Apartment or home?

[Aniviel]

Hello all!

I am a first-year graduate student, and I've only been handling my own money in the past half-year since I got my undergrad degree. Having had the past months to contemplate my student debt and my future career, I'm set on living frugally and retiring as early as possible.

I know it's still quite a while off, but I figure it's not to early to start considering these sorts of things. I'm wondering about the relative expense of apartment living versus buying and owning a home (and anything in between; rental homes, condos, etc.)

I am currently living in an efficiency apartment and it's definitely a good fit. I naturally adopt a small living space so the size of the place is a non-issue (in fact I'm only living in about 50% of the space; my "living" area is pretty much storage.) Other perks are small utility bills (heating and cooling this space is easy, and I'm insulated by my neighbors), no worries about repairs, and the flexibility to relocate.

My point is that I could be content living in an apartment indefinitely, but that doesn't mean that I can't see the advantages of living in a house. One big advantage of owning a home would be having a dog (I love dogs) without being a slave to its bathroom needs.

So my question is, does the lower utility bill, lack of property taxes, and paid-for repairs make up for the recurring expense of paying rent? Would I be (financially) better off paying off a house or living in an apartment forever?

Thanks in advance!

[ladykemma2]

in houston texas, should buy a home. depends really on where you live. housing is so affordable here you would be throwing money away on rent. remember mortgages come to an end, but rent goes on forever.

either way you have to pay for shelter. a lot of people think once the mortgage is paid you don't have any more bills anymore. Tain't so.

i had a 15 year mortgage at 5% on a 74,000 home. it's all paid for now and the home is worth 120,000 presently. towards the end of the mortgage the payment including taxes and insurance was about 1200.

now it's all paid for, i pay 598 monthly for taxes, insurance, and all annual bills like trash, termite, and association fees. I also put away 250 a month for upkeep.

so 850 a month to keep a roof over my head, now. to rent this house in houston would be about 1200 a month.

there is also an emotional element. this is my home and my hobby. my home gets all my attention and spare cash. i garden, grow flowers, and lavish a lot of love on this place. i wouldn't do that for a rental.

[MaryCarney]

You don't have to decide on a forever strategy now, you know!!! A tiny apartment suits where you are now in life. It will also suit when you begin your career (what are you in grad school for??), and pay off student debt and get an emergency fund built up.
After that? Who knows? There are advantages to home ownership - but also risks (mainly the debt and the risk of losing it to a natural disaster - depending on where you live). Until you obtain a fully-functional crystal ball, I think it's up in the air.
Congratuations for tackling the topic of personal financial responsibility so early in life. I know people three times your age who don't have an interest in it yet.

[Aniviel]

Thank you ladykemma!

I assume you live in Houston currently? Upon first glance I was very confused because Houston is my hometown! I'm living in Austin at the moment, going to UT. I like Texas, but a career in software might push me further west. I don't have any specific plans for where I'm going to live in the future; in this economy I figure I'll follow whatever jobs I can get.

Thanks for including a concrete figure on your monthly expenses! I spend about $600 monthly on this place (rent, utilities, and internet access) so that's an interesting comparison.

[Aniviel]

Thanks MaryCarney! Haha, I know that I'm probably getting ahead of myself. I know that any "decision" I make at this point isn't going to be a hard and fast rule, and I probably won't stick with it. However, planning for the future is half fun and half an effective counter against my irrational anxieties about making it in the "real world," and I figure it can't hurt to be informed early about what my options are.

Oops, edited to add: I'm in grad school for computer science, and hope to build a career in software development.

[frugalfranny]

I agree with the other poster...........you have got to think about your life for the right now........and know that things change.

What will work for you now will surely change when you are settled into a job.

A house 'can' be a good investment but also has a certain element that ties you down...........esp. if you don't want to consider renting it out.

[Aniviel]

A house 'can' be a good investment but also has a certain element that ties you down...........esp. if you don't want to consider renting it out.

Yep, I do consider the freedom to pick up and leave a big plus for apartment living!

[frugalfranny]

Yep, I do consider the freedom to pick up and leave a big plus for apartment living!

And let me be the first to tell you............don't overlook that freedom!!!

I had a house when I decided to 'be a gypsy' and it definitely had its drawbacks............I can only thank a family member that helped or I NEVER would have been able to do it.

