Why Buying a House is a BAD IDEA! Don't buy a house to live in. Lifestyle Inflation.
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- Опубліковано 14 жов 2024
- Is Buying a House a Good Idea or Bad Idea? What impacts whether buying your own home is a good investment or bad? Is it a good idea to buy a house?
You've likely came across the debate over buy vs rent:
There are a ton of Buy or Rent Calculators Online - but does that take into consideration all facts?
Frequent Arguments for Why You Should Buy a House:
-Best Investment Your Parents/Grand Parents ever made
-Forced Savings Plan
-Quality of Life
Arguments for Why You Should Rent Your House:
-Flexibility, and Ability to Pivot are much higher
-Low overhead, Simpler
-Most People don't review all the facts/costs
Honestly though - the number one decider is this: Are you conscious of your consumption? Will buying a home result in further lifestyle inflation?
Matt McKeever:
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Matt McKeever is a CPA, CA and Real Estate Entrepreneur in London, Ontario. On this UA-cam Channel Matt will walk the viewer through how to invest in real estate using such strategies as the BRRRR method while also documenting his personal experience as a real estate investor. Matt began investing in real estate at age 25 by purchasing a student rental near Fanshawe College. In 2016 he's acquired over 25 units.
As well on this channel Matt will share his personal monthly spending and discuss the strategies and tactics needed to reach financial independence (retire early) at a young age. We’ll discuss such topics as safe withdrawal rates, how to build passive income streams and how to reduce your personal consumption
I rented for 10 years. In an apartment. I bought a house a year ago. My two children live with me and my mother. I no longer need to deal with noisy tenants that kept me up many nights. I have beautiful property and can have barbecues and entertain people + quiet. This is priceless and so buying a house suits my needs. It's not an investment property. It is my home.
Are you a man or a woman?
@@rockwithyou2006 Does that matter?
@@deecee2174 yeah I see that it’s usually the women who like to have their own house
@@rockwithyou2006 That's stereotypically sexist of you.
@@deecee2174 It's not sexism. You clearly do not understand the meaning of discrimination on the basis of gender and probably have the habit of crying racism, sexism randomly for no reason. And I am saying this as a black immigrant living in USA. Even today car insurance is cheaper for women than men with the exact same profile. Women typically like to have their own house where as men prefer to rent. There is enough statistics to prove that.
I bought an inexpensive little house for cash on a big lot when prices were low and stayed put. 25 years later, the property value has increased 14 times what I paid for it (the city built something people want to live near a block from my house). I also live way below my means, so although I've never earned much money, I'm in very good shape as I enter my retirement years. I've been very, very lucky, but also very disciplined. Wishing everyone the best. I know it's not easy these days.
Thanks for sharing your experience!
It is impossible in the UK to find a decent house in a decent area at a decent price. Greed has killed the housing market, people will be in debt forever with never ending mortgages
@@ELECTRICEYEMEDIA I can see your hating on him but I see your point. I over doubled the value of my house. Bought it for 400 payed it off and sold it 10 years later for 1 million. Now I took that one million moved to the Dominican Republic (tropical paradise) hedged my wealth bout a penthouse for 200 grand (no property taxes). Diversified with index fund a rental property. Like they say Caribbean life is good! My point is you can make it work for you but your right on the point that you can't spend your equity.
By the way you can always rent out a bedroom for 1k a month... 👍
im all the oposite of you just sayd, my parents dident left me anything, also they didnt gave me a education so i canot get good income, i think i will rent for ever till i die
The guy in the video is an idiot.
Yep been renting in Chicago for 2yrs decided to move to the Bay Area in California. Now I almost make double of what I did in Chicago. Renting is way better if you need the flexibility to move anywhere in the World.
Mario Alvarado how long have you been renting??
I agree. Especially in expensive cities I think it's better to just rent and work on making money in other places.
Tej Drake it’s going to be around 3 years all together.
100%! Your a perfect case study of what this video was all about! Thanks for commenting Mario - really appreciate people sharing examples/their personal experience.
Mario Alvarado Bay Area rent is ridiculous too though 🤔
"A stranger is a friend you haven't met" LOL I love it!
😂 Glad you enjoyed it.
he is also a serial killer who hasn't started killing yet :D
@@teeque5320 hardly ever
Renting its always best the best choice when you are young or you are just joining the workforce, in my experience during your 20's and early 30's you will change jobs a lot and probably even have to relocate a few times in search for the best career opportunities, this video applies really well when you are in that situation, renting is a good idea then, however, once you hit your mid to late 30's, owning a home becomes more important.
You have to remember that as you age, your goals and way of living changes drastically, so unless you are willing to be moving and switching jobs all the time then renting its a bad idea.
TL;DR
Rent when you are young and probably don't have the money to afford a home (20's to early 30's).
Buy an actual house, apartment or something to call your own, even if its something small (mid 30's and above).
This imho its the best approach....
