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Some people, such as Ramit at I Will Teach You to Be Rich, go on and on about how renting is the best way to go for most of us.  Others say that renting is throwing money away.  Few people, though, have a real tool to tell you which is best for you.

Steadfast Finances stumbled upon a great tool from the New York Times that does just that.

I’m not saying it’s never better to rent than buy, nor am I saying it’s better to always buy than rent. I’m saying you need to do the research and you should understand that multiple variables are going to come into play. Such as:

1. Length of time you’ll be in the home.
2. Total cost of home
3. Monthly mortgage payment vs. monthly rent payment.
4. True cost of home ownership (taxes, insurance, maintenance, etc.) vs. maintenance free living as a renter.
5. Percent decline of home from real estate bubble prices (not a factor in non bubble locations).

Follow his advice and make your way to the New York Times the next time you are looking at renewing your lease or if you are on the verge of a home purchase.

Last week, I wrote about my recent apartment hunting.  Now that I have a new place picked out, I have to move.  I arranged an overlap of one week so I have time to move everything in my busy schedule of working during the day and going to classes at night.

So, I started by looking at moving trucks.  I went to the most obvious place first, U-Haul, and was surprised by the cost.  The rental fee, about $20, didn’t seem too bad.  However, the .80 per mile blew me away.  I have mapped out the route from the rental place to my needed stops and found that it is about 20 miles.  With tax and all, that puts the cost somewhere in the $40-$50 ballpark.  No thanks.

So, I decided to look at Enterprise to see about just getting a pickup for the afternoon.  $109!!!!!  No thanks.

I did a little more Google magic and ended up at the website for Budget Truck Rental.  With a fall coupon they have out, offering 25% off and only .50 per mile, I found a winner.  Estimated cost with tax: $29.99 including miles.

Next up, I had to figure out how I was going to get the furniture into the truck and into the new apartment.  Fortunately, I have helped friends move in the past, and would help those friends again in a heartbeat, and they offered to help me.  Cost: one dozen doughnuts and a six pack of beer. (We are moving in the morning-early afternoon time frame)

Next, though, I realized I would need Internet when I move in.  I have blogs to maintain after all.  Fortunately I work somewhere I can get a phone/Internet package discount, so I have set everything up for a good bargain.  TV is not as cheap as I expected.  The TV company got rid of “expanded basic” cable and now makes you get either crappy basic with about 20 channels for $15 per month or “digital starter” for $55 per month.  I hoped expanded basic would be somewhere in the middle, but it is dead.  So, considering that I do like watching my cable shows, I just bit the bullet.

With roommates, the cost of TV and Internet is split 3 ways, but now I am at it alone.  My power/heat bill, though, will go down significantly moving from an old house into an apartment.  Even losing sharing on the energy bill, I am saving (and I turn the lights off when I leave).

I guess I should stop rambling and get to the point.  Moving is not cheap and certainly not easy.  When you are considering doing so, remember that the cost is not just an increase (or decrease) in rent.  It is new couches and dishes if you are sharing with other people, and utilities are going to change as well in most cases.  Commute times may shift and insurance costs may change.  There are many pieces to the puzzle.

The most important thing to remember, above money, is your happiness.  If you are miserable where you live, it is probably worth the extra cash to get out to a new place.  If you think you can be happier elsewhere, spend the money.  What is the point of money if not to make us happier?

Yesterday I completed a multi-week process of searching for and picking a new place to live.  I have been living in a house near my school for the last 15 months.  In that 15 months, I have been very happy with the rent and location, but I decided it was time for me to go out and get a place on my own.

I started my search with an apartment book and the Internet.  I found a free “Apartment Book” for the Denver area from the people behind Apartment Guide.  I used that book to eliminate certain parts of town, limit down neighborhoods I would like to live in, and get an idea of what is out there and what costs might be.

From there, I used a combination of two websites to find and investigate apartments in those areas.  I used a zip code map to help me search.  Apartment Guide was useful for finding apartments within my rough guidelines for a one bedroom apartment within a certain area and price range.  I also checked for things with Apartment Finder and Apartments.com.  There are dozens of sites that help with this.  Some charge, some are free.  Based on everything I saw, the charge sites are a rip off.  Why pay for what you can get for free?

The big things I was looking for were near my school, but not full of undergraduate students.  That created a circumference to search within but eliminated a handful of apartments right near campus.  I also wanted something that was one bedroom, not a studio, for about $600 per month.  Again, this limited down the selection.  There were also a bunch of “wants” that I could live without.  Those included in unit washer/dryer, covered parking, and no pets.  I also wanted to be in a safe, clean place.  Those two are not negotiable.

