Personal Finance: When is Renting NOT Wasting Money? Answer ...

For a very long time, my concept of "Personal Finances" consisted solely of believing that if you wanted to BUY something, you absolutely, positively MUST have the money to pay for it. After all, that's how things worked when you went to the corner newsstand, the supermarket, or the to pizza store.

That mindset works wonderfully for credit card bills. Thanks to my sister and my mom, I have always made a point of paying off EVERY such bill IN FULL, every month, no excuses. They taught me that paying any kind of interest, finance charge, etc. is a shameful waste of money, and money should either be spent of saved, NEVER wasted.

Then I bought my first car.

Although I had a fine job at the NCR Corporation, there was no way I could consider buying $18,000 of automobile on a credit card, and paying for it in full at the end of the billing cycle. Nor did I have a checking account with that kind of money in it -- and even if I had, draining it would have made buying gas, groceries, heat, and rent impossible. So how is it possible for anyone to buy something so expensive?

That was when I learned about "financing". That you could borrow a huge chunk of money from a bank, and then pay it back a little at a time. The catch -- and it's a gigantic one -- is that you get charged a large fee for each payment. So instead of paying the $18,000 the car actually cost, you end up paying close to $25,000 for the privilege of borrowing someone else's money.

I hated the concept. It may be legal, it may even be fair and reasonable, but what it really means is that I wasted seven thousand dollars over sixty months.

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My sister, and many people around the world, insist that renting an apartment is an even bigger waste of money. And there is lots of documentation to support this position:

• If you rent an apartment for $1,000/month for ten years, you will have paid $120,000 in rent.
• If you bought a condo for $120,000, you can pay it off for $1100/month for a 10-year mortgage (loan) at 6.25% and a 20% down payment of $24,000 (total payments of $155,000, which include $35,000 in interest costs.)

So at the end of thirteen years and $155,000, the condo buyer has been living payment-free for three years, while the apartment dweller has continued paying a thousand bucks a months and will continue until death. If that's another 40 years, that's nearly a HALF-MILLION DOLLARS total.

From this example, it looks like buying a home is unquestionably the most economical solution, right? Even with the $35,000 in interest payments, the homeowner could conceivably not have to spend another dime in home payments for the rest of their life.

However, look at what happens as the price of the house/condo rises:

• $120,000 = $1100/month = $155,000 total payments (6.25%, 20% down, 10 yr loan) = $35,000 interest
  
• $250,000 = $1700/month = $360,000 total payments (6.25%, 20% down, 15 yr loan) = $110,000 interest
• $250,000 = $1250/month = $500,000 total payments (6.25%, 20% down, 30 yr loan) = $250,000 interest
  
• $500,000 = $2500/month = $980,000 total payments (6.25%, 20% down, 30 yr loan) = $480,000 interest (!!!)
  

From this calculation, it looks to me that once your total homeowning payments EXCEED the $500,000 estimated cost of renting over your lifetime, the cost of owning a home is no longer worth bragging about to your friends.

This "sweet spot" number, according to my calculations, is around $300,000. Anything more than that, and you're spending more money on buying the house than you would just renting a place for a thousand bucks a month.

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Here in Los Angeles, the median price for a home is $500,000 -- fully $200K higher than that "sweet spot". My rent for my wonderful 1-bedroom loft apartment, where I've been living for eight years, is right around $1100, so I've paid about $100K for this place. My rent paid during my lifetime to date is roughly $200K. And if I live another 40 years, that should bring my grand total up to, say, $650,000 in rent payments.

The whole point of this dreary post was purely selfish. I needed to figure out at what point it would make financial sense to stop renting an apartment and start paying for a townhouse. And my conclusions?

Well, fourteen years ago, when I arrived in Los Angeles and 1-bedroom condos could be had for $125K, THAT was that mythical point of Financial Sense. Today, that exact same tiny condo runs for $450K, which would translate into:

1. Doubled monthly payment (from $1100 to $2400)
2. Additional payments for Homeowner Association fees (appx $300/month)
3. Up to half a million dollars in money wasted in the form of interest payments to the bank

So much for buying a townhouse in this town. Now, of course, if I moved to, say, Oneonta, NY, I could buy a duplex for $145,000 ...

No. Los Angeles is my home. And that's a tradeoff that's worth the $650,000 Lifetime Rent Payments.

Second Base For Sale

Second base has been an exciting turnstile over the last few years for the Metskis. I grew up in the era of Felix Millan (who never missed a game due to injury) and then Doug Flynn, who won a Gold Glove at the position on a team whose only goal was NOT to lose 100 games in a season. I of course remember Wally Backman of the mid-80s teams, and then Edgardo Alfonzo manning the position for the Best Infield in History in 1999.

I wonder if a great second baseman will be the fabled "final piece of the puzzle" for today's Mets to finally advance again to the World Series?