Buying a home was the worst decision I’ve ever made in my life. Maintenance, service calls, lawns to mow, roofing tiles to repair. Renting is peace of mind and hands off everything, I can get to my life quicker and Iam happier.
anthony dyson then you probably bought the wrong house... most of those things you only have to do once every 5 or 10 years depending on how your house is built... (with the exception of the lawn obviously)
I’ve grown from infancy to adulthood in apts with endless freedoms. My lifestyle of no children and most of my family deceased doesn’t need or warrant me to take on the responsibility of maintaining a home, it’s just a wrong fit for me, I don’t need or want that real estate or the upkeep. We’re not all supposed to be doing the same things in life, one size doesn’t fit all. If the house was FREE and I don’t want to be there period it’s still a waste of my life because it’s not what I WANT IN MY LIFE. Just because your car can go 190 mph doesn’t mean that you SHOULD. Like I tell ppl, it’s not about ECONOMICS and repeating what the masses do, your life should be by your own design and not conformed by what has always been done. See I love Cheescake, but one bite might send you to the emergency room with swollen lungs, Iam not going to say maybe you should have taken Benadryl first with Soda water, I’ll just say it’s not for you and leave it alone. But in today’s world, everyone wants to place a tag on you, profile you, sell you this, convert you to that. My thing is this, it’s not what I want for you, but what do YOU WANT?
anthony dyson that’s fine, my point was all those things you mentioned, roofing, maintenance, etc are done maybe a couple of times every 10 years... so it’s not big deal as some people make it to be...
Salvador Molina I understand and I thought the same thing with my home, it just turned out that being a homeowner wasn’t for me, I tried but on all sides renting just gave me a better quality of life and I was at peace in my life, I could actually get my hands around my life when I didn’t have to worry about home issues of any concern. If I became a billionaire tomorrow I would at best have a condo. Never a homeowner again.
This video can be summed up in two words: “it depends...”
100% - It's not a satisfying answer - but it's the truth. thanks for watching!
As in most things in life:-)
tons of factors that go into it. suppose the take away is that renting is not inherently a bad idea. As long as you're saving what you dont spend on repairs and invest it instead
Its because of great and wonderous people like you that I dont waste any more time in my life than i have to thinking valuable knowledge is about to be given.
1. My mortgage is cheaper than my rent was. 2. I can write off interest with my taxes. 3. The value of my house has increased every year over 6 yrs. This does increase the property taxes, which increases mortgage but it's not by much and rentals also go up in rent. Rent increases every year where i live. 4. I have until the 17th to pay mortgage. Rent was due nlt the 5th. If you didn't pay rent on time best believe you will get a summons to court immediately. It takes a while to kick someone out of their house. This is more security. 5. You can change whatever you want in your house, not in a rental. 6. When you rent, rules rules rules! Now this is also true with hoa/condo, so i advise against that. I could have 5 dogs if i want and i don't have to pay pet rent or deposit. Lol i don't need an apt parking sticker or i get towed.
The only thing good about renting is you can easily leave at end of lease and you don't have to worry about maintenance issues. But when you leave, you leave with nothing. When you own, you pay mortgage, which here is cheaper than rent, and you can leave with over $50k in 5 years. The only thing better than owning is renting a room for $400 a month. Lol
Jamal McLovin and when you get old most people downsize to condo, or senior independent living(an apartment essentially).
And houses can lose value. And if you buy, you can end up in negative equity which means you will not be able to sell...
@Tonē P. Nice That's where equity comes in. What you pay into your house is your equity. So when you go to sell your home, you essentially get back what you paid into it, plus even more as equity is the market value of the home minus your outstanding balance, which means as the property value increases over time, that's just free money for you. And with your equity, you can use what you paid into your home plus the extra money made from the property value increase to buy another home. Houses can lose value but it's not really that common if you have insurance and maintain it.
Currently in London it's cheaper to buy than rent. My house is a home and is not a savings plan!
The error in the video, at least with most of the US is that a mortgage payment is far cheaper than a rent payment.
Hi - I disagree that it's an error. As I discuss in the video it really depends on your exact situation. I'd argue that most people that live in major cities (NY, LA, Chicago, TO, Vancouver etc come to mind) it's frequently more cost effective to rent. As well there are significant transaction costs associated with buying/selling a house that I don't think enough people pay attention to. But what the biggest focus of this video was about - was lifestyle inflation and becoming aware of it. Many people when they buy a new home, feel compelled to buy new furniture, cars, clothing etc and upgrade every aspect of their lives. I'm not even saying there is anything wrong with it - but I wish more people were conscious of this. If they were, I think a fair number would opt to defer that gratification. Hope that clears up my perspective on the subject. Thanks for watching!
That's not true at all once you factor in all the fees that go along with a mortgage.
Often renting is not renting out a full house on your own, it is an apartment and in cities where the biggest cost is the land not the building it is cheaper to rent because you are splitting the cost of the land with the people living above and below you. I live in a nice part of Baltimore MD and for $12000 a year I can rent a single bedroom apartment but if I were to buy, the cheapest properties in the area pay about $7000 per year in taxes alone.
Doesn't buying a house really (besides being a "forced savings account") kind of mean renting to yourself though? You pay less than you would in renting, build equity you can borrow against then reinvest, etc.?
Barring those who live in big cities where land is a premium/you split the land cost with those who live above & below you, etc.
Piano this is Absolutely false! Renting out a property is an INCOME generator. Buying a personal residence is not. mortgage, upkeep, Taxes without any income generated by the property.
I never understood why someone would call their HOME an investment. How is it an investment if you're living there? How are you making money? Are you planning on homelessness later? Are you planning on moving and purchasing another house? Makes no sense.
