Easter Sunday

Our Easter Sunday was celebrated with church, a family lunch, an egg hunt, and more rides in the wheelbarrow.

20080323 - Easter - 23

I think the reason I like this so much is because my Grandpa pushed me around in the wheelbarrow 25 years ago:

Wheelbarrow

More Easter photos here, and a home movie here.

Why We Rent Our Apartment

Doug and I are both in our 30′s. Doug has a successful job. We have a kid. We have good credit and money for the 20% down payment. According to most social standards, we should have bought a home a couple of years ago. Why would we still rent?

Not a week goes by that Doug or I don’t hear at least one of the following:

  • “You’re just throwing money away.”
  • “You’re paying someone else’s mortgage.”
  • “A house builds equity and appreciates in value.”
  • “You’re missing out on the tax breaks.”

What these well-meaning friends don’t realize is that we save a lot of money by renting, and then we invest those savings into dividend-paying stocks that appreciate in value. Here is how I calculate the savings:

Monthly costs to rent our apartment:

Rent $800
Renter’s insurance: $15
Average utilities: $140
Total monthly cost to rent: $955
   

We really like our neighborhood, and the location is convenient for Doug’s work, so we want to stay in this area. To make this comparison fair, I’ll use the cost to buy one of the townhomes for sale next to our apartment. There are two townhomes for sale that are similar in size and scope to our apartment. One is listed at $239,900 and the other is $249,900. We think they will be lucky to get $200,000 from a buyer, so I will use $200,000 in my example.

Monthly costs to buy similar townhome:

Terms are a selling price of $200,000 with a 30-year fixed mortgage at 6% interest and a 20% down payment (to avoid paying PMI).

Mortgage: $959
HOA dues (includes some utilities and yard service): $240
Property insurance: $40
Average utilities: $100
Property taxes (2.5%): $417
Minus the tax rebate for interest and property taxes, above the standard deduction: (average from first year, assuming 25% income tax rate and a standard deduction of $10,700 for married filing jointly) - $80
Total monthly cost to buy: $1676
   

Monthly savings by renting: $721
Annual savings for the first year: $8,652

This is just a monthly example for the first year, and it does not even include the huge expense of fees and commissions when you buy and sell a home. It also does not include having to pay for maintenance or repairs.

Only $164 of the $1676 for the townhome goes to principal each month for the first year. A payment of $1592 per month goes to interest, taxes, and fees, and then you get $303 back in taxes. A renter on the other hand would get $223 back in taxes just by taking the standard deduction, so the tax advantage for owning is really only $80.

After the first year, it gets complicated with appreciation and inflation rates, so I used this online calculator to model it. According to the charts, after thirty years the townhome appreciates to $461,000 — more than double. The invested rent savings have grown to over $2.4 million! The equity in the townhome will never be able to catch up to the value of the invested rent savings for this scenario.

True, a home can appreciate in value, but if you sell it, where will you live? Would you really take the money as cash and buy a cheaper home? Most people tend to trade up, not down. On the other hand, the stock investments (using the $40,000 down payment and monthly rent savings) continue to grow in value, and we can sell them at any time.

Some will say that over the long term, buying a home is a better deal, because the mortgage is fixed and the rent will rise. Maybe, but our rent has not risen as fast as the property tax would each year. And I really don’t want to spend an extra $721 per month just to say that I saved $80 in tax breaks.

I would like to live in my own home one day, so I hope that the market will change and bring a balance in rent versus price of ownership.

I am not saying that renting is the best way for everyone. I am suggesting that each family measure the costs for their personal situation and market region, and then compare it for themselves. Don’t just take my word for it, or your realtor’s.

Carrot Cake

carrot cake

I made this carrot cake as dessert for our Easter family lunch. The recipe is from Melissa at Tiny Happy. It’s one of my favorite non-dairy cakes.

I’ve made this recipe several times. It’s really good for muffins, but this time I made it as a bundt cake. That’s all I use these days; I should just give away my other cake pans.

The topping is dairy-free, too. It’s 1/4 cup of coconut milk mixed with 1 cup of confectioner’s powdered sugar. Coconut milk is a great substitute for milk when you need something that is creamier than soy or rice milk. Doug uses it when he makes waffles, and I can’t even tell the difference between those and buttermilk waffles.

It’s a pretty good feeling to slice into this cake and see all the bright orange bits of carrot. It’s enough to make this cake seem good for you.