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Don’t Overpay For Rent

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I’ve always seen renting as “temporary” and buy as permanent. So the two years I spent renting in the Baltimore, MD area, I hardly ever took any time to decorate the place and I tried to pay as little as possible. From my point of view, because it was temporary, not actually mine, and something whose cost I wanted to reduce as little as possible, it made no sense for me to pay more than the average rent in the area or even spend money on decorating it. Now, I didn’t pick the absolute cheapest rent (though I had a roommate and am fairly certain I was paying a pretty good price for rent) but I was pretty close to it and I did very little upkeep outside of vacuuming. As the saying goes, who washes a rental car?

Now, I don’t entirely agree with the idea that renting is “throwing your money away,” as many homebuying proponents espouse, but I do see it merely as an expense that should be reduced to as little as reasonably possible. The reason why it’s not throwing your money away is because the housing market has always been difficult to predict, though the trends were always pointing up in the long run as they are even now, and because a house isn’t always a winning proposition even if the value goes up. You’re throwing a lot of money away in interest payments (a small part of which you get back), you’re throwing a lot of money away in maintenance, and you’re throwing a lot of money away in taxes, insurance, etc – all of which are not concerns (though they’re integrated into your rent price) for a renter (I bring these up in the Devil’s Advocate post Rent Forever, Don’t Buy A Home).

So, when friends of mine talk about how they can get this awesome apartment with all these incredible amenities for the low low price of something like a thousand dollars per person, I wonder to myself why they would pay so much for rent when cheaper options, though with fewer amenities, exist. Granted, part of this is in perception, some people like to rent in nicer areas with great amenities and are willing to pay that price, I certainly would pay a higher price for a nicer area (from a crime, convenience perspective, etc. within reason); but sometimes the numbers are exorbitant – I know people paying at least twice what I paid in rent!

Are you the stingy renter like me? What are your thoughts? Or are you on the other side, willing to spend the money for a really nice place, please share your perspective!

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25 Responses to “Don’t Overpay For Rent”

  1. plonkee says:

    I rent on my own and most people that I work with wouldn’t rent in the area that I do. In fact two of my colleagues used to rent very nice expensive apartments right in the city centre which probably rent for between 2 and 2.5 times my rent.

    Given that I prefer to live on my own than with people I don’t know, I pay as little as possible for the priviledge of having my own bathroom and kitchen, and I can’t see the point in paying more for a better location.

  2. CK says:

    You really have to go on a case by case basis to see if renting is worse then buying or vice versa. Hypothetically if I could rent a Malibu beach house for 200 a month would I be throwing away money when buying the same house would cost 5 million? Obviously this is a fantasy argument but it illustrates there is a line in the sand somewhere, you just have to determine where and what side you are on.

  3. Flexo says:

    I’m almost positive I’ll be moving into a new apartment in a few months, and my rent will probably increase 50% over my current rates. I’ve been living like a poor college student since leaving college, always choosing the least expensive option and having to deal with crappy, inefficient appliances and noisy college-aged or maintenance-staff neighbors. I’ve had to drag my laundry to the community laundry “hut” if I wanted clean clothing. So I’m willing to make the upgrade. Rent will be high, but it will still be more affordable than buying.

  4. Ronnie says:

    Renting all the way. At some point I’ll buy a home, but not now when I’m only in my 20′s. Right now, the money I save by renting cheaply is greater than the equity I could ever build in buying a decent home.

  5. Nick says:

    Back when we lived just outside of Baltimore, my family lived in the same relatively simple apartment for almost 20 years. Each time a rent increase would come along, we’d ask for the increase to be bumped down, and we got it. By the time we finally moved, there were families in the same building as us paying twice the rent for less apartment.

    Moving to a suburb of DC, we decided to sacrifice price (rent for an equivalent apartment here is 50% higher) for proximity to work (5 minutes each way instead of the original 90 minutes from Baltimore) and a few extra amenities (in-apartment washer and dryer, ceiling fans, stuff that doesn’t break all the time). But our apartment was still on the cheaper side compared to most others in the area.

  6. LAMoneyGuy says:

    Like you, I view rent as an expense to be reduced. However, that view is within the perspective of saving to buy so that I can keep my mortgage cost low, another item that I view as an expense to be reduced. From a lifestyle point of view, many do not want to make short term sacrifices for longer term gain. For some young people, the idea of buying is pretty far fetched. Either the prospect of spending that much is daunting, or they don’t want to be tied down to a piece of property. In either case, they want to live a certian lifestyle today, and a few hundred buck a month more in rent allows them to do this.

