Why Are Apartments So Expensive?

If you are shopping for your new digs you may be surprised that the rates for apartment units considerably more than a mortgage payment would be, all things being equal. Why is this the case? It seems strange that you should have to pay an equal monthly expense but have nothing to show for it later. Of course there are good reasons for this. People who do not have the sufficient credit or income to to secure a mortgage really have no choice in the matter. They have to rent, and so there is always strong demand for rentals. You also have to remember that landlords and property managers are in the business of making money off of renters. You are paying for their livelihood, plus all the maintenance and repairs, taxes, management fees, and miscellaneous expenses that come with it. It makes sense that a stranger would have to pay at least as much as someone who is paying to own the property they live on.

To Rent or to Own?

That explains why apartments are so expensive, but what about the true cost of renting? The true expense of apartments is that you never get anything you pay back. You are paying for your time at the apartment, and nothing more. An apartment is like having a mortgage or other loan where 100% of your monthly payment goes to interest, and nothing to principal. If you are someone who is actively investing or saving your money, consider that you may get a far better return on your money if you can switch from a rented home, to one you are on track to own. Think about it. If you rent, you are effectively tossing your entire monthly payment away. Investing in home or condo ownership is, generally speaking, a far more intelligent investment opportunity than virtually anything else you could possibly invest in.

The moral of the story? Apartments should really be thought of as a short term convenience. Do your best to save the necessary down payment to secure a mortgage and enjoy the wonderful fact that your biggest monthly expense is really not an expense at all, but more like a long-term investment of savings account.