A reader reinforces my feelings about the whole thing with numbers:
I have to disagree, at least a little, with the NPR reporter in regards to Gaithner’s housing troubles. The implications of the quote are that he’s losing money faster than he can count. While you’d hardly describe it as a wonderful deal, Geithner isn’t going to go bankrupt because of his house, if he can keep it rented.
The $7,500 per month in rent comes to $90,000 annually. On the expense side we have $27,000 in property taxes plus as much as $72,000 in interest payments on a $1.2 million loan (at a conservative 6%). The interest portion of the mortgage payments will go down each month, of course so after nine years, the cash starts flowing the other way. You cannot count the principal portion of the monthly payments, since that isn’t really being spent but rather is simply moving to a different part of the balance sheet. Anyway, Geithner will pay a total of (as much as) $99,000 per year on interest and taxes. It isn’t a way to make a lot of money, clearly, but paying $9,000 per year for a few years to hold onto an asset worth somewhere in the neighborhood of $1.5 million doesn’t sound unreasonable to me.