True! My house is 100% sentimental.. I want to raise my kids and pass it on to them someday. I can leverage it at some point which would be helpful business wise but as a straight up investment it isn't the wisest. Would never trade it though for the quality of life we get from it.
Appreciate you sharing your perspective!
The key is being conscious of your consumption - and sounds like you've weighed the quantitative and qualitative factors and determined what's best for you and your family - love it!
Great job on this. Very well thought out. I hate when people ask why we rent when a mortgage is "cheaper". There's so much more to it than that!
Thanks Kristina!
In my city, the same 3bed/2bath house would mortgage for $900 or rent for $1500. We bought a fixer upper 3 years ago and now have $100k equity.
I'll take the equity and the house, versus if we rented, spend almost double, own nothing, have spent more on rent, and have no equity or asset at all.
how much have you spent on maintenance? How much have you paid in property taxes? How much extra was added on in legal fees and escrow fees? YOUR SITUATION IS NOT THE NORM.
@@KTSpeedruns exactly, with renting you pay none of those fees. smh
I bought my house 12 years ago for 170k and today it's worth 370k I personally think it's the best choice I've ever made. Granted I bought in a down market but it was a good choice
@@KTSpeedruns I pay 2200 a year in property tax, maintenance is probably 50 bucks a month. My house payment is 850 a month. To rent a house my size is 2200 a month so you're argument isn't very good
I loved this video! I bought one of those homes and am looking at ways to defray costs now. I personally find that you should never look at your principal residence as an investment. I bought and paid off my first home in 3 years. This one, I expect to in 5-years. I am renting out a room in a month and love the idea of having a roommate. I appreciate that you had that section in the end!
That's awesome! and sounds like you've got a solid strategy in place! Good luck with your Real Estate Investing Journey!
For me, buying is the way to go for sure here in the UK. My rent is around £500 a month and increasing yearly. If I bought this very property and got a 25-year mortgage my monthly costs would be £250 so saving me £250 a month. If I put that £250 into the S&P500 and got 8% over those 25 years then at the end I end up with £239,341.64, a flat, and no more rent/mortgage costs.
Realistically I probably won't stay here that long but also plan to pay it off much faster and then rent it out as it a highly desirable area for renters in the city centre. Obviously, it is all speculative but it does stand that around most of the UK mortgages are a lot cheaper than rent.
All that said, my goal is to buy my current place (or similar) and have it as my start to building up a property portfolio till I eventually no longer need to work my current job.
Does sound like a nice idea mate but that 250 quid you are putting in the sap500 shouldn't really be touched for at least 10 years if you expect to make gains on it so what would happen if your roof all of a sudden started leaking or you needed emergency repairs to the house which cost thousands, there is all pros and cons
Mortgages have a fixed rate for a short period of time so after that ends your mortgage payments are likely to go up too. You also have to factor in the deposit for buying which can be invested as a renter on top of the investing that the renter will be doing during their working years. It all depends on the individual and their financial goals but to believe that renting is always worse only comes from people who haven't run their own numbers
“Try to control your life style inflation “ - one of the best financial pieces of advice I have heard. Thanks for sharing.
Renting is peace of mind. A thirty year mortgage? How do you even know you'll be alive in the next 7 days? It's a banking scam.
Interesting perspective - I appreciate you sharing it!
And people fall for the scam year after year. "It's the American dream!".
How is renting a peace of mind when your rent can be increased at any moment and you can be evicted at any moment? I'm starting to think a lot of these people making the rent arguments never actually rented before.
@@christianjames9667 .....You can move to a different apartment or go and live with someone else. With a house, if you can't make the payments, you cannot just move. You are deeply obligated to continue paying with serious legal consequences if you don't pay. That's why home owners are always so stressed and are slaves to their jobs.
Again rent doesn't work like that. Trust me I rented for years before I owned my own house. As property values go up, so does rent. So if my landlord raises my rent then that means other landlords are raising their rent in my city. We call that in Florida, especially south FL, seasons. Many people constantly have to move out of their cities and further away from work because of this. Again renting makes sense for a particular type of person that's not into a fixed occupation. For the majority of people buying makes more sense.
Again this argument makes no sense. If you don't pay for your rent then guess what your credit becomes shit and you can't get another place worth a damn for years. This idea that friends and family are just going to open their homes to you when you can't pay rent is also a very simplistic view. If you're comparing apples to apples to owning then your example is actually worse. Because if I can't afford my home anymore I could have equity into that house. So if my house was 150k when I bought it and now it's worth 225k I can profit close to 50k+ if I sell it and downsize for a different house. Can't do that when renting because you have zero equity.
Of course everybody is different. Example, my sister owns several houses but she cannot afford to live in one of those herself, I don't call that being affluent, nor having a choice because her mindset it completely different to mine, she is afraid of the future.
Me, I've owned houses but for the last 8 years I've been renting in *shared* houses. I love it. My rent is dead cheap and I don't have to worry about a thing PLUS I can move when I want, which I one day plan to do.
The mere thought of buying a house and living in it for 30 years honestly does not appeal to me but one day I'd like my own place, in the last 10-20 years of my life.
An average 3 bedroom home in Vancouver was selling for $3,000,000. It’s very similar to what I rent for $925 per month heat included in another part of Canada. The mortgage will be $14,000 per month for 25 years. The property tax will be around $2000 per month. Then heat, insurance and upkeep. So roughly $18,000 per month for 25 years then $4000 for life for taxes, heat and maintenance. I think of this whenever an agent tells me I’m an idiot to rent, and they have.