Based on a few hours of searching on those websites, I came up with a list of about a dozen potential apartments.  I searched for ratings on those apartments through two major methods.  The first was a simple Google search.  Using Google, you can find out a lot about an apartment, particularly a bad one.  Second, I searched every single apartment on Apartment Ratings.

Apartment Ratings was one of the most useful tools in limiting the apartments I found.  I looked back at a few places I have lived before and saw that most of the ratings were either very bad (most) or very good (a few).  The ratings on these sites are user generated, like Wikipedia or Yelp, and have to be taken with a grain of salt.  People are more likely to rate a place that is really bad than if they were just content.  I also looked at a trend over time.  More recent ratings are going to be more relevant to current management than older ones.

Using the ratings sites, I was able to eliminate apartments with apparent drug, violence, noise, break-in, and bug problems.  That narrowed my list down to about six.  I then did more reading into what people liked and didn’t like about certain areas.  That limited it down to three.

Once I had my top three apartments in mind, I looked online at the websites, which offer only the most glowing reviews, and found that one of them had nothing available in my price range (not even within a few hundred a month!).  And then there were two…

I did a drive by of both complexes to see what they looked like in person, how the neighborhood felt, and what was around.  One of the two was in an area just off from a familiar busy road.  The farther I got from the road, the less safe the area felt.  And then there was one…

I toured the final apartment complex on my own once and setup a time to come back with my Mom to get a second look.  No matter how old I am, it is always good to get a second opinion.  I trust that my Mom would never let me do anything stupid, so I brought her along.  Parents, significant others, and good friends are good options for when you are looking.  I did it once without anyone helping and ended up in a bad situation that I had to pay to get out of.

I setup another visit to see the actual unit I would be moving into.  I really liked it.  I filled out the application and left a deposit.  I should be moving around the middle of next month.  I would love to tell you all where, but seriously, this is the Internet.  There are lots of wackos out there!

What I Learned: Tips for Apartment Hunting Neophytes

• Living around a university campus often puts you in a situation with a crappy landlord that will try to take advantage of you.  Living farther out could mean better landlords, based on my experience.
• The web has a plethora of information about safety and living in certain areas, but you have to see it in person and go with your gut.
• Get a trusted second opinion before you pay any money or sign a lease, always.
• Living is generally the most expensive part of your monthly living costs.  However, it is also the place you spend most of your time.  Pick a place that you will love.  Don’t settle on being unhappy with your living situation.  You can quit a job, you can sell a car, you are stuck in a contract when you sign a lease.  If you are not confident, don’t sign it.

What advice do you have for a new apartment goer?  A college student looking for fall housing?  A 20-something going to a new city?  Please fill in where I missed or left off in the comments.

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It is nearing census season here in the United States.  Every decade, the United States government puts together a report with details about every single person in the country.  This includes citizens, legal residents, and illegal residents.  The government then puts together population demographic and trending reports that tell you everything you could imagine about people living in the US.  You can see these reports at census.gov.

Other countries have similar systems.  In the UK, government projections show that the population in England will rise from about 51 million today to over 60 million in 2031.  In the US, the population grew 8% between 2000 and 2008.  That is over 22 million people.  The 2010 census is projected to show continued population growth.

What does that mean to us?  The average person will need a place to live.  More people means more houses are needed.  The simple “what it means” is that houses will have to be build, mortgages will be needed, and banks will make loans.

However, there is another segment where people stand to benefit.  Not all people live in a single family house or a condo.  Many Americans rent.  In Minnesota, 75% of homes are owner occupied, leaving 25% as renters.  In New York, on the other hand, only 55% of homes are owner occupied.

Jobless rates today are impacting those numbers.  Many of the bad mortgages in the last year or so have been in owner occupied situations.  People have to give up their home ownership and move into a rental.  Property developers and investors have the opportunity to profit from this situation by owning rental properties with an increasing demand.

It is also important, though, to look at an often forgotten group of people.  3.5 million people in the United States, about 1% of the population, experiences homelessness at some point in any given year.  Be sure to remember those in need even in tough times.  If the economy is treating you bad, imagine how some people are doing.  If you are able, support a local homelessness charity like the Colorado Coalition for the Homeless in my neck of the wood.  Everyone deserves a home.

