Why can’t people just live in a 1 or 2 bedroom Apartment or Condo?

If you compare Owning a 3 bedroom house with living in a 1 Bedroom Luxury Condo you will see a dramatic difference in cost.

A 1 Bedroom Condo or Apartment will have a Power bill of around $50 per month tops.

A 3-4 bedroom house will have a power bill of around $350 a month.

That’s $300 a month going out the door.

If you want to get rich, do what I do: Earn $30,000 or more a year after taxes and RENT a 1 Bedroom Luxury Apartment owned by a massive corporation.

My rent is only $700 a month and I never pay: Taxes, Insurance, I pay ZERO Maintenance, No lawn to mow, No roof to repair, No gutters to clean out, Even my appliances are included so if my Washer or Dryer breaks it’s not my problem. If the dishwasher breaks it’s not my problem.

My utilities are FAR LESS than a home owners. In fact, cable and Road Runner High Speed internet are INCLUDED in my $700 rent along with water/sewer, pest control. The only utility I pay for is power.

I only pay $8400 a year for a very nice comfortable place to live.

I eat the same food as home owners, I drive a nice car, I use the same internet. etc. etc.

I don’t see why so many people think they MUST have a house.

Consider the differences between owning a stock and owning a house. You buy a stock with money you own – you don’t borrow the money, so there is very little cost (broker’s commission) compared to a mortgage. The stock doesn’t require upkeep, you just own it. The stock may generate a dividend, meaning positive cash flow into your account. Again, a house requires that you fix toilets and spend cash out instead of receiving cash like you do with stock. And then, of course, you can ideally sell stock later and make money paying just broker’s commission (as low as $4.95 per order) instead of a real estate broker’s commission – 6%, or $12,000 on a $200,000 sale.

So, maybe the author’s wording isn’t perfect, but I think his overall point stands. Home ownership isn’t the best way to invest. People should stop comparing renting to owning and start saving regardless of where they live and invest in positive cash flow “assets” like stocks, bonds, mutual funds, rental properties, etc. instead of financing luxuries with their credit cards.

That means that at the moment you buy a house, it becomes an asset, regardless whether you sell it for more or less the amount you paid for it.

So why do you confuse it with a liability? Because you (inaccurately) combine the asset of the house with the liability of the mortgage. But the house is not connected to the mortgage, except for the security function of the house. However, you can always pay off the mortgage without affecting the asset “house”. In addition, some of the costs that you list, only incur when you use the house (which represents a value (quality of living) for you). Also when you mention the cost that a house generates, especially when you actually use your house (living in it), you need to consider the ‘opportunity costs’ – the rent for an apartment. If you choose to live under a bridge, the opportunity costs are small and it would be a smart business decision not to buy the house. For the rest of us it would be an apartment with rent, utilities, and other expenses (like higher insurance premium for your car, because it is parked on the street). Meaning you need to consider what the other choice (living in an apartment), will cost you (as already mentioned by others). So the question you wanted to answer was actually: Is it a wise business decision to buy a house.

So please be more careful when simplifying a definition, so that you don’t start out with the wrong assumptions. When the starting point is wrong, you end up with the wrong results.

P.S. I just found another description for asset on Wikipedia. “An ‘asset’ in economic theory is an output good which can only be partially consumed (like a portable music player) or input as a factor of production (like a cement mixer) which can only be partially used up in production. The necessary quality for an asset is that value remain after the period of analysis so it can be used as a store of value.” — look at the last sentence: It can be used as “store of value”. That means an asset (like a car) can also depreciate without becoming a liability.

The tax deduction for mortgage interest is deducted from the taxable income, not from taxes owed. It is not a one-for-one exchange. The reduction of tax burden is less than the amount of interest paid. Therefore, it is better to pay off a mortgage and keep what you would be paying in interest than to keep a mortgage for a relatively small tax deduction.

I do not have “a degree in finance or economics” but I have taken a lot of Organizational Budgeting and Accounting classes and the principles behind this article are the same principles that most large corporations operate on.

You did not include the tax deduction for interest.

Maybe you should get a degree in finance or economics before you start pretending to be an expert.