Q: I will be turning 40 this December and I am still renting an apartment. I am single with no children, earn $50,000 a year, live in Austin, TX and don’t plan on moving anytime soon.

I’ve been putting 15 percent of my paycheck into my 401(k) over the last four years. Before that, I was a social worker and didn’t make that much money, so I’m way behind in saving for retirement.

I currently live in an 850 square foot 1-bedroom apartment with a study and I pay $820 per month. There are some new condos being built near where I live but a 600 square foot unit starts in the $200,000 range. A 1,300 square foot home in Austin starts at about $160,000 and to get something at that price, I’d have to have a 40-minute commute to the suburbs.

The thing is, I love apartment living. I am not into painting, yard work, home repairs, or piddling around the house. I love to be in the city. I like to eat out, spend time in coffee shops and bookstores, and I enjoy traveling 2 to 3 times a year.

But I’ve been told 1,000 times over that I am throwing money away and need to purchase a home. What if it’s not MY American Dream?

My concern is that 30 years from now, when I am 70 and it’s time to retire, I will wish I had a house that was paid off so I wouldn’t have to worry about paying the rent. I also see prices in Austin continue to go up substantially each year and I feel as though if I don’t buy something soon, I’ll be priced out of the market in the near future.

There is a new development being built that is five minutes from where I live. The condos there cost around $160,000. The neighborhood is changing but I feel that in five years, prices will be higher than they are today.

What should I do?

A: It’s clear that you haven’t really made up your mind whether you want to buy something (because you believe in a home as an investment) or keep on renting. To figure out what you want to do, you’ll have to dig a little deeper and pull out your calculator.

If you don’t wish to be a homeowner, then you have to examine the reason why you’d go against what your heart and mind are telling you. Do you feel that you might be missing out on an investment worth having? Is making this investment in your future worth giving up some of your lifestyle today?

Do the numbers. If it costs you $820 per month to rent today, you have to figure that will go up substantially over time. Will your income rise as well? Now calculate how much it will cost to own your own place. You’ll have a mortgage, real estate taxes (that will go up), insurance, plus you’ll have to maintain the property. If the property value rises, you’ll make back some of that cash. If the value of the home remains where it is, or only goes up slightly, you won’t. It will cost you something to live, so do the numbers and decide. Buying a house or a condo doesn’t have to be a “forever” decision. You can buy property and 5 or 7 years down the road, you can sell it and go back to being a renter. Or, you can sell and buy something else in which to live.

I can’t make the decision for you. But if this new condo is located only five minutes from where you live right now, and will cost just about the same each month as renting, it’s probably a good idea to buy.

But keep this in mind: In some real estate markets it is up to 35 percent less expensive to rent than it is to own a similar property. While you might get some tax savings, if the difference between the cost of renting and owning is significant. Financially, you might be better off renting than buying.

July 4, 2007