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Why Renting is Right for Us Right Now

From the moment the complex manager opened the door, I’ve been in love with our little apartment. The living/dining room has great sunlight, the bedroom is a cozy size. Maybe the kitchen is a little small, but I’m only really in there a couple days a week, when it’s time to whip up big batches of food.

The price is right too, less than $750 for an apartment just outside DC. In a fairly quiet neighborhood, not in one of the worst areas of town. The complex is brick and has attractive lawns. It’s right next to a cute, delightful neighborhood where we go walking. The neighborhood is particularly awesome because the houses are pretty unique. There are big and little ones, all different styles, and it’s old so there are nice trees.

The best part is that the price covers everything. We don’t have to pay for most apartment repairs or property taxes. We don’t have to pay interest.

I can’t pretend that some days I don’t get house lust. But honestly, even my house lust is transformed by my renting experience. Last year, five other girls and I shared a house right next to our campus. I began to see that renting a house isn’t that bad.

Until you pay off the mortgage, the bank “owns” the house anyway. So unless you’re planning to stay there for good and pay it off, it’s kind of like you’re renting anyway. The advantage is that you don’t have a landlord telling you what you can and can’t do with the house. The disadvantage is that have to pay more for “rent,” repairs, and property tax. The winning advantage is that once you pay it off you increase your odds of staying there.

Right now, we don’t have income or job security. We have enough that we can afford the rent, but I’d be nervous about being in a house. And we have no idea where Micah will be able to find a full-time professorial position. Plus, our credit isn’t that great, so we’d likely have to go for a less-than-optimal mortgage. And I’d be nervous and stressed about it. So much easier for our finances and my psychological health.

Our lovely apartment is probably temporary, but right now it’s just right for us!

(and an update: Home Prices Are Falling, But We’re Still Not Buying)

This post is part of a writing project headed up by Rocket Finance exploring different aspects of the sub-prime crisis, lending practices, and foreclosures, and is my own musings on taking on a risky mortgage. Visit Rocket Finance on Friday for Home Finance: all you need to know about home ownership, a carnival of entries in this project. (I’ll be adding links to some of the other posts at this time.)

Here is the complete list of participants in the series “Home Finance: Mortgages and the Real Cost of Home Ownership”:

{ 17 trackbacks }

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My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad. | My Two Dollars
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Adjustable Rate Mortgages: The Benefits | My Dollar Plan
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Predatory mortgage lending and subprime loans
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final word on foreclosures | plonkee money
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Great advice for buying a home! | rocket finance
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Saturday Roundup - Jan 26th, 2008 - The Time Travel edition | Credit Withdrawal - Helping You Kick the Credit Habit
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Real estate, foreclosures, mortgages, and other things that go bump in the night | The Dough Roller
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Sunday Money Roundup - Superbowl XLII Edition. | My Two Dollars
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Link Roundup: Punxsutawney edition at Mighty Bargain Hunter
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SJean January 30, 2008 at 10:06 pm

I’m so in love with renting that I don’t even get house lust.

A house would just be more space for me to furnish and keep clean. I would be tied down to a certain city. And I can’t afford a house anyway. And repairs? Ug, don’t want to deal with THAT.

ms. m&p January 30, 2008 at 11:37 pm

It’s really hard to buy in the DC area and make out better than renting. You’re definitely doing the right thing.

Looby January 31, 2008 at 12:03 am

My SO and I are also renting because we are both recent grads and because within the next year or so we are likely to have to pack up and move half way round the world again. There are many benefits, I love just calling one manager whatever the problem and knowing they will fix it. But I too get house lust occasionally, even more so when I think that we might not settle down in one place for another 10 years or more. But I just work on my vision for our perfect retirement cottage, and know I’ll be there in 40 years!

RacerX January 31, 2008 at 12:39 am

Until your debt is in shape and you know where you two will end up, you are doing the right thing. I agree with the belief that isf you aren’t going to be in an area for 5+ years don’t buy.

hat being said, don’t scare yourself out of it either. Your first home doesn’t have to be the enormo-dome.

You two are doing the right thing…because it is right for you!

fathersez January 31, 2008 at 2:36 am

Mrs. M

I have read so much about renting vs buying and how renting may make more financal sense.

Maybe it is a cultural thing, but my feeling has always been “to own a house”. In fact we are considered as having “not arrived” until we have our house.

It was only after reading RK’s RDPD that I first heard about renting vs buying.

You clearly have your well thought our reasons for renting, so good for you.