It's the only position with no clear frontrunner anymore on the team. Say you like about incumbent Jose Valentin, but I've seen better second sacker defense from kittens wearing oven mittens. (No wait, I think that was a cartoon. But you know what I mean.) I leave it to the other, purely statisician-blooded bloggers to point out his second-half collapse and deafening silence during the playoffs.

The Mets interesting recent history of second basemen runs along thusly:

1. Jose Reyes was the best second baseman the team has had for some time, but he's even better as a shortstop.
2. Kazuo Matsui was despised by Mets management and fanbase alike, and never managed to win either group over to his side. He can hit and he can field, but he could see that he would never get any love from his bosses and left. He now is the starting second baseman for the Rockies and apparantly loving it.
   
3. Jeff Keppinger was a favorite of Art Howe, which may as well have been the kiss of death. He also fielded like Mo Vaughn and has disappeared.
4. Ty Wigginton played a few games there, and was used to get a pitcher from the Pirates (who was used to get a pitcher from the Orioles) before signing with the Devil Rays as their slugging utility player.
5. Chris Woodward seemed to make an error every day he played at second. Really likable fellow, I actually met him at Dodger Stadium last year, but he had no shot at the daily gig when he was such a useful backup.
   
6. Anderson Hernandez looks like a chubby Jose Reyes, and is delightful to watch on defense at the keystone as well as dancing in the dugout with the Dominican. But hitting makes Doug Flynn look like David Wright, and Mets Manager Willie Randolph has no use for guys who can't hit home runs.

Watch for another spinning turnstile at the Keystone this season. There are no obvious frontrunners, so this means we can be in for a wonderful surprise. Maybe Anderson will learn what a curve ball looks like. Maybe Valentin will turn into Chuck Knoblach (or Steve Sax) and force Willie to use him as he should: as a backup and pinch hitter. Or maybe Felix Millan will resurrect his mustache and glove and show up for Spring Training, and fill the Mets last glaring weakness.

One month before Spring Training begins. I'm all atitter with anticipation.

A Requiem for Trannie

For all my bashing of the talented, hard-working centerfielder of the New York Mets, I feel that MLB.com's final article of the year went a bit too far.

Carlos Beltran has had the whole offseason to think about what might have happened if he had swung at a pitch from Cardinals rookie Adam Wainwright with two strikes, two out, bases loaded and the Mets trailing in the bottom of the ninth of a Game 7 that decided the NL pennant. He was Carlos the Cardinal Killer -- that's what Cardinals co-owner Fred Hanser even said after the game. No one expected Beltran to take that pitch. It was a strike and St. Louis went on to win the World Series. If Beltran had swung, it's possible that the Mets would have won the World Series.

It's also possible that had Beltran swung, he would have struck out swinging. Or he could have hit the catcher in the forehead. Or he could have injured his quadriceps and corkscrewed into the ground, screaming in agony. Or -- thanks to the Chaos Theory Butterfly Effect -- it's possible that it could have started a chain reaction that will knock another Canadian ice shelf loose, eventually causing massive floods and a new fad for "Beltran's Glacier Cubes" in your grocer's freezer.

I have never been a fan of Carlos Beltran. However, I am a firm believer in the belief that no one player loses a game (well, unless your name is Billy Wagner or Armando Benitez or Braden Looper, that is), and while Trannie was indeed the fellow who made the last out of the Mets' season, the man who will be the Charlie Brown Goat of the 2006 season, the man who will be remembered for taking strike three with the bat on his shoulder when the entire season was on the line ...

What was i saying? Oh right, well, remember, I was never a Trannie fan.

The point is, Trannie had lots of other teammates who did not deliver in the clutch, either. Aaron Heilman gave up a gopher ball that was far more damaging than Trannie's un-swing. David Wright didn't hit a ball hard the entire game, even striking out in the 8th when he should have been modifying his swing to get on base at all costs. Carlos Delgado didn't deliver. Endy Chavez didn't break the Mendoza line. Shawn Green ... well, he's not a big fan fave right now. In fact, everyone in that lineup took responsibility for not scoring more than one run against that Cardinals' pitching staff.

Mark Newman's MLB.com's article was needlessly hard on Mr. Beltran. Despite the truth that every Met and baseball fan in the world is rightfully disgusted with him for taking strike three with the bat on his shoulder, it is unfair to even suggest that a Trannie swing in that situation would have won the Mets a World Series. It could have won a game, a series, a pennant, and the hearts of New Yorkers, perhaps even my fandom (which I'm sure is worth just as much to him, snort snort) -- but even a grand slam that landed in Rhode Island would not have won the World Series.

I have no problem criticizing Trannie's performance based on his performance. But basing it on what I wish might possibly happen? That's just mean-spirited and unprofessional. And entirely against the standard I've been holding myself to on this blog.

Still, dammit, Trannie, rent yourself a copy of Mookie's at-bat in the exact same situation in the 1986 World Series, game 6, and LEARN.