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This Is The Reason We Rent An Apartment And Don’t Own A House.

Care to guess how much this house in my neighborhood is listed for?

housesale.jpg


$998,000

Yep, a 2 bedroom 1.5 bath house THIRTY TWO BLOCKS further away from the beach than I am is listed at about a million bucks. A house that has the same number of bedrooms and bathrooms as my apartment does. The apartment I pay $1949 a month for. Sure, I don’t have a backyard, but then again I have a park overlooking the ocean 1 block away that I use as my backyard!

For my $1949 a month in rent I could own a pretty nice house in most other places away from LA, SF, NYC or Boston. But here I could not even buy a cardboard box that I would feel comfortable living in…not if I wanted to take out a legitimate mortgage for 30 years. Sure, sign me up for a 5 year interest-only loan and I could get in anything I want – but I have a head on my shoulders that won’t allow me to do something so stupid as to buy a house I know I cannot afford in 5 years. So I rent.

People (including family members) ask me all the time why we don’t buy something and all I have do is send them a listing of something in my price range and then they begin to understand. Then I show them what a decent sized house goes for in a nice neighborhood and they really start to understand. This house is in a neighborhood not as nice as mine, is miles from the beach, and is probably no bigger than my apartment is. For a million bucks.

That, my friends, is why we rent. At least until we leave for Taos, NM where I will definitely be buying something. People who continue to buy in this Southern California market are off their rockers, if you ask me.

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Comments (13)

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  1. Tom K says:

    I often think about the idea of with rent you are throwing away money but with a mortgage interest you are doing the same thing. With still rent because it is cheaper in the long run to throw the money away in rent than the amount we would throw away in interest for the mortgage. Plus take into account all the extra costs of owning. Right now we don’t pay for water, snow plowing, malfunctioning dishwashers etc. Make sense?

  2. DebtDieter says:

    I’ve never understood the “˜renting is throwing away money’ argument; you have to live somewhere don’t you?

    I’m with you, I’d rather rent somewhere nice that suits my needs and lifestyle than mortgage myself to the hilt to live somewhere that none of my friends would ever come to visit me.

  3. Mrs. Micah says:

    *shivers and feels very grateful for her $733 rent payment*

  4. plonkee says:

    I think the expression that covers people buying in South California is *more money than sense*. If they can’t afford it, they have very little sense indeed.

  5. “I’ve never understood the “˜renting is throwing away money’ argument; you have to live somewhere don’t you?”

    DebtDieter, I completely agree. If my a/c unit explodes or anything similar, it’s on my property management to fix or replace. As a renter, I get to focus on savings/investments more and less on house property maintenance =)

  6. Housing prices in some parts of the country are just crazy. Even your rent is wayyy more than I would be willing to pay for housing each month. I’m glad I live where I live (Atlanta) and if I want to go to the beach, I’ll just visit.

  7. david says:

    We do get paid more out here than most other places, so it makes up for some of the difference. A crappy apartment in a not so nice neighborhood will still run over $1000

  8. DebtDieter says:

    Exactly Modern Worker, don’t get me wrong I’d like to have a place of my own one day, but when I can afford it!

  9. [...] My Two Dollars – This Is The Reason We Rent An Apartment And Don’t Own A House. [...]

  10. Great post! When you rent you aren’t necessarily throwing away money but most people treat it like that. When you pay your mortgage you are saving SOMETHING, even if in the first few years of the loan it is a small amount. The longer you own the house a higher % of your payments go into the “investment” of your house as opposed to down the drain (towards interest.) Most Americans would be close to the poverty line without their home equity.

    Renters however need not worry as long as they invest a large % of what they save by renting. Let’s pretend your rent is $2000 a month and if you were to buy in your area your mortgage would be $3000 a month. As a renter you are actually “saving” $1000 a month by renting. That’s some serious money. When you pay a $3000 mortgage payment, maybe only $200 of that actually goes to equity in the first few years. So in this example the renter is WAY ahead of the buyer. But…what do most renter’s do? They take that $1000 in savings and blow it on plasma TVs, dinners out or an SUV. Since renter’s aren’t “forced” to save; they often don’t. So I do applaud a committed renter if and only if they are a committed saver.

    Two more things to say on this (and sorry for the long post) 5 seems to be the magic number in real estate. So I wouldn’t worry about buying anything unless I was pretty certain I would live there for at least 5 years. FYI.

    Another mistake renters make is not getting renter’s insurance. Where I live, my homeowners insurance policy is about $55 a month. But when I used to rent (in a higher crime neighborhood) my renter’s policy was only $15 a month. (Another way renting can save you money.)

    BUT DO GET A POLICY. Every Xmas I recall the story of my friend who had his wrapped Xmas gifts stolen right out of his car. (how does that theif sleep at night?) Anyway since he didn’t have renters insurance he ate the entire cost of all those gifts. Contrary to popular belief, renters insurance covers your stuff even if it is outside your home. And even if it is inside your apartment, it is NOT covered by your landlord. A pretty cool website to learn about renter’s insurance is http://www.youcovered.com because you can get a quote without putting in any of your own personal information. Always nice.

    I hope this helps. This is an important issue, the buying vs renting thing and I think much of the current housing crisis was caused by too many renter’s thinking they were “losing” money. They can actually come out ahead if they are disciplined about it. Happy Holidays!

  11. [...] from My Two Dollars says that sometimes, the frugal option is to rent an apartment, rather than buy a home. If a two bedroom home in my neighborhood costs $1 million, I would have to [...]

  12. [...] Two Dollars explains why he rents. We own our house, but if we were able sell it for what we owe, we would become renters in a [...]

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