A Guide To The Benefits Of Renting An Apartment
For several generations now, society has painted the “American Dream” to be centered around homeownership. The ultimate goal and measure of success seems to be “Buy a House” and then make enough money to “Buy a Bigger House”.
Everything from commercials to lending to where we live and how we structure our lives seems to revolve around homeownership. On the weekends what are your neighbors or friends going to do? Work on their house. Why? Because they have to. The continual maintenance is something that has to be done on a regular basis, so the property doesn’t lose value. All of this takes time and money.
Much of the talk around homeownership revolves around the implicit idea that houses will always increase in value. This is a fallacy in thought as we have seen played out many times over the last several decades.
Millions of people, especially in areas like California, New York, and Arizona, have bought houses primarily on the assumption that their house will appreciate faster than any other asset or investment that they own.
Unfortunately, this is not necessarily the case. While homeownership CAN be an amazing investment if done at the right time and with no small amount of luck, there can be some significant disadvantages to owning a house as well.
And while many people have the dream of owning their own home, which is a fantastic goal, there are many advantages to simply renting and leaving the actual ownership responsibilities to someone else.
In short, you shouldn’t feel like you are failing at life if you don’t own your own house. In fact, there is something to be said for the goal of Financial Independence rather than having a large mortgage, paying property tax, and being able to tell people you “own your home”.
Being able to pay all your bills, take vacations, save money, and have money to do things when you want to do them can end up being more important than simply saying you are a homeowner.
After all, what is the use of owning your home if you end up having to reverse mortgage your home just to pay bills?
While the following isn’t a complete list of all the disadvantages of owning a home, we are going to highlight some of the advantages renting an apartment has over homeownership to dispel the myth that the end goal in society should necessarily be homeownership.
Initial Investment
The down payment on a house is no trivial matter. Ever since the housing collapse of 2008, banks and lenders have been much tighter in who they lend to, and the amount of money they are willing to lend. This means that they are not going to lend you 100% of the value of the house you want to buy. They are probably, at most, going to lend you 70%-75% of the price of your house unless you have serious collateral that you can put up as a guarantee.
This means that you are going to have to come up with the other 25%-30% on your own, upfront. If we are talking about a $200,000 house, that means that you would have to come up with as much as $50-$60k just for the down payment. For most people, even those with really good-paying jobs, this is going to mean years of savings from several earners.
This isn’t including the real estate commission on the sale of the home either. This is typically another 5% of the sales price of the home. So, on a $200k house, you are looking at another $10k that is going to go to the real estate agent or broker that helped finalize the deal.
Considering that the average rental price for a 2-bedroom in the United States is around $1,100 a month, you can see that just the initial costs to get into a house is going to be 4-5 years of rent at an apartment.
With apartments, there are absolutely move-in costs, but they are nowhere near the costs associated with owning a home.
Repairs And Maintenance
When you are living in an apartment, the overwhelming majority of the cost to repair something in the unit is going to be taken care of by the landlord. Do you have a leaky roof? The landlord is going to pay to get that fixed. Need the sink replaces? The landlord will take care of it. Refrigerator go out? The landlord is going to shoulder the burden of getting it replaced.
When you have a home, every single item in the house is your responsibility. Not only is it your responsibility when something goes out, but it is your responsibility to keep everything in tip-top shape so that nothing does break down in the first place.
If the roof leaks on your house, you could be looking at thousands of dollars getting it fixed. The same thing if your heater or A/C unit goes, you are going to be spending thousands of dollars just making sure your house has heat and A/C again.
In an apartment, all of these costs are rolled into the cost of your rent. And these expenses are spread out across everyone else who is renting in the complex, so the shock is lessened for the landlord as well, and they are able to keep all of their units up and running at all times.
If you don’t put in the time and money doing the necessary repairs and maintenance, your house is going to depreciate in value, and you won’t be able to sell it for as much as you bought it for, taxing your pocketbook even further. Most people, especially first-time homeowners, grossly underestimate the amount of time and money it is going to take just to keep their house in good condition.
Property Taxes
Another cost that is often overlooked initially when people are considering purchasing a house is the property taxes that are associated with owning it.
