Apartment vs House Debate

Three preaching topics that should be avoided over a beer: politics, religion, and home ownership. Topics that invoke strong opinions from people are not shaken easily. The basis for these opinions revolve around a specific attitude of the world and a personal lifestyle that defines a person. To question a view of political belief, religious stance, or advantages/disadvantages of home ownership would be challenging what a person represents.

Over the past two years, I have been challenged with the question of home ownership with respect to its financial advantages. As an avid apartment renter in a time of low mortgage rates, home depreciation, and tax credit incentives, I often lost the argument to these good points. People would say, "How does someone who seems to have financial sense make such a bad financial decision?"

Today, I am raising my pint glass to my fellow renters. I ran the numbers to find out that it's not about the numbers. It's about lifestyle.

Renters aren't losing more money than homeowners. Try a quick calculation comparing the sunk costs of a house versus an apartment in one year. I'll use some representative numbers to make my point, and of course, there are many factors that can change this calculation.

Rent
Rent per month x 12 months= sunk costs in one year
$700 x 12 = $8400

House (Assume a $150k house with a 20% downpayment)
Taxes $3400
Insurance $920
Interest $4200
Maintenance, HOA,
increased utilities $1200
Tax Refund ($1500)
= $8220

Rent Sunk Costs - House Sunk Costs = $8400 - $8220 = $180

Only $180 would be lost in equity if someone rented an apartment instead of maintaining a house. $180 becomes negligible in a calculation like this one. Don't forget to factor in opportunity costs, meaning the 20% downpayment was kept as cash and invested through another vehicle. But what about house appreciation? This is true in the long term, such as 15+ years. This viewpoint is for the singles out there that don't want to narrow their opportunities because the biggest asset in their portfolio is immobile. Other advantages of renting include living in a preferred location and a maintenance-free standard of living.

Good reasons exist to own a house, however. If you...
- want more privacy
- want more space
- want to start a family
- host really awesome house parties

The decision to rent or buy is not about financial investment. It is all about lifestyle.