  7. I did not have any interest in having a roommate after college. I wanted something for myself. I found a decent apartment (but not great) in a good area for a good price. When my girlfriend moved in, expenses were way down, but the guy below me had a roommate that smoke way more than he did and our health suffered.

    The landlord never raised my rent; he was just happy to have somebody that paid on time.

    We found a house, though, and were remarking this morning how much healthier we both were over the past year, despite the fact that my wife spends all day every day cooped up in a small room with 100 other people.

  8. I agree that spending too much on rent can be like a punch to the gut. When my wife and I moved from the suburbs of Philadelphia to the suburbs of Boston, we knew we would be spending more. We paid $930 for a decent sized one bedroom in Philly.

    Equal sized one bedroom apartments in Boston’s North Shore ran nearly $1400! So instead, we started looking at multi-family houses which were rented out. We ended up with a decent sized two-bedroom with a good choice of amenities for $1200.

    However I think it’s important you consider your apartment more than just a temporary space. Most people rent for at least one or two years, so why not spend some pocket change decorating and making the space comfortable.

  9. MossySF says:

    What if the more expensive location means you can drop the car and commute? No car payments, no insurance, no gas, no parking fees — and more time for yourself without the commute. How much of that car savings would you be willing to rollup into the rental cost?

  10. Minimum Wagec says:

    As a boomer with no hope of buying a home, I long ago resigned myself to being (and viewing myself as) a permanent renter.

    This has led me to obsess on finding and keeping the most affordable housing I can find. (Took me four months of daily pavement-pounding one time.)

    Most people don’t know this little tidbit about low-rent housing: A large proportion of low-rent units are occupied NOT by renters with the lowest incomes, but by renters with average incomes who have ferreted (or in some cases networked) out the cheapest deals. The resulting “mismatch” forces many with the lowest incopmes to pay much higher rents than they should be paying.

  11. Steve says:

    were you live plays an important role psycholgoically. If you are focused on building wealth for yourself, I believe a nice place to live is essential.

    It is the intengible factor which makes the difference.

  12. invest4life says:

    I agree with you that renting is temporary and the real test is purchasing a home. Renting to me is throwing your money into a black hole, the return you get is a roof over your head for a month (valuable no doubt). Compared to buying a home, which is an asset you will possess for as long as you live or until you sell. Real estate is one of the most sound investments there is (it may not appreciate as much as say a killer stock). Regardless of how bad the real estate market gets, it can never go to zero! No one can take your land/space away from you if you own, that cannot be said if you rent.

  13. Master Allan says:

    Flexo has a good point. I pay almost $800 in rent for a well maintained unit, high fence, and security here in Denver. Some “el cheapo” apartments very close are complete disasters but hundreds less a month. No way would I consider trying to save a few hundred dollars in exchange for noise, poor parking, crime, and otherwise unbearable conditions. But paying $900…$1000…$more would be throwing money out.

    invest4life – In some cases renting is throwing money out. But I am the front page photo of renting is better sometimes. I was working a miserable tech job in Dallas hating every minute. Rather than buying a home and putting down the 20% downpayment, I continued to rent. A fantastic opportunity in Denver opened offering nearly double salary but I had to act fast. I left Dallas June 3rd, instructed to report to work June 5th…..my apartment lease expired on June 4th!! Relocation was a breeze with me jumping into the car and leaving that miserable place behind. No house to sell, paperwork to deal with, just walked away and forgot all about it.

  14. Disgruntled says:

    A lot of people don’t have the money for anything better than “el cheapo” apartments.

    I have a dream, that one day, the ability of our children to live in decent neighborhoods will be based not on the content of their pocketbook, but on the content of their character.

    Several years ago I thought I was clever because I found a great deal in an obscure neighborhood with good value. (Cheap rent but without the usual neighborhood negatives.)

    But now the gangbangers and illegal aliens are moving in because they’re getting displaced from gentrifying neighborhoods.

  15. cad says:

    For me, it’s a choice between diversified investing in the stock market, which I do, and investing in real estate, which I don’t do. I like knowing that my invested money is semi-liquid instead of being tied up in the home I live in, which I’d have to sell in order to get at the funds. My rent is probably what you’d consider high, but all utilities, repairs, package deliveries, security, trash pickup and recycling, gardening, painting, pool maintenance, etc. are included/done for me at no extra fee or trouble. (My least favorite things are choosing contractors and repairpeople, waiting around for them, and paying them!) My renter’s insurance is under $200/year. I enjoy watching my investments grow.

  16. james says:

    I agree 100% — Dont overpay for rent. I have a question though.

