I’m 30 years old. I’m a public school teacher. I make about $40,000 a year. I’m a lifelong apartment renter.
As I’m getting Up In Years, my friends and relations are starting to tell me that I’m a moron for continuing to rent.
Their argument: if I bought a house, I’d be getting ownership, whereas now, I’m stupidly making donations of money to the landlord, money that’s now lost forever to me.
My argument: everyone I know who owns a house seems to dump every dollar and every minute of spare time into keeping it maintained, while I just call up the landlord and say, “Hey, the plumbing’s broke. Fix it, please.” I say that I’m better off living comfortably and with a low stress level than killing myself to pay off a mortgage, mow a lawn, plant a little flower garden, fix the bloody roof…
Am I, as my family asserts, an idiot? Do I HAVE to buy a house?
The rent you pay is not “money that’s now lost forever” to you. You have nicely received the benfit of shelter from that payment.
Mortgages tend to be larger than apartment rent and half of that money, over the long run, will be “lost forever” as interest paid to the bank.
Those points said, there are benefits and drawbacks to both. Weigh each cardfully and do what’s right for you. My sister, who is a current house owner for what it’s worth, looks back on her time spent renting as Halcyon days.
I’m 30 and bought my first house about a year ago. I am very happy I did. Knowing that when if/when I move I immediately have x amount of dollars in equity is a good feeling.
I moved into an apartment a few years back out of the house I was buying. I was having trouble as a single woman keeping the repairs up on the house, for one my ex-husband had never fixed anything the whole time we lived together and the house was literally falling apart. I love that I do not have to make repairs. So if you are like me, rent is not wasted. But maybe one day I will once again want a house and then I will not mind the yardwork. I could even have a pond dug for my pet turtles.
So I feel it is a personal choice on what you want to spend your time and money on. Do not let others influence you because then you will resent the work and them for suggesting it.
I’m in a similar situation to yours, and I’ve mostly had a similar attitude. All summer long I listen with pleasure to the lawn mowers that someone else is pushing around in the sun, while I chat with the neighbors as I sip my lemonade poolside.
I’ve never figured the “house as an investment” argument added up. I think it’s a feel-good justification for making an expensive purchase that most people want for other reasons.
One friend of mine explained how great it was to have $(a large amount) in equity in his first house when he upgraded to a newer house. But I’ve always been a compulsive saver; I didn’t tell him that I had about 4x that much in cash because I haven’t been paying a big mortgage with interest, taxes, massive utility bills, insurance, maintenance, etc.
If you’ve got no savings discipline, a mortgage can act as a forced savings plan, and for some people, that’s good. But people who view houses as good investments usually don’t consider unpleasant realities like taxes, interest, inflation, and upkeep (both time and money).
I think over the long term, you’ll do better financially if you buy a house (or condo or something). But you’re right, in the near-term you are going to pay more per month for your mortgage + expenses than you would for rent. That ratio improves as the years go on until you have eventually paid up the whole thing. Your rent is only going to go up over the long term.
One advantage to buying a house is that you have a larger structure that you can feel free to do anything you want to with (expect for those nasty home owners associations). Most apartments, in my experience, are rather tiny. And try knocking down a wall or redoing the kitchen.
If you rent a house, on the other, most likely you are paying more than you would for a mortgage. After all, the landlord has a mortgage on that house and still wants to pocket a little cash.
One thing you do need to consider is that if you rent, your rent will likely go up each year due to inflation, whereas if you buy a house or apartment, you’ll pay the exact same mortgage payment each year.
That depends on where you live. In my complex, we’ve renewed our lease twice and our rent dropped one year and stayed the same the next. At our old complex, our rent stayed the same when we renewed the lease.
It also depends on the house you’d buy vs. what you rent. If a house payment is $1,000 a month and rent is $600 a month, I don’t see how you’d be better off paying the bank $400 a month in cash money. Oh, you may see it back eventually in 30 years. Better, I say, to wisely invest that extra $400 a month.
But it’s maitenance that really makes me NOT want a house at the moment. Not that I could make the payments anyway. Right now, if my AC unit is dribbing water, I call the office and say “Hey, the AC thingie is dribbling water” and someone comes out and fixes it. I found out what the guy did and checked a little guide thingie online and that was a $200 repair. They’re going to replace the carpet in here, another thing I don’t have to pay for. They just repainted the outside, don’t have to pay for that. I may in rent increases later down the road, but whatever.