Dad January 31, 2008 at 8:26 am

Renting has much to say for it until things are more stable, both in your lives and in the financial markets. I’m glad you are content for now, too many people try to tell you that you have to buy. That is not true. THere are trade-offs as you said.

mrsmicah January 31, 2008 at 8:31 am

Fathersez, I think that’s why so many immigrants have been caught up in the housing crisis. Between their culture and the American dream we project abroad, it seems like owning a home is something every working American can do.

Mrs. Nathan January 31, 2008 at 8:52 am

Exactly. My mom tells me that I’m not throwing money away by renting; I’m “buying” myself time until we’re financially ready for a house.

Like you, I genuinely love our little apartment and neighborhood, but when 6 of my very close recently-married friends have bought houses in the last 6 months…its hard to convince myself that we should stay where we are, especially when many of these couples are much younger (and less frugal) than us!! However, while paying for our grad school tuition a house isn’t an option, so instead I am trying to content myself by making our apartment as home-like as possible. This past weekend we made a trip to Ikea and bought several bookshelves, lamps and other organizer-gadgets to spruce things up. We rearranged furniture and our place looks completely different now. We feel like we have much more space with all of our papers and books filed away and off the desks and floors. So there’s my two-cents – work with what you have before you seek out a mortgage…

Veteran Military Wife at Life Lessons of a Military Wife January 31, 2008 at 9:09 am

Well said. We wouldn’t be in this subprime housing mess if people had only bought with 20% down and at least planned to stay in the same place at least two years. People do look (or at least they used to look) at homeownership as being some kind of basic human right…no, it is a privilege and you have to EARN it…just like anything else in life!

There is nothing wrong with renting if your finances and personal situation lean towards that. I have relatives in Germany, and they are just astounded how you can just buy a house here…or used to…it’s not like this in Europe…and don’t get me started with credit cards:-))

deepali January 31, 2008 at 9:57 am

I own a condo in the DC area. We put 20% down and got an ARM, but we’ll probably refinance once it resets (until we can sell). The nice thing about owning is that my “rent” (ie, mortgage payments) is going towards something that I will get back in the end. In a couple of years when it comes time to sell it, we’ll get back at least what we paid for it (closing costs, downpayment, mortgage payments).
Honestly, that’s the only thing I like about owning. 🙂

I’m actually not living in it now – it’s being rented out. Luckily, the rent is covering the mortgage and condo fees, so I’m coming out a wash (actually, it’s covering a bit more, but the extra gets budgeted for maintenance and repair).

Megan January 31, 2008 at 10:12 am

I find myself getting house lust in the DC area. Of course, it’s something I absolutely can’t afford, and I love the amenities of my apartment (which is about a block from the district border). But it’s something that’s so hard to avoid, with prices falling and interest rates dropping. It seems like the “right” time to buy. It’s just not the right time for me.

Anitra January 31, 2008 at 10:33 am

My husband and I are young, and we bought a house, but we wouldn’t recommend it to most of our friends. We only put 5% down, and seriously examined our finances and intentions before jumping in. We made sure that we were ready to stay in this house at least 5 years (probably a lot more – like 20 years or longer), and that we can still afford it even if we drop down to one income.

Most of our young friends are not at the same place in life that we are, and aren’t as certain about their future. They should be renting 🙂

vh January 31, 2008 at 12:31 pm

Wow! That’s an awesome rent rate for anything within driving distance of a big city. Hang onto it.

My son was living in a dangerous three-room (assuming you count the bathroom as a room) firetrap, a real hole in a scary part of town, and paying $500 for the privilege. It was so decrepit I fell down the crumbling, uneven steps, spraining my ankle and laying myself up for six weeks. The plumbing was so bad that when he went off for a two-week vacation he returned home to find his bathtub still full of the water that hadn’t drained out the last time he took a shower. For this elegant abode, they were about to raise the rent $200 a month!

If you’ve found a decent place to live for that amount, there are so many reasons to stay put:

* Renting gives you flexibility to move when a better job opportunity comes up.

* Somebody else pays the taxes (well, you do, but at least you don’t have to do battle with the county).

* Renter’s insurance is soooooo cheap compared to homeowner’s.

* Somebody else takes care of the unending maintenance chores. (Big, very very big. Make that “huge.”)

* Paying the rent regularly is like paying any bill on time: it helps build your credit.

* Utility bills are generally cheaper.

* It allows you to put money that you might have used to pay down principal into liquid savings instead.