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Home Equity Ad from Community Bank Delaware

If you pick up the Wall Street Journal on any particular day, you might find an article that mentions HELOCs.  You probably see that word on a poster or rate board at your local bank as well.  You might get something in the mail (or e-mail) from your credit union advertising the best HELOC rates around.  That is all great if you know what a HELOC is.  Consider this post HELOCs for dummies.

HELOC stands for Home Equity Line of Credit.  HELOCs are a form of home equity loan.  Since I have never discussed home equity loans before on this site, I figure we can knock out two birds with one stone.  So sit back, relax, kick your shoes off, and get ready for a short lesson on real estate loans.

First off, you need to own a home and have equity to qualify for any home equity loan, as the name implies.  Home equity is the ownership you have built up in your home.  To calculate your equity, subtract your outstanding loan principal from the present value of your home.  If your home is appraised to be worth $250,000 and you have $100,000 left on a mortgage, you have equity of $150,000.  Equity changes based on those two inputs.  If the value of your property goes up or down, as constantly happens due to market conditions, your equity will change.  If you pay down your mortgage loan, you will also impact your equity.

So, in the example above you have equity of $150,000.  If you need a lot of money for a planned purchase, such as a car or large home improvement, you can take out an installment loan based on that equity.  The rate of a home equity loan is generally the lowest interest rate a consumer can find.  However, it also means that if you stop paying, the bank can foreclose on your house.  If you plan on paying every month (as we all do), you can get a better “car loan” rate if you use a home equity loan instead.

Sometimes, however, emergencies come up.  We don’t all have an emergency fund, even though we probably all should.  For these scenarios, HELOCs come in handy.  A HELOC is a line of credit attached to your property.  Like all lines of credit, your HELOC works kind of like a secured credit card with unique fees.

If you decide you want a HELOC, you will have to pay fees up front to create the loan.  Once it is established, you never have to use it.  If you don’t use it, you don’t have to pay any more.  If you do use it, you have to pay interest on the outstanding balance, like a credit card, and pay back the loan balance at a later date.  Some HELOCs simply accrue interest and require no payment until the end date of the loan.  Some require interest only until the loan end date.  Others institute a minimum payment based on the outstanding balance.  You can generally negotiate this with the bank when you set up the loan.

If my opinion, HELOCs are a good idea for established homeowners for emergency use.  If you are new in real estate, this is just another complicated loan that lets you spend money you will eventually have to pay back.  If you have a lot of equity and want to be ready for when the water heater breaks, you need to replace the furnace, or a plumbing emergency comes up, a HELOC might be right for you.  Just remember, it can take weeks to setup this type of loan.  If you want it in an emergency, waiting for the pipe to break will be too late.

If you think I missed anything or have any questions, feel free to say so in the comments.

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While we are still in a recession, the recession seems to be getting less bad.  As a Wall Street fund manager told me today, it might go down in history as “the great recession.”  As we all know, this recession has pushed down housing prices around the world.  It looks like the worst might be behind us.

In May, UK housing prices increased by 1.2%.  Housing prices are an indicator that the economy may be recovering.  Housing is a major piece of a very large economic puzzle.  Along with factors such as employment, consumer spending, inflation, manufacturing inventories, and the stock market, housing is a key factor in looking at economic health in the United States and abroad.

Housing purchases are a major indicator, and that rate drives housing prices.  When people were afraid of losing jobs and income, home purchases fell.  As people are becoming more confident that their income will remain constant in the future.  That means that they are willing to spend more on homes and other goods and services.

While I highly recommend you all keep on saving, it is best for the economy if people spend.  Spending moves money into businesses that moves on to create profits and job opportunities.  That leads to more spending.  The cycle will continue to grow when consumers are confident.

How does this impact you?  When the economy is bad, stock prices and home prices go down.  Interest rates are also at historic lows.  When the markets are depressed, it is a good time for you to make investments.  If houses are at the bottom, it is a good time to buy a home (to live in or invest depending on your own financial situation).  Remember the mantra: buy low, sell high.

Hopefully things will start to turn up.  In the global economy, housing recovery in the United Kingdom may be tied closely to housing in the US and the rest of the developed world.  What do you think will happen next?  Is the worst behind us or are we just at a hump in a longer downturn?

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I have a steal on rent. Right now I am paying $400 per month. I knew the landlord so he cut me a good deal. However, most people in this neighborhood pay more like $600-$800 per person per month. In a 4 bedroom house that is easily $2400-$3200 per month. Mortgage payments might be less than that.