See, my mom owns her house and I don’t know what her payment status is, but she’s always fixing something, saving up to have something fixed, or otherwise working on the darn thing. Or there’s upkeep things like mowing the lawns, cleaning the gutters, etc.
Something else to consider -
I assume from your OP you don’t have a live in significant other?
If you wait until you get married/move in, your combined incomes will certainly make it much easier to afford a mortgage on a larger, nicer home than you could afford on your own with your salary.
The best part about owning a house is that it is operationally mine unless I cease to make the mortgage payments or let the yard go so far it becomes a public nusicance. No One can interrupt my privacy to inspect “their” property. Plus you usually (other things being equal) get substantially more square foot space for the dollar in owning a house and yard and I need room for my toys.
My best friend bought a house two years and one day ago for $60,000. It’s a 3-BR on a quarter-acre in a seaside community. It was appraised a month ago, and I’m buying it from him for the appraised value – $96,000. He’s making about 40% on a two-year investment. He did put about $10,000 into it, but it’s still a good return.
The county where the house is is the fastest-growing county in the state. Houses in the $100,000 range are becoming scarce, and most of them are double-wide mobile homes. I figure the prices will just keep going up.
I’ve been in the same apartment in L.A. since 1987. Rent has gone up every year. In November I’ll start paying $783 per month on a one-bedroom apartment. The house will cost about $550/month including insurance and property taxes – which is less than my apartment rental back in 1987!
People have been evicted from this building. The landlord has no qualms about it. If he could get rid of me, he could charge $895/mo. for my flat to the next tenants. No such problems with a house. As long as you pay the taxes and make the payments, you’re pretty secure.
There have been changes at the office. I may not have a job for very long. Or maybe I will. Nobody knows. My severence package should cover me for four months if I don’t take any more vacation time. That’s L.A. months. Money goes farther up north, and my “rent” will go down by nearly a third. That gives me more time to look for a job up there. And unemployment benefits would allow me to live there after that, whereas they would not be enough to cover my current situation.
So the house is A) an investment, and B) an “escape hatch”. I just wish I had bought a place two years ago when the prices were lower.
If you are a lifelong renter, you are taking a tremendous risk that a new landlord will come in and jack up the rent tremendously. This happened in the complex I used to live in and the older residents were really hurt.
As other folks have pointed out, owning is usually financially better over the long term. A lot better.
If you like the idea of someone else taking care of mowing the lawn, etc., you can always get a condo or co-op. So you are protected from inflation but keep many of the advantages of renting.
This is really a IMHO-type question with the answer, “it depends”. But I wouldn’t let finances be my prime determinant of whether I bought a house or not. Yes, the tax break is nice, and the gain in equity (if any) is a nice bonus, but it’s mostly a lifestyle issue. A house is eternal maintenance, gardening, and lawncare (unless you buy a brand new condo). It’s also space and privacy, and freedom for hobbies such as woodworking that have no place in an apartment. No one to forbid you from owning a cat or dog, no noisy upstairs neighbors, no chance that the landlord might raise the rent unexpectedly or decide to sell the place and cast you out in the street. It’s also a big-ass mortgage – kind of a scary thing to have hanging over your head in bad economic times.
You also lose some flexibility owning a house. It's easy to leave an apartment -- at worst you have to pay a few months rent to appease the landlord. Selling a house and moving is A Big Deal. So don't buy a house unless you're pretty happy with the idea of living there for several years.
Condos can be tricky, too. You have to check really carefully about how the management company can raise fees, and charge for major repairs and improvements.
Owning a home is really a hobby; always something to do. And you get to buy cool tools. I like it.
I think you should save enough money in low risk investments so you always have the option if you DO get sick of renting (which is paying for shelter, not throwing money away.)
But if you let them nag you into buying a house, then they’ll start on you to get married …
Round about these parts, a two bedroom can run around $800,000, that gives you a monthly payment of about $6500. You can rent a two bedroom for $900 a month. Hmm, which looks like a better deal?