    Is it better to rent an apartment or buy a manufactured home? I found a good location where they are selling a 2 bedroom manufactured home for $170K. The mortgage calculator says, for a no downpayment for 30 years at 6.12% interest, I pay $1,032.39 monthly.

    Today, Im renting a studio at $1,000 a month. So I thought would the mobile home be better? I mean in 3 years, I would have paid out 36,000 (more if the rent goes up). That money goes away. But I buy that mobile home, I can sell it in 3 years for a super discounted deal, say, 80,000. I would not be only be able to regain the 36,000 but also would have made money.

    Will this approach really work?

  17. tina says:

    I recently rented a one bedroom with a den in an apt. complex. When looking in this sunday’s paper i saw an adverstisement for the same apt. in my complex for less money. Should i confront the landlord and ask why i am paying more? I HAVE A LEASE. WHAT SHOULD I DO.

  18. Rummy says:

    I’m a stingy renter too! Glad to know I’m not alone. I pay $715 and that includes parking and electricity. It’s a small place and not heavily decorated but I don’t care. It’s just a place to sleep and store stuff.

  19. Frugal says:

    I agree that purchasing a home is a great investment and well worth it in the long-term. However, it depends on your current situation and lifestyle. I graduated from college less than two years ago so I’m young and would like to remain flexible. One thing I do hold myself too though is that every dollar I pay in rent, I also pay towards my student loans. This means that when I’m done paying them off, I can start saving this amount for a downpayment on a house. Renting allows me to get my finances in order before making the committment of owning a home.

  20. Peter says:

    This is an old thread and topic but somehow Mr. Wangs’ thoughts are even more significant to me now than when this topic got started.
    I am 69 years old, married, divorced. have a Son who built his own home in the last 5 years..
    I have NEVER owned a home because of most of what Jim Wang sez here, I see the idea of owning a home as something which is out of reach for most people if they are very honest with themselves. Very few of us can afford to buy a house..
    People say they have equity in a house…. instead of ‘throwing’ their money away renting; baloney.. You don’t have any equity at all in a house for many years, you don’t own anything, the BANK owns it….and You!
    If you are one of those folks who still think the american dream of a house is important, that is your business and you are entitled to think and act as you wish; it’s your money and your life certainly..For me, With the economy as it is now, it will be many years before we ever get back to any stability, if we ever had any to begin with. People by the thousands are still losing their jobs, foreclosures around 97,000 last month and the market for existing home sales is down by the largest margin in our recent history; something like 38 percent..From my point of view, you must be kidding to go in debt for a house.

  21. IMMI-RENTER says:

    My family and I have immigrated into the US recently. A former colleague of mine had introduced me to her friend who needed help. She had a 2 bedroom 1st floor of the house empty and as she was alone living upstairs she wanted to rented it out. So we came looked around the place and it was an okay house which was about 30 minutes away from NY; Wanting to find a job in NY we settled temporarily in the house and negotiated a rental price of something between 6 and 7 hundred US dollars. The first month we were without a sink in the toilet as she would not fix it. The second month she actually fixed it with a negotiating upstairs with her plumber friend. Our ears were unfortunate witnesses of the negotiation and the next day we had a miracle. Hoping for best we had already registered out kids into school and boom it turns out that she did it to demand more money from us.
    Conclusion: Renting in this current economy is cheaper, however, make sure you have an agreement that safeguards you.

  22. thunderthighs says:

    I’ve always gone for the cheapest rent possible. In college, I could never understand why some students were blowing (or their parents were blowing) upwards of $1000 a month for rent in a student ghetto.

  23. brettski says:

    I was assigned to live in New York city for 2 years; since I knew I’ll probably never be back I bit the bullet and paid ~$3,700 in rent to live right on central park and broadway.

    Not at all a smart thing financially (I’d argue having anything to do with living in manhattan isn’t) but it’s an experience few people will ever have and something I’ll treasure always.

  24. Sandy says:

    Disclaimer: I’m a Realtor.

    Renting vs Buying is a personal lifestyle decision along with being a financial decision.

    Currently rental rates are skyrocketing – due in part to the large numbers of foreclosure properties already on the market and the elusive ‘shadow inventory’. Landlords are using the demand for rentals as a means to increase rates and really make a profit. And they can pick and choose their tenant.

    It comes down to where you are in life, what you want and how many hoops you are willing to jump through to purchase or rent.

  25. a-landlord says:

    Just for your info, I am a landlord ! And reading your commentary makes it difficult for me to have confidence in my tenants, you lived there for a year and vacuumed once: did you ever sit on your floor? Its attitudes like yours that make landlords charge higher rents and do more checks on tenants. Also, you are developing very bad habits of neglect that will be very hard for you to change, if you should ever want to buy your own home.


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