People around the country are making similar discoveries. People are finding that buying a house or condo costs less per month than renting. It is important to note that this is on a cash flow basis only, buying is almost always a better decision in the long run for net worth and investing.

If you were wondering how this works, I am glad you are here. That is exactly what I was planning to tell you.

So, lets say you pick an average neighborhood in Denver, Colorado, my hometown.  Lets say average rents are $600-$800, as described above.  Now lets say you can buy a house for $200,000.  At current rates, if you put 20% down, your monthly payment might be as low as $1,050 per month.  If you live with a roommate at only $500 per month, you are making money.

Let’s look at this through another lens.  If you live about 15 minutes down the road, you can find a great downtown apartment for $1200 per month.  Condos in the same neighborhood start below $200,000.  At the same rates, you can see the $200 cash flow savings per month.

If you are starting to think entrepreneurial, I am in a neighborhood near a campus with many renters.  You can buy a $200,000 house with 4 bedrooms and charge $600 per room per month.  After your mortgage payment, you are making $1200 per month in profit.  Given there are other costs of owning the home, you get the idea of how this works.

Someone I know used that logic when he bought a house.  He lived in it with three other roommates for a couple of years.  They were each paying him $500 plus their share of utilities.  Based on the price of nearby houses, he was not making a lot, but his rent was free.  He has since moved out and rents the extra room for $500, ensuring a monthly profit of at least $500.  At the end, he is also building equity in the house on the renter’s dime.

So, if you are looking to move sometime in the near future, it might be a good idea to look at buying too.  You could save money, or make money, in the long run.

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The number of mortgages in foreclosure, or mortgage possessions, seem to have hit their peak.  While foreclosures are still a problem, they are slowly turning around and fewer homes are being taken over by banks.

The perception of foreclosures is still high.  That is because several states are still experiencing high foreclosure rates.  Florida and California, for example, are still experiencing a large impact from foreclosures.  Nevada is in the worst shape in the United States.

On the other hand, most states have begun to recover.  This map, which references March, 2009 data, shows that most states have leveled out or turned around.  Things are starting to look up.

This has a large impact to the overall economy.  The recent recession was triggered by a spike in foreclosures, which led to bank failures, which also impacted investors and funds that bought into mortgage backed securities, which led to a sell off and stock market decline, which led to consumer spending fears, which led to the economy getting worse.  I could go on, it is a big cycle of bad events.  You get the idea.

Today, however, things are getting better.  The stock market is up.  Investing is on the rise.  Spending is up. (But not by Narrow Bridge readers, right?)  Companies are doing better.  Profits are returning.  Foreclosures are no longer on the rise.

This has been seen internationally as well.  In the UK, for example, first quarter 2009 possessions were down 42% from the same time the prior year.  It seems that the world is not going to end after all.

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Hundreds of studies have shown that millions of people have lost trillions of dollars in the US alone.  In the UK, that number is roughly 1.9 trillion pounds.  The financial crisis has impacted less wealthy families and rich families alike.  People are losing their homes and their wealth.

Unless your money was all in certificates of deposit and cash, you probably lost something.  Fortunately, most of our 401(k) and investment accounts have recovered, at least somewhat.

Many people have lost equity in their homes.  The average house value in the United States was down 6.8% (Money-Zine) from 2007 to 2008.  In the UK, the average home value is down 17.5% since 2004 (Debt Free Direct).  Canada has had mixed results depending on the city.

One major problem with decreasing home values is negative equity.  For example, if someone bought a house for $100,000 in 2008 and the house is worth $90,000 today, but the owner owes $95,000 on the mortgage, they have a negative equity of $5,000.  They owe $5,000 more than the house is worth!  This is a fictional example of what is happening to millions of people around the world.  Many have a far worse equity hole than $5,000.

This example helps explain why the mortgage crisis is so bad.  Many people are in loans that they can’t afford, and many people owe more than the house is worth.  If you were in a bad situation and owed more for a house than it was worth, why wouldn’t you just walk away?  The only thing you have to lose is your credit score, which would take a massive hit.

Now thousands of people are rejected for new mortgage loans every day.  Few companies would give a new mortgage loan to someone who defaulted on a loan in the past.  It will take at least seven years before the defaults will drop from their credit history.  Until then, they are stuck renting.

It is widely believed that owning a home is one of the major keys to financial success.  Now the people who are having the biggest financial problems can’t get out of their current situations.  Hopefully new legislation and hard work will bring people back from financial despair.

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