Why Renting Makes Sense

When it comes to living arrangements, we know you’ve got choices. We like to think we have some of the best, affordable apartments in the Albuquerque area, but even if you’re not terribly well-off, it can be tempting to buy a house. After all, when you own a house, it’s yours to do what you please.

But in today’s economy, buying a house can be a big risk. You might not get the return on investment you were hoping for, lenders can be known to take advantage of people who can’t afford their mortgages, and they can often end up costing you more in the long run.

At Forbes.com, tax writer Kelly Phillips Erb wrote a terrific column about why she’s wary of buying a house in today’s economy. Among some of her reasons:

As investments go, it’s not always a great deal. While it’s true that some homes do appreciate, so do many other assets. If you bought a house for, say, $200,000 thirty years ago, it would be worth $468,375.09 today. While that gain feels impressive, that appreciation is based solely on inflation – which means that, in theory, the same appreciation would have happened with any asset. While we did “make” money on the sale of our house, I suspect we would have had a similar increase had we invested that money in the market or in our business. 

 Homes often tempt people borrow more than they can afford. As Congress tosses around the idea of taking away the home mortgage interest deduction, homeowners are screaming that they won’t be able to afford their homes without it. In fact, when you’re looking to buy, most lenders and realtors will use the deduction as a selling point to boost prices. But is that a great strategy? When buying a new dress or a new car, consumers tend to focus on the cost of the item alone when determining how much to spend. But when it comes to mortgages, that number edges up because of the potential for tax savings (again, see #2). With that temptation, combined with a sluggish economy, it’s no wonder that more than 10 million homeowners are currently underwater on mortgages worth more than actual house values. We were fortunately not one of them but not for lack of the banks trying. When we bought our home, we were actually approved for a mortgage which was hundreds of thousands of dollars more than the home we ultimately bought. We opted for a less expensive home – and thankfully so. 

 Houses take a lot of your money. There’s a reason that many folks refer to their homes as money pits: you often put a lot of money that you’ll never see again into a home. Not all improvements are deductible. Deductible expenses are generally limited to casualty loss deductions. In most cases, significant repairs to your home meraely increase your basis for purposes of calculating a gain at sale. As most taxpayers aren’t likely to experience the kind of gain that would subject them to capital gains, basis isn’t always an issue which means that those expenditures get lost. Thousands of dollars to replace the air conditioning unit? The new garbage disposal? Replacing the flooring in the kitchen? The new washer/dryer? Landscaping additions? You can’t write them off and while you may recover some dollars at sale, rarely do you recover the entire amount. If you add all of those expenditures up over a 30 year period, you might see an explanation for some of that “gain” at sale. Often homeowners get fixated on two numbers: the purchase price of the house and the selling price of the house – but don’t forget to account for all of the money you spent in between. 

If you don’t live here yet, you’re not just missing out on a great apartment--you could also save money in the long run. Check out our floor plans and unit availability on our website.