Abberly Green Blog

When deciding whether to rent or buy, you are making the choice to rent an apartment home or renting the capital needed to buy a home. Most Americans don't consider that they are renting equity (from the bank) to buy a home. As you are aware, very little equity is built in the first few years of paying a mortgage. Many people are surprisingly still very unaware of this fact.

This following article explains how renting is financially better than buying in about 75% of cases!

For the Past 30 Years, Renting Was Generally Better Than Buying

If homeownership is the American dream, then the nation had better wake up. That's the message from a new research paper that examines whether buying or renting a home was a better financial decision over the past 30 years. Most would find the result surprising: over the period Americans were better off renting between 65% and 75% of the time, depending on the investment alternative.

The article essentially looks at eight-year periods and assumes that a person invests the money he or she saves by renting. Since buying is generally more expensive than renting, renters have extra money to invest. It also makes a number of assumptions favorable to homeownership, including gains from the mortgage interest tax deduction, the option to refinance, and the ability to walk away -- loss-free -- from an underwater mortgage. Still, renting wins approximately three-quarters of the time.

The staff at economic research organization e21 explains why this result actually shouldn't be so shocking:

Counter-intuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

Housing advocates may respond by pointing out that at least the $8,600 in this scenario went towards home equity rather than simply being squandered on rent. But, as demonstrated in the Real Estate Economics article, the principal component of each mortgage payment - i.e. the portion of the mortgage payment that goes towards reducing the principal mortgage balance instead of interest - is an added expense renters don't have.

This turns the real estate industry's biggest talking point on its head: you aren't throwing rent into the wind each month, you're casting away equity.

Of course, that equity also provides a potential benefit. The analysis's eight-year rolling methodology appears to miss the biggest reward of owning a home: living rent-free once the home is paid off. After that 30-years is up, the longer a family remains in that home rent-free, the more buying pays off. Taking this into account would almost certainly change the result in some, if not all situations. Renting may be a better option initially, but there's no eventual reward.

An important point still needs to be made here: buying a home that you don't plan to live in for an extended period of time probably isn't a great idea. The rent you pay in the form of interest on a 30-year loan for five or even 10 years won't be any better than if you had just rented outright. But if you're planning on living in a home for 30-plus years, then you could potentially get some benefit from buying rather than renting.

Original article by By Daniel Indiviglio, The Atlantic

Apartment hunting can be a stressful experience. Not only does it take a lot of your time, but the process can leave you frustrated, desperate, and overwhelmed. For your search to be as effective and fun as possible, do your best to keep stress out of the picture.

Fortunately, this isn’t as hard as it seems. Here are some tips to help you find the right apartment without the stress:

1. Know what you want. Before you venture out there to look at apartments, take the time to decide on what you want in an apartment. Ask yourself questions like how many bedrooms and bathrooms do I need? How much closet space? How important are size and location? What kinds of amenities are important to me: crown molding, updated kitchen, a good view? Do I need a parking space? Do I have or want a pet?

As you ask yourself these questions, decide on your limits. For example, if you need to walk to work, look at a map and decide on how far you want to walk.

Once you understand exactly what you're looking for in an apartment, keep all your criteria in mind while you are searching. Don't waste time checking out apartments that aren’t a match.

2. Set realistic goals and expectations. Understand that it may be a longer process than you expected, but keep in mind; this is an important decision, where you live has a dramatic effect on every other aspect of life. Now, if you find an apartment immediately, great. If not, you'll know that it's just a matter of time until you reach your goal.

3. Stay organized and take good notes. Once you start to see a few apartments, it's easy to get them confused. Stay organized by taking good notes about your apartment hunting efforts. For example, make a chart (by hand or on your computer) that lists the addresses, the owner, number of bedrooms and baths, all pros and cons and any additional notes.

In a file to hold any brochures, advertisements, floor plans, listings, photos, or other printed material you have.

4. Ask questions. Choosing a community in which to live is very important, so ask questions. If you don't like the answers you hear or you suspect that the broker or a landlord isn't being honest, move on.

Hopefully, you'll feel less stressed with a plan in place. Keep your plan in mind as you search for your new apartment. Soon you’ll find a place to call home.

One concern when moving into a new apartment is decorating your new home, or to be more exact, how to decorate your empty corners. If you have a beautiful apartment with empty corners, you need to decorate them; empty spaces dominate the look of your decor.

The first way to decorate empty corners is with plants. Plants that have beautiful colored flowers, or that are vibrant and lush are soothing to your eyes.

Another option is to caddy-corner a fish tank. But you have to keep it clean, a dirty tank will detract from your décor more than an empty corner.

If you're artistic or know someone who is, an original piece of art hanging in the corner, accented with a floor lamp looks great. Light and art will accentuate the empty corner and make it more eye-catching.

Perhaps a small corner book shelf, or a random table with a decorative items, vase of flowers, some family photos, or something else that is warm and inviting. It's not always about stuffing something in the corner of your apartment home, but rather, an intelligent and welcoming choice that works with your color scheme and personality will do wonders in making your new space feel like home.