100% agree that your situation/market really dictates what’s best solution
That $3,000,000 could buy 30 Corvettes.
So what is your rent going to cost in ten years
Yeah, buying is worse. IF....
- you move to an expensive neighbourhood
- buy a new car
- get a whole new expensive wardrobe
- change your entire lifestyle
Renting is better if you religiously save all your money and invest it wisely.
Seems legit.
Love it when people watch the video rather than jump to conclusions!
I've not got all day to watch 100% of every video, *just in case there's a twist ending* ffs
The problem is we're not taught how money works. So we borrow and rent which gets us nowhere in the long run..
For me, the only reason I want to buy - & it trumps all other reasons for renting & buying - is so that when I'm old I can't get kicked out of my house. In Australia, rental instability is a huge & stressful issue. People can spend 6 months in a property & get told the owner wants it back, sometimes two or more times in a row. So expensive to continuously move, & of course stressful. We can never ever know we are in a rental for longer than any one lease term. It's worth all the extra money to have your own home you can't get kicked out of. Especially as we age. I never ever see this addressed in any texts on ERE or investment etc.
A HOUSE IS NOT AN ASSET !!! its a liability
I agree that a non income producing property is rarely an assets/investment
Eril McNamara renting is a liability too. It doesn’t put money in your pocket either. 😝 Just have assets pay off your mortgage or rent.
You should only buy a house if you want to stay in ONE area for at least 7 years. If not, then renting is a way to go for flexibility.
Or you can buy then if you decide to move years later, rent it out.
As a landlord, I think this is super advice. I love when others pay down my mortgages. As a homeowner, not so much. I love being able to write off mortgage interest on my taxes, build equity and own assets (yes when you go to sell it, it is an asset). While renting vs owning certainly depends on your unique situation and preferences, its a bad idea to make a sweeping generalization that buying a house is a bad idea.
I think advising people to save or invest any money they would save renting is good advice on the outset, but let's be real, most people are not that disciplined. More than likely they will spend any extra money they 'save' and be dependent on government assistance to help them pay the rent when (if) they retire. Also not all investments are safe, remember the stock market crash in 2008 when everyone lost most of their supposedly "safe" IRA's?
Yeah that's my issue with renting. You're essentially just paying off someone else's mortgage. I mean I get the convenience factor for people who maybe want to be able to move on a dime, but owning seems to generally be the better option as the money you pay into your home comes back to you. And a lot of these arguments in the video seem to be based on assuming renting is cheaper, which of course isn't always the case.
Real estate has been one of the safest and most lucrative asset classes in history. IMO it should be in everyone's portfolio ..... you can always rent it out and then live somewhere else that better suits your needs.
can't *always* rent it out
real estate is a great investment for people who cannot handle stock market volatility. Infact an index like Vanguard will give you far better returns than real estate.
@@rockwithyou2006 the difference is if you have 15k to put on a 300k house vs putting 15k in the market is that if you get 5% in the market that 15k would now be 15750. But if the house goes up 5% your house is now worth 315k. Just saying. Stocks will start to be more worth it if you have a few hundred thousand invested.
What about house hacking!? Buying a duplex, living in one half and renting out the other half.... the best of both worlds
100% - House Hacking is the BEST! I'm constantly talking about it on my channel - for this video I just wanted to mainly focus on the downsides - as sooo much of my channel discusses the benefits of real estate. (Alternatively you can always rent hack to vs house hacking)
Awesome! I will have to check out the rest of your videos. Love how you get to the point and have a good sense of humor keep it up
You screen the daylights out of em before you ever rent to them . If they do start to be a pain in the ass you don't renew their lease or raise their rent forcing them to move .
IMO this is the only way to buy, If possible go for 4 units with a lot where you can add another unit in the back. It reduces your risk, you get paid to leave/reduce risk (rent the unit your living in), you learn how to invest with training wheels, and you essentially leave the rat race bc if you lose your job, you don’t lose your home because someone else is paying for your mortgage.
xr7fan you’re at the property, you will make sure things go your way. The easiest management is when you live there. When you live off site is when you need good managers to be your eyes and ears or you do “onsite visits”
There are a million advantages to owning a home compared to renting. The obvious and biggest advantage is that I own equity in that house. If you're smart and you have a good real estate agent with you then you can buy a house for a good deal and then not even a year later that house's value could skyrocket. I bought my house for 150k 2 years ago and now if I really wanted to sell I could profit nearly 60k on my initial investment. So that means I could buy another house after selling this one and still have money to play around with.
second advantage is that I control my own destiny with my own house. My mortgage will never go up or go down. I don't have a landlord telling me what to do and I don't live with the anxiety of potentially having to leave that residence at any given moment. Anyone that has rented knows how much rent can skyrocket on a year to year basis and they know landlords will not hesitate to raise rent at any given moment.
The people that advocate renting over buying are usually people who also advocate investing as a career. If you own and are renting 3, 4, 5+ properties then yeah it makes sense to rent and keep all your equity into the houses you're renting out. But for normal everyday folks buying a house and securely knowing that your mortgage payments are going towards making sure you own your house in 15 or 20 years is priceless.
What if u rent out rooms/basement to give u additional income?