So.......until you know for sure...........I would say SAVE as if you will be buying one...........but wait until you feel comfy with settling in one spot to actually do it. (then you have the money to do so)

[heartofmine]

Normally I would say "buy instead of rent" but in your case and your being so young and in Grad school and will be job hunting which may take you elsewhere I say "rent" is your best option.

[shoiji]

I have rented for my adult life and have become very used to it. My complex also lets us garden. Sometimes I think it would be nicer to have a larger place or a house. Then I realize that I am only here x amount of hours and can't imagine paying more money for a place I am not in all the time.

Since you are still very young try to realize that you never know where your job and life will go. Keep living within your means and save as much as you can. Get used to living a frugal lifestyle especially now before you know anything different. It really is worth living within your means and saving up for what you want. Someday what you want may be a house in which case you will have the cash for a downpayment.

I knew one person who lived with his parents. I thought it seemed odd at the time since everyone was out on their own renting. Come to find out they did it so they could buy a house. Now he has a nice house.

[mndtrp]

I agree with the last two posters. The simple fact that you aren't settled into your life, coupled with your desire for small places, leads me to have you keep living in a small, cheap apartment. Save for a future down payment, but also pay off debt as much as you can.

Also, look very deeply into just what goes into owning a home. There are so many more costs associated to home ownership than your monthly mortgage payment.

[Greebo]

Buying a house as a grad student would be a great way to set you off on the wrong foot for your future.

[Aniviel]

Thanks for the additional replies, guys! In response to the recent encouragement to stick with apartment living for now, let me clarify that I definitely don't plan on buying a house anytime soon. I'm just the kind of person who takes pleasure in having a plan for the future, but I also recognize that anything I come up with at this stage will probably be refined and altered considerably as life happens.

I guess what I was originally wondering about was, for instance, if I settle into a house at 30, how does the cost of utilities, upkeep, property taxes, down payment + mortgage over the rest of my lifetime stack up against renting over the rest of my lifetime? Because despite the gut response that renting is financially wasteful in the long term, it's hard for me to see how the large chunk of money spent on actually buying the house would ever be offset by not having to pay rent, since, for instance, ladykemma's $598 estimate on upkeep is so close to my own current apartment-living expenses including rent. Please, I'd love to hear any flaws you all see in this logic, because I've always heard that renting is for chumps , but I can't really work out the math of it.

Granted, when I am making a good salary I may want to move into a place where my plumbing doesn't despise me and my neighbors' pot smoke doesn't come in through the A/C vent, but even at a pricier place the cost would still be on the same order-- the places that really appealed to me tended to run around $800 - $900 a month. And I suspect that might be higher than it needs to be, since my apartment shopping all happened in close proximity to the university, which undoubtedly drives up prices. I'm totally ignorant of what's reasonable to be paying for an apartment, but this one is a steal for the immediate area. I feel very lucky to have found this place, because I looked at a lot of dumps that charged $700+, and if my principle worry is my plumbing instead of not getting raped or keeping the rats at bay, hey! That's good news in my book.

But ladykemma raised an excellent point, that a home is more than a price tag, and there is something to be said for loving where you live. That's not something I had really dwelt on, but considering it now, it seems that my love of pets will force me to work towards land of my own at some point in the future. Maybe by the time I'm ready to buy, those tiny house prototypes will have taken off!

Thanks again for all the insight!

[heartofmine]

Aniviel you are very smart to think ahead. When you are settled into a good job and in your life and ready I say go for it. Its hard to give specifics of home ownership costs because its so different all over the country. For instance I live in a small town in TN and costs here for homes, insurance and taxes is not near as it would be in other parts of the country. This is one of the poorest towns in the state with few jobs and many people work in neighboring towns. My home is now paid for but I never had a high mortgage because homes here are not as expensive. My home is 900s square feet upstairs and 800 downstairs...split foyer. Not a huge house by others standards but you did say small. It sits on 1.1 acres. My land taxes just went up and we now pay $330.00 a YEAR for land taxes on this place. We did pay less than $200.00 a YEAR. House insurance is about $700.00 a YEAR on this house.

Compared to other parts of the country some would say we have it made but when you configure in low incomes...most less than $20,000.00 a year... very few jobs it equals out.

My best advice is once you are ready do your homework in the area you decide to settle in. Different neighborhoods even will have different price tags.

[Aniviel]

Thanks again to everyone who gave advice! I'm going to go ahead and give the best answer to ladykemma for raising the points that she did.