In 2019, the average amount paid by homeowners in property tax was $3,498. Obviously, the amount you pay in taxes is going to depend on where the house is and how big the house is.
But the fact of the matter is that taxes are a big deal. Just last year alone, property taxes went up an average of 4% nationwide.
When people are looking to budget for their home, the property taxes alone are going to equal several month’s mortgage payment just by themselves. This can put an absolute crunch on someone’s budget.
With an apartment, the landlord is going to pay all the taxes associated with owning the property. They are simply a part of the rent that all tenants pay. You are never going to receive a couple of thousand-dollar bills from your city twice a year that you have to come up with the money for.
You have to take care of your monthly rent payment, utilities, and any other services that you subscribe to.
But the burden of ownership, including the property taxes, still rests with the landlord.
Flexibility
Living in an apartment gives you the flexibility that you will not have with a house. If you need to move for your work or family, selling your house and finding another one to move into is going to be a stressful, expensive process.
With an apartment, you are only tied to the length of your lease agreement, so even if you just want to move, you have the ability to do so. You are only going to be tied to your monthly payment.
Additionally, if you want to try out several different places to live, you can do so relatively inexpensively compared to picking up and moving houses.
Lower Insurance Costs
With an apartment, the most insurance you are ever going to have to get is Renter’s Insurance. This can normally be purchased for less than a dollar a day and will cover everything inside your apartment.
Not so with homeowner’s insurance. You are going to have to ensure not only everything inside your home but the actual home itself. The cost for homeowner’s insurance is going to depend on how much home you are insuring, but it is almost always going to run into the thousands of dollars per year.
Additionally, many insurance companies require that you pay the entire first year’s payment upfront when you buy your house and start the policy. This means even more out of pocket costs you are going to have to bear.
With an apartment, the landlord is the one who is responsible for the insurance on the property, all you have to take care of is covering what you own inside the unit. Just this cost alone can save you thousands of dollars a year, giving yet another benefit to living in an apartment.
Utilities
While not all apartment complexes cover the cost of utilities, many do cover some. And because with utilities, you are paying for what you use, an apartment becomes an attractive place to live, as it is going to be significantly smaller than a house.
Even though your apartment is going to be smaller than a house, that also means it is a smaller space that you have to heat in the winter and cool in the summer. You also don’t have to use water for your yard or anything outside either, all things that are lowering your cost of living.
With a house, you are going to be responsible for all of your utilities, no matter what. And those utility costs are going to increase with however large of house those utilities are going to.
An apartment complex at least has the potential to provide you with some of the costs of utilities covered.
Amenities
These would probably be referred to as “Fringe Benefits”. Let’s say that your apartment complex has a pool, which many do. How much would it cost to install an in-ground pool at a house? $30k dollars? $40k dollars? More? And then how much is it going to cost you in time and energy to take care of and maintain that pool every year? How much is your homeowner’s insurance going to go up because you have a pool at your house?
Being able to use something like a pool, or an entertainment shed, or any of the additional things an apartment provides for you in amenities are things you would have to pay big bucks for if you owned a home.
Using these amenities without owning them gives you the same utility, just less of the costs.
Opportunity Costs
What else could you be doing with your time and money if you didn’t own a house?
As we mentioned before, homeowners have to invest serious time and money into the upkeep of their homes. This means that they are giving up doing other things and spending their money on other things they otherwise could be doing.
It doesn’t matter how much or how little money you make, the time and money spent on not having to deal with maintenance and repairs is going to be time and money you can spend doing anything else you choose to do. Including making more money.
Consider what time and money you could be saving by simply renting an apartment.
While there are absolutely benefits to owning your own home, there are drawbacks as well. Too often, success is determined by the benchmark of homeownership, sometimes for illogical reasons.
Wherever you live, the primary function of that place is to provide you shelter and safety. If you can provide this for yourself at a much more reasonable cost at an apartment complex, rather than a house, you are going to have that much more time and money freed up to do the things that are important to you in life.
Consider the costs, both in your time and money, that are associated with owning a house, and see if maybe simply renting an apartment is really the way to go.