I'm 29 and looking at possibly buying a house instead of just getting an apartment. After watching this I think it would be best if I just got my career on track first :(
Take my advice.
1. Get your career secured.
2. Buy a small house 5% down.
3. Put a good percentage of your income into the stock market consistently every month.
I just recently got interested in investing into real estate, and I have been bingeing on Graham's videos. I just found your channel and Im excited to continue bingeing more vids! As a recent college grad with low debt, I make about 60k pre tax. I live with my parents, and so no rent. No car payments, no kids or gf. I could probably save 30k per year once I pay off my student and credit card debt, which should be less than a year due to my new income. My goal is to be able to retire young from a full time job and be self employed. I am soon to be 24, I hope I can secure a financial future for myself by the time I'm in my mid 30s. You guys are my motivation! Thank you!
Miss your property tax payments and see how much you own your home.
haha - true
Miss paying your rent. See what happens. What's your point?
Got 3 yrs to pay property taxes before it goes to auction
Jc Galang Government is the landlord whether you own or rent, for life.
Ice Fishing Three years of unpaid taxes would likely be $10,000 easy. Repaying that would be very hard to avoid auction.
Maybe in the US or Canada its better to rent.
not the case in UK and Australia if you can afford the loan definitely better to buy property.
In my opinion renting and investing in shares instead of a house is just way to risky.
Thank you for the video esp. for summarizing a large concept in a couple of words "Lifestyle Inflation". I was aware of the idea but it was hard to convey to people without rambling. Now I can say "Lifestyle Inflation" and get the gist across real fast.
Depends ... I bought my house when the market crashed back then I paid 92k for brand new home now it's worth 195k and I currently owe 61k on it so you do the math it'sgood to buy when the market crash
Great points here. It's definitely more worth it to rent in cities with grossly inflated home prices like Toronto and Vancouver while saving up to invest in income properties in cities more reasonably priced like London and Windsor!
Yeah, frequently in major metros Like GTA or Vancouver - the Landlord is actually subsidizing their tenants rent. (LL loosing money every month - just hoping that their asset appreciates) - In that case it's almost impossible to argue against renting. (Now this isn't true city wide, but certainly in certain neighbourhoods/buildings). Thanks KJ for commenting!
kj 90 I bought a condo in Metro Vancouver in 2015. I decided to move at the end of the year and I sold my condo for a net 31% gain. After that sale I bought a condo in Toronto in Oct 2016 and after five months my investment is up 35%. So renting in both cases would've been major missed opportunities.
@@CanadianRealEstateChannel I'm in Victoria. With the rents so sky high, it's looking like it's cheaper to buy than rent now. Limited stock, and incredible demand means a vacancy rate under 0.3% officially. And with the new builds, it appears that renting is an endless loss versus the gain of passing of a mortgage and almost undeniable value increase over time in the underlying asset. What's your take Matt?
paying mortgage interest stinks but your mortgage will stay the same while your rent will increase every year for the rest of your life. I think the key thing is to purchase a property which you can actually afford. that doesn't mean max out your disposable income, but what can you afford and comfortably save for retirement.
There are positive and negatives to owning a house and renting. It also depends on whether renting is cheaper or more expensive for the same size house. At the moment owning a very cheap, I can get a three bed house for £900 per month mortgage and crappy one bedroom flat to rent for £900 a month. If the deposit can be afforded at 5% then it makes sense to buy.
What I might do is get lodgers and then eventually buy a second house and put the first one on rent and then repeat that process. Eventually when I earn enough, then i can rent a property that I would not want to buy but comes with additional benefits like a gym and pool and so on.
Buying limits your mobility for opportunities elsewhere..That's what I'm unwilling to give away very easily..
With the red hot property market fueling property prices ... its an amazing retirement plan. There are people are around Toronto who will clear 2 million CAD by selling when their principal residences when they retire and downsize.
Another point of view I’ve heard of is that 20% of your home, (your deposit) you lose forever whilst owning because even if you sell and buy again, another new 20% deposit is always locked up in the house to avoid mortgage lenders insurance. So a home could be a good investment but some of the money in it can’t really be used to leverage your financial position
When you no longer have a mortgage and your house is paid off it still really is not. You still have property taxes, home insurance, maintenance, and bullshit HOA fees and other things I am failing to think about.
But rent goes up, and a house payment can be fixed in place.
Exactly.
Property taxes every year for life. If you don’t pay they take your house. Either way they have u
@@minimalist_monk dont forget home imsurance.
Fixed for 2 or 5 years. Then it might skyrocket!
Also house maintenance/repairs.
There's a dynamic being missed here - the average price for a house bought 75 years ago was something like 2x income. Now, it's what...7? 10?
It probably didn't cost a lot more to purchase a home back then than it did to rent, but was rather a matter of qualifying for a loan.
If you can tolerate having a smaller space, renting and investing the difference is definitely cheaper in most markets. I can burn things in my back yard and sit in it without anyone else in there (house less than 2x income - long ago paid off - long before 40). It's not so much renting that's such savings, it's having the discipline if you're going to buy to buy something that's not ridiculous - follow the 50s rule - 2x income. If you think you're better than a 2x income house, then you'll pay the consequences.
If you're somewhere like san fran or vancouver, then I have no advice other than to move somewhere else, no matter how cool those cities are.
