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Tuesday, June 23, 2009

Renting vs Owning - For us a $9K / yr difference!

We sold our home 2 years ago, just before the market tanked (lucky us!) to prepare for this trip. We went from being homeowners to apartment tenants. For us, even removing the mortgage from the equation, we spend less money now every month than we did in the house. Our quality of life has not gone down in any way. In fact, in most ways it has improved. We sat down and wrote out all the differences in our spend. Some may apply to you, some may not. Some apply only to home owners, some apply to both owners and renters.

The point you should take away is that you should challenge the conventional consumerism driven wisdom. Accept nothing on belief. Challenge notions until you know something is a fact for sure. It is very easy to accept things that seem logically true but really aren't. If you don't challenge them, you won't ever really know.

Sunk Costs (e.g. money we wouldn't ever get back)

  • No more neighborhood association fees ($300 / year)
  • No more property taxes ($2500 / year)
  • No more cable TV ($720 / year) [reception of free channels is now possible]
  • No more pool costs ($100 / year) [free at our apartment complex]
  • No land line ($600 / year) [we just use our cell phones]
  • No more lawn care ($1300 / year) [chemicals, maintenance staff]
  • No more gym membership needed [free at our apartment complex] ($500 / year)

That is $6,020! Holy smokes. That equates to $500 / month in additional money for the family.

The following items have not gone away, but simply reduced:
  • Sanitation dropped by $64 / year
  • Electricity dropped by $330 / year
  • Water dropped by $280 / year [mainly due to not having a yard]
  • Transportation dropped by $2410 / year [same cars, we just don't need to drive much]
That is $3,084! Another whopper of a number!

These are real numbers based on our actual experience. By moving to an apartment that was in the right location with the right amenities and capabilities, we are saving:
$9,104 each and every year!!!!!!

That's right, each year our family is pocketing $9,104 because of our move and change.

For us, this was the right change. Let's bring in the whole idea of appreciation of a house. We bought our home for $157,000. We sold it for $208,000. The net difference is: $51,000. We owned it for 8.5 years. This equates to: $6,000 per year. The tax savings stuff due to interest is kind of a washout since we didn't get back any of the interest paid when we sold the house, only the equity. Again, we sold it before the crash, so I'm pretty sure we would have made out with less. Plus, appraised value money isn't nearly as valuable as real, in your bank, money. We could really get crazy on this one. What if I took that same $9K each year and had invested that?! Each year for 8 years, putting away $9,000 of real money earning 5%. Easy as cake.

In our particular case, we would have been financially better making this life change earlier. We would have been ahead about $3K per year. Sure, there is pride in home ownership, and we enjoyed it. But $3K is $3K! Plus, as noted, this doesn't include the interest that could have been earned each year on the $9,000 saved over the 8.5 years.

Do your numbers, figure out where your life really stands. You are taught conventional consumerism wisdom. Challenge it!

Oh, do I miss the house? Our house was beautiful It was picturesque. Beautiful green grass, in an wonderful neighborhood, 4 bedrooms, big back yard, etc. etc. Since moving, I've missed one part of the house exactly 3 times and that is the back yard. So, instead, we walk to the local park and have an equally good time.

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