* It gives you and your spouse time to adjust to being married before you’re saddled with a back-breaking financial commitment (another “huge”).

Clever Dude January 31, 2008 at 3:32 pm

Technically, you never really own your house outright. If you don’t pay your taxes, the gubment can swoop in and take it from you, even if it’s all paid up (I don’t know what compensation they must give, if any, though). Also, the gubment can use their “right” of eminent domain to take your land for “the good of the public”, but that could be for a big housing project, not just public works or facilities.

So you never really own your house.

Canadian January 31, 2008 at 6:51 pm

I have house lust a lot. I am somewhat older than you, I have a Master’s, I’ve been married for years, I feel like I “should” have a house by this point. But I don’t.

My apartment is even cheaper than yours, and is very conveniently located. It is a 13 minute walk to the subway station. We love much about the neighbourhood. It makes sense for us to rent right now, because we are not sure we would stay put longer than a few years. In any case, we have decided to put our savings (which were meant for a down payment) toward student loan debt instead. Makes sense because we were paying prime + 2% which was more than our savings in ING were earning!

Even though I struggle with the issues of renting an apartment (lack of space, no garden, not enough room for hobbies, etc.) I just have to keep reminding myself that this is a deliberate, rational choice.

Chief Family Officer January 31, 2008 at 11:21 pm

I can certainly understand how you feel! While I’m happy to be a homeowner, in your situation, I would want to rent too, until our careers and income were more settled. For me, there’s nothing like uncertainty in our finances to stress me out!

Catherine L February 1, 2008 at 7:06 am

Mrs M – I think you’re making the right choice. I bought a house in my early twenties and I don’t think you need to commit to buying a house when you’re that you.

Well, we had to move away but we couldn’t sell, as the price of the house has dropped, so we rented it out to cover the mortgage and it was a real headache.

We eventually sold after thirteen years and made not one bit of profit. Then prices soared a few months later and the new owners doubled their money.

It really was a huge headache and not worth it!

Him February 1, 2008 at 11:45 am

While we never officially entered this writing meme, we had our own take on all of this earlier this week with our rent increase, why we didn’t buy in the past, and what we’re doing in the future.

Mrs Micah's Mom February 2, 2008 at 12:20 pm

Mrs Micah’s sister took a course in consumer math in high school. It had a chapter explaining different types of housing and different situations and what was best for people in various situations. By the criteria in that lesson, you are right to rent in your current situation.

By the way, the same chapter suggested setting aside 2% of the value of the house each year for repairs. I think that’s really good advice. This year we’ve replaced the sewer line to the street, had the trees trimmed, and had the gutters put on more tightly, and we have to get a new furnace/ac system in the spring. We will have spent more than 2% of the value of the house between July 2007 and July 2008.

Ginger @ Girls Just Wanna Have Funds February 3, 2008 at 10:42 pm

I too am in the DC metro area and I’d like to know where you LIVE! LOL! Well we have friends staying with us while they find jobs and a place to live…. and for hat price heck we’d sell and move!

Anyhoo, I can relate to where you’re coming from even though we bought a house not even one year ago. Still, I go back and forth about it for different reasons. I love our house and I love that we have the space to grow and do what we want when we have kids, have family over etc etc. Still, I realize that it comes at a huge expense.

While renting we were paying $1700 for a 900 sq ft one bedroom apartment which we LOVED!! No question, hands down we loved living there but consider that our mortgage is SAME as what we were paying for our little apartment so it made sense for us at the time. If I had the chance would I sell and move? I dont know that I would, it would have to be great neighborhood and I have my preferences which I realize caused us to live in a pretty expensive area prior to moving.

Ehh Im undecided , but if we found a cheaper place, say less than $1500 we would consider it. What I do find crazy is that during the housing boom here, folks werent talking about the cost of a home because of the BOOM. When I moved here investors were holding houses for a month and then making a serious profit once sold.

Shawn@MoneyBrick February 12, 2008 at 1:32 am

The fact that you’re renting for the reasons you’re renting make perfect sense! I feel that the biggest reason you have for renting is the fact that you and your partner don’t have a stable income.

However, I’d like to mention some facts that you missed about home (or apartment) ownership. You miss out on equity build-up when you rent. However, that can be somewhat remedied with a lease-with-option-to-buy contract on any home you rent (temporary or not).

Also, I feel that even if you aren’t completely sure you’ll be living permanently in one part of the country – this is a day and age where people pick up and move just as often as not, and it would be totally feasible to have your former primary residence turned into a rental property.

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