The home I bought in 1993 for $70k was over $20k more than my income and I paid it off in 9 years.
I was prequalified for $150k mortgage.
The beach home I bought in 2009 for $260k was twice my salary and I paid cash.
Only difference between myself and others is I bought a home I could afford,lived within means,stay out of debt.no new cars or “stuff” to keep up with the Joneses or upgraded to larger home. No divorce, too many kids,or family disruptions.
In other words I didn’t trade houses,spouses, and cars among other things the past 30 years.
Right now I can go on Zillow and find a home I like as low as $60k and less than $200k on my $120k-$160k/yr salary.
My coworkers (even though we make the same salary) will buy a $200k-$400k home and later complain about affordability.
I don’t like burning trash and whatnot around the home prefer secure gated community. Can sit in my private patio with no one there.
I make 75k a year and i just bought a house for 265k. A little over 3times income. Thats the bottom ofthe market in my area. I will be fine. Im considering renting a room out to a friend. And when i get married eventually we will be on 2 incomes so probably about 120k a year. Im sure it will.be fine.
What differences on taxes when selling a principle residence versus rent a home and sell a property?
The house is a highly leveraged investment whereas your stock investments are not so it is likely the leveraged investment will give you greater ROI (albeit with greater risk) but the fact that you have the house to live in offsets some of the risk
Price to rent ratio formula will tell you if is better to rent or buy.....example 100000 divided by the yearly rent 12000 equals 8.33 what these means be good to buy. If number is above 15 or 16 rent is better.
Fixed exp renting no capital expense owning.
Smart tip!
Great Tip Jeff.
Jeff, care to discuss a bit? I'm looking at a unit costing 420k after all initial costs. To rent such a unit would be minimum 1300, up to 1500 a month. Both figures cover the mortgage amount. Seems that to rent is wasting cash, buying seems to have capital appreciation in it's side. Moreover, rental units are such a rare gem that the competition for them usually includes people offering more than the asking rental price. Care to discuss your numbers?
I think your argument makes sense if: a) you're a disciplined investor, b) flexibility is important to you.
I would argue that the vast majority of people are not disciplined investors - they don't look at the theoretical savings they have each month from renting - they just see extra cash in their bank account and they go out and spend it. That's why the forced savings of owning a home is so important for the majority of people.
And I would also argue that the vast majority of people (especially as you get older) prefer stability vs flexibility. Being close to family (ex.elderly parents) or living in a good school district is more important to people than being able to jump from one city to another city for a new job or opportunity.
I don't think you mentioned the benefit of the capital gains exemption (In Canada) - the fact that you can sell your home and not incur capital gains tax is such an important factor to consider when buying a house.
I sold my personal home a year ago because I knew it was a negative cash flow of over $10K/yr even with a legal apartment in it & the property had doubled in value in the 10 years I owned it.....I divorced my mortgage & took the money to private lend. The returns from the money I lent out from my house more than pays my rent....and I never spent any of the principal. I realized not only my personal property was costing me but that it would not give me the returns of other opportunities. I found that if I occupied the property I was the biggest expense.
does this make sense guys,
purchasing a rental property while renting yourself a much cheaper cost. Then save for another down payment and use that asset to show the bank you can take afford another property and continue the cycle?
This only presents the scenario where one recurs to mortgages to buy a house. If you have 100% capital it is always a good choice to buy. That will save a tonne of money you would have to spend on rents. And if you find another job oportunity elsewhere, nothing more easy than rent your house to somebody else and earn the passive income. The trick to it is to find a reliable house with few issues. Besides renting is NOT hassle free, at any given time the landlord may increase your rent, kick you out (simply by not renovating the contract) and there it is, more time and money spent on a new renting house that will never be yours and your kids.
I am looking into buying a house. 140k house will cost almost 150-250% more than the apartment my family is living in right now! We don't need a house and I wish we didn't start looking at houses.
We'd could literally but 60-80 inch TV's every month if we continued to live at our apartment instead of buying a house.
And this doesn't include the headache of shoveling or mowing every weekend.
This would be a very bad idea here in the UK, to rent even a small crappy one bedroom in London is so expensive. I saved a years money and put a down payment on a house, my mortgage payments are far less than what my rent would be. Also houses are going up faster than inflation, I also rent out two of the rooms. At the end of it I'll have a £1000000 home paid for by mainly my tenants. It's an interesting video, but on the whole buying is by far better than renting. I made a lot of money just by the price going up in value in the 5 years I've owned it.
Hi Scott, as I touch upon - a lot of it comes down to the exact situation/location. Sounds like owning (and house hacking) has worked out great for you! Thanks for watching & commenting!
BUYING a home in 2008 got me out of student loan debt in 2016 !!!! PRAISE GOD !!!!!!!!!!!!!!!DEBT FREEEEEEEEEEEEEE!
I'm so glad to hear that buying your home had such a positive impact on you! - How did owning a home in 2008 get you to debt free? (Did you house hack, substantial appreciation?) Either way - thank you for sharing your experience - I know all the lurkers in the comments appreciate it!
TheGood Samaritan During the bubble burst maybe ? ;)
Am I the only one who watches Matt's (And Graham :D:P) videos once w/o interruption then re-watches it diligently while taking notes to then subsequently research concepts or terms discussed in the video - To then watch it a 3rd time with full understanding :D?
