage in putting up the money,
04000		since it brings 9.6% plus closing costs (2%).  Taxes offset 1/3
04025		of this interest charge, so I am paying effectively 6.4%+2% closing.
04050		If I can do better
04100		than 8.4% net after taxes on some other investment, then I
04200		should choose that investment, rather than putting my money
04300		in the house.  Any return on capital must come from appreciation
04400		and that to maximize percentage return, I must minimize capital.
04500	
04600	Tax rebate
04700		Interest and taxes are allowable expenses.  Depreciation
04800		may also be claimed.  
04900			interest 5.75% of $20k is $1200  first mortgage
04950			interest		  $1400  second mortgage
05000			tax $51.99		   $600
05100			depreciation 25 yr	  $1600
05150			room as office		 $840
05200						________
05300						  $5640 total
05400		Incremental tax rate is about 1/3.  Thus, about
05500		$1400 per year tax break.
05600		Are there any other tax considerations? homeowners,renter's rebates
05700	
05800	
05900	Incremental Benefit
06000		Income-Interest-Tax
06100			C capital
06200			T incremental tax rate
06205			P payoff rate
06210			I interest rate
06300		C*P-C*I-T(Income-Interest)  assumes same tax rate for both
06400		C*P-C*I-T(C*P-C*I)
06500		(1-T)*C*(P-I)
06600		From which we must conclude that the incoming payoff rate
06700		must be greater than the interest rate in order to gain,
06800		unless the payoff is taxed at a lower rate than the interest.
06900		Note that the potential payoff from real estate appreciation
07000		may be substantially higher than 9.6%, however that is risky
07100		and we may be limited by monthly income as to how much we can
07200		invest.