Purchase risk, fair offer prices and loan choice for six houses inspected in October 2026.
Six houses listed at $157,000 to $255,000 were inspected and run through 4,000 simulated ten-year futures for local prices, rents and mortgage rates. The inspections separate the houses more than their prices do. House C and House D need $9k and $14k of expected work; the other four need $38k to $48k, mainly roofs and foundations. Repairs are counted as cost with no resale value.
Recommendation. Offer on House C up to $206,000. Offer on House D up to $193,000, conditional on a roof inspection or a seller credit for the roof. Do not pursue A, B, E or F at current prices; each would need to fall to $97k–$147k.
Financing. Use the 6.25% 30-year fixed loan. The 7/6 ARM is cheaper only if you expect to sell within seven years. Hold about $27,000 in cash until the loan falls below 80% of the home’s value.
| House | Asking price | Expected repairs | Monthly cost, year 1 | Buying beats renting, 7 yrs | Expected loss if forced to sell | Maximum offer | Decision |
|---|---|---|---|---|---|---|---|
| House A | $157,000 | $39,600 | $1,395 | 25% | $12,900 | $97,000 | Pass |
| House B | $224,500 | $38,100 | $1,994 | 20% | $11,600 | $137,000 | Pass |
| House C | $225,000 | $9,000 | $1,953 | 50% | $4,200 | $206,000 | Below asking |
| House D | $225,000 | $14,300 | $1,962 | 44% | $5,400 | $193,000 | Below asking |
| House E | $250,000 | $38,100 | $2,232 | 18% | $11,500 | $147,000 | Pass |
| House F | $255,000 | $48,500 | $2,259 | 13% | $14,700 | $129,000 | Pass |
Each house was scored on 40 items as good, fair or a problem. Every problem is costed as a repair at purchase, using local price ranges toward the high end. Each note from the inspector is costed as a possible bill: a probability that it comes due and a range for its size. Each simulated future draws its own bill. Condition also sets yearly upkeep: 1% of value for a house in good order, rising to 2% for one in poor order.
| House | Good / fair / problem | Problems to fix | Inspector’s notes | Expected total | 1-in-20 total | Upkeep per year |
|---|---|---|---|---|---|---|
| House A | 20 / 11 / 9 | $16,200 | $23,400 | $39,600 | $66,800 | 1.4% |
| House B | 20 / 10 / 9 | $32,000 | $6,100 | $38,100 | $58,900 | 1.4% |
| House C | 32 / 5 / 2 | $3,000 | $6,000 | $9,000 | $17,500 | 1.1% |
| House D | 31 / 5 / 4 | $6,000 | $8,300 | $14,300 | $30,400 | 1.2% |
| House E | 17 / 13 / 10 | $31,800 | $6,300 | $38,100 | $58,500 | 1.4% |
| House F | 20 / 12 / 7 | $33,100 | $15,400 | $48,500 | $61,000 | 1.3% |
| Inspector’s note | House | Probability | Cost if needed | Expected cost |
|---|---|---|---|---|
| Roof tear-off: several shingle layers, possible water damage | House A | 70% | $20,000–$30,000 | $17,500 |
| Structural repair for a possible lean in the roof or a wall | House A | 30% | $10,000–$30,000 | $6,000 |
| Garage door repair | House B | 100% | $300–$1,500 | $900 |
| Roof rated fair, may need replacing | House B | 25% | $17,000–$25,000 | $5,250 |
| Soft exterior walls: rot and framing repair | House C | 60% | $5,000–$15,000 | $6,000 |
| Roof of unknown age, may need replacing | House D | 40% | $17,000–$25,000 | $8,400 |
| Garage floor crack | House E | 100% | $600–$1,500 | $1,050 |
| Roof rated fair, may need replacing | House E | 25% | $17,000–$25,000 | $5,250 |
| Water damage under the roof | House F | 60% | $2,000–$8,000 | $3,000 |
| Sewer line repair or replacement | House F | 50% | $4,500–$16,500 | $5,250 |
| Back patio replacement | House F | 100% | $3,000–$8,000 | $5,500 |
| Diseased trees removed | House F | 100% | $500–$3,000 | $1,750 |
The analysis simulates 4,000 possible futures for the next ten years. Each is consistent with Manhattan home prices since 1986 and with the usual behaviour of inflation and mortgage rates. The model starts from long-run inflation, adjusts that with forty years of local prices, and carries the remaining uncertainty into every future. Each future is then priced for every house: loan payments, tax, insurance, upkeep, inspection repairs and, on a sale, selling costs. All six houses face the same 4,000 futures, so differences between them come from the houses.
Each house is compared with renting a similar home and investing the money that buying would have tied up (down payment, closing costs, repairs and any difference in monthly cost) at 5% a year. The comparison is made after 7 years, net of selling costs.
Each year carries an 8% chance that the household must move (job, family), close to the national rate for homeowners. A move means selling at that year’s market price. The expected loss weighs each year by the chance a move happens then. The reserve is the cash needed to close a forced sale in the first five years in 99 futures out of 100.
For a stay of seven years or less, the ARM costs less than the fixed loan in every simulated future, for every house, because its lower starting rate covers the whole stay. Beyond seven years the payment can reset upward. The fixed loan costs more in a typical future and removes that risk.
If the household moves after year 3 and rents the house out, rent is collected net of 6% vacancy and a 9% management fee. Costs are the mortgage, tax, insurance, upkeep and repairs.
| House | Market rent | Gross yield | Monthly shortfall (median) |
|---|---|---|---|
| House A | $1,250/mo | 9.6% | −$300 |
| House B | $1,500/mo | 8.0% | −$690 |
| House C | $1,500/mo | 8.0% | −$640 |
| House D | $1,500/mo | 8.0% | −$650 |
| House E | $1,580/mo | 7.6% | −$870 |
| House F | $1,600/mo | 7.5% | −$870 |
As rentals, all six lose money every month and rely on price growth for any return. Homes here sell for 10 to 13 times a year’s rent, so an owner-landlord needs other income to cover the shortfall.
| Assumption | Value |
|---|---|
| Down payment / closing costs / selling costs | 10% / 3% / 6% of price |
| Fixed loan | 6.25%, 30 years |
| Adjustable loan | 7/6 ARM from 5.75%; caps 5 / 1 / 5 points |
| Property tax / insurance | 1.45% of value / 0.75% of price, rising 4% a year |
| Mortgage insurance | 0.5% of the loan a year, until the loan falls to 78% of the price |
| Upkeep | 1% to 2% of value a year, by inspection condition |
| Renter’s return on savings | 5% a year |
| Chance of a forced move | 8% a year |
| Rental vacancy / management | 6% / 9% of rent |
Not modelled: income tax and the mortgage-interest deduction, refinancing, and any resale value from repairs. Repair costs come from published ranges for Manhattan and Kansas City (roofing, foundations, plumbing, windows); where no source existed, a stated allowance was used. Inspection scores were transcribed from handwritten forms and should be confirmed against the originals before an offer is made.
| Parameter | Estimate | 90% range | R-hat | Effective draws |
|---|---|---|---|---|
| Long-run growth, %/yr | 3.61 | 2.27 to 4.99 | 1.005 | 879 |
| Persistence | 0.31 | 0.04 to 0.56 | 1.005 | 571 |
| Yearly swing, % | 4.11 | 3.38 to 5.01 | 1.003 | 902 |
Mortgage rates use the same kind of model, fitted to Freddie Mac yearly averages since 2000. Rents grow about 3% a year with yearly swings of 2%.