This channel is so detached from reality. The mentality and goals described on your many videos are what drives the increasing untenability of these 'investments' for most people that just need to live somewhere and don't want rent. Good job.
Depends a lot on where you live. In CT it's a horrible investment. A house in my neighborhood was purchased in 2006 for $490K. It sold last year for $350K. In Ct that is not unusual.
I'm paying $870.00 a month to rent in Jacksonville, FL. I'm also paying $10.00 per pet (2) and all together I'm paying $890.00 a month in rent. I'm retiring next year and I don't think that this will go down unless one of my dogs dies.
Ok what about buying a cash flow property like a duplex or triplex and living one one of the units while renting the others versus renting.
Absolutely! I love that strategy and recommend it all the time. I plan on doing a whole series on various house hacking ideas and approaches
In my CURRENT situation. Buying makes more sense. I can buy the same size house I live in now, and pay half the payment and that includes insurance. Now, later on, when I get a little more stable. I will probably swap this because i plan on buying about 20 units.
Thanks for sharing your perspective Bair! - Determining the right answer to the buy vs rent is so situational - glad to hear if you taken the time to figure out what's best for you!
It only depends on how good you are at investing. If you can invest your capital to get 10-15% it is definitely better financially to rent. if you can hardly beat inflation, it's better to pay mortgage and property tax than rent. This assumes you have no intention to move and you have no need to be flexible.
When I look back at this, the quality in your videos has really improved.. keep at it Matt.
Thanks Keith!
Thing with 30 yr mortgage is your paying almost double of the home price. And upkeep and taxes.
Id say buying your own solar powered RV complete with a bathroom, kitchen, living room, and washer/dryer is better than buying a house or paying for a house/apartment rent which will cost you a lifetime since you will be totally out of rent to pay.. Not a lot of people are rich like bill gates and purchasing myself my very first RV is better especially for a single guy like me..
I love the idea of an off grid RV or camper van. I'm sure at one or various points in my life I'll own one. Thanks for watching & commenting!
Hey no problem..
When you rent, you never see this money back, houndreds of dollars month after month. When you buy, you loose a few thousands with repairs and fee, but every single rend goes straight back into your pockets. Plus, the value your property will take over the years, will cover the reparstions and the fees
Hi Matt,
First of all, great UA-cam channel. I really like the Canadian content and the great information you’re providing to individuals such as me, who have question regarding investment strategies. I’ll try to keep my question as brief as possible.
Background:
My dad and uncles were/are contractors, and growing up I benefitted from learning from their wisdom through the years, and have developed a solid competence renovating homes. In the last 15 years I’ve bought 3 houses in which I’ve lived in while renovating each of the properties. So basically, a buy and renovated situation every 5 years, and selling for a suitable profit. I’m at a bit of a crossroads now in deciding what to do next, I’ve educated myself with the “BRRRR” method and I would like to perhaps like to create a cash stream through the BRRRR method. Ultimately, I would like to in approximately 10 -15 years have enough cash flow in order to quit my 9 to 5 job. I’m currently working with $450K in capital, own my condo (so no mortgage). I’m interested in your input, how would you get started in this situation? Should I buy a multiplex out right and rent in out with my own money, or do I borrow?
Thanks for your time,
Regards,
All these fees. All that property tax, and as the house appreciates that income tax will increase someone I watched said 3,000 in one year. The person had to appeal and in the meantime had to pay the taxes. And the accesors office had 9 months to repay the overcharge if the appeal was in homeowners favor if not ur assed out. Too much bs for my $$. Repairs are on you also. I rather pay the security deposit and rent the taxes alone almost covers 5 months of my rent for a year.
Great points! Thanks for commenting and sharing your perspective!
Tallal Labanieh
You have to be able to afford to buy a home.
If you can't don't buy one
@@blackworldtraveler3711 Its not about affording its about the expensive headache that comes with buying a house
Ms. L A
The guy above is complaining about all the fees,taxes, increases involved,repair costs, and compares rent and security deposit to taxes.
My annual personal property tax of primary home is $1700/yr in an upper middle class gated condo community/zip code which is less than 3 days take home pay and have homestead exemption. Paid off my 30yr mortgage in 9 years and since I have no debt my total living expenses are $900/mo. while everyone around me paying more than $1500/mo. on just rent/mortgage alone.
Also beach condo on Marco Island and rental apartment in Rome both paid with cash.
No headaches.
Heck I’ve been taking off 3-4 months each year without pay on top of my 5 years paid vacation since 2009.
And I just retired 15 years early still with zero debt.
If you can’t afford a home don’t buy..
The "quality of life" and square footage arguement is only true for so long. Leverage provides a three bedroom two bathroom house in a suburb for 100k upfront, where 100k assuming 9% in annual dividends and capital appreciation covers the cost of rent of a studio or a one bedroom. However, people who advocate buying (100% true to your argument) never ever factor in the cost of maintaining the home. What I mean is, they assume you never add to that investment portfolio of stocks bonds or ETFs. Ultimately, the value of your stock portfolio should be able to cover your living expenses however you want to live and you wont ever encounter any unexpected costs.
My coworkers advocate buying homes but tote the benefits of the pension we make contributions to. I laugh and let them feel this way while knowing they value an instrument they dont understand as a better investment at the end of the day
I agree with you for a young single person, or a family that will likely move to follow employment, but what about the family of 4/5 with stable jobs who do not plan on following the next job offer around the country? who plan on paying the loan off in 10 - 15 years? Would you recommend that family rent?
Great content. Thx a bunch!
Renters, if they invest the cash differential will have tens of thousands in the bank. The homeowner with similar income will own his house with nowhere near the cash the renter will have.
Thanks for watching!
Completely disagree. In retirement paying rent is just stupid.
I own a one family house with a lot of room indoor and outdoor. This offers a lot of opportunities to save time and money and put things into effect. I understand that this is hard to grasp for completely finantially focused folks.
Another overlooked point is cap X expenses are always happening. Single family house will cost more then renting do to this fact. Roof furnace water heater all have life use left and need to replace....avg monthly cap X 195 month needs to be invested in index fund and used as needed. To cover it.....buy duplex and receive the payment from tenant. At least it offsets the expenses. Or condo assoc pretty much same as cap X. For cost monthly
Owning is slightly more expensive month to month then renting if you budget and include maitenance. But owning means a good chunk of your mortgage is not lost and instead invested in your asset of a house. And the property should appreciate overall over time. And buying locks in your mortgage. The longer you pay it the more goes to principle, and the price stays the same. Renting continues to go up. If renting properties was a money losing game why does anyone have rental properties?
Easy version is, owning is good if you can afford it. If you are living paycheck to paycheck then rent, you will regret buying. Owning is for wealthy people who don't bat an eye at spending $10,000 on a roof.
In my situation I have a bungalow with upstairs rental. Mortgage is $1000, I am renting the upstairs for $1450. Rent income covers mortgage and bills. The only expenses left are insurance, property taxes, and maitenance. Let's budget $300 a month for maitenance, then all that is about $600 a month. the basement rents for $800 a month so I am already ahead. But the mortgage is paying down $700 a month in principle. So I live there for free and have $100 a month leftover in my pocket. I pay rent to myself in the form of equity. When the mortgage is paid off that money goes directly in my pocket every month. But I put 20% down and I put $15,000 into renovations. Broke ass people aren't going to be able to do that.
In the senarios that you mention it makes sense, it isn't always the case. If you enjoy your job and like where you live buying is better. Fast forward 5 years and your rent will go up hundreds of dollars but if you'd of bought your mortgage will be the same.
100% agree that it depends on the exact scenario, each person and city is different. So much of my UA-cam is focused on the positive of real estate ownership, that with this video, I wanted to focus on the other side of the argument. Thanks for watching & commenting!
Rent forever. When you get old just do a month to month rental. When you go landlord can rent it quicker
but you can own a home in 15yrs after College and not have to worry about paying overprice Rental Rates which can cause to much stress, you would never feel stationery, you become a gypsy, not healthy when having kids..
Can you refer to any studies that came to the conclusion that feeling ‘stationary’ is healthier for children?
1st of all Renting the same house is more expensive than owning it. If you rent and dont have renters insurance thats not very smart either.....Renters in general dont have the down payment or good credit i had 1 bad experience when i resold my house but my other 4 homes that I lived in I made money. I made over $300,000 in 3 years from 2002-2005. the house I lost money on if I had just stayed there a little longer would have made me $150,000. my current home is an older downsized home. that I bought almost 4 years ago and Im about to make another $80,000 on that and move our of state... there is no comparison the best thing about renting is you can leave at the end of your lease. worst thing about renting is having an owner tell you that he is not renewing and you get an unplanned move. Apartments are no sure thing either they can really raise the rent and they will as soon as they know they can get more...causing unexpected costs in moving or just paying more. the last apt raised my rent $400 per mo. so I moved
So what I''m seeing here is a lot of the arguments against buying seem to be that you can reinvest all of your savings from not having a mortgage and just renting, but the thing is that's assuming renting is even cheaper than owning, which of course isn't always the case, and add on to that the fact that 100% of the money you put into rent never comes back to you. With buying, assuming everything generally goes right, you'll actually see that money you invested into your home actually come back into your pocket over time if and when you decide to sell it. So if you can get a decent mortgage, you're probably better off buying to be honest.
I bought a home in 93 for $70k paying it off in 9 years and a beach condo on Marco Island in 2008 paying $260k cash.
Both upper middle class areas.
Even though both are three times what I paid and worth totaling one million I bought them as my home not investment. I consider them liabilities even though my total living expenses for both are less than $2k a month.
I have close to 2 million just in retirement savings alone anyway.
The argument should be about living within means and staying out of debt which is the issue. Very few do this anymore and miss out on opportunity.
I can go on Zillow right now and find an affordable home to buy.starting at $60k in my area.
You can't say buying is a bad idea. It's all situational and is often better than renting
100% agree it's very situational, and that was the goal of this video - take a controversial position compared to common wisdom but then explain it's really situation driven. (But I do find society's 'general' wisdom usually is very pro house buying, at least in my area). Hope that helps clarify my position.
Good job Matt! I like the video.👍 All I want to say that if you renting, you are actually still paying all the property expenses were mentioned in the video (mortgages, taxes, cap expenses, vacancy, closing costs, insurance and etc, etc) for your landlord, plus some extra money for his profit. This is whole point to be a landlord. 😁
Thanks again for the video, Matt!
Good Video Matt! AGAIN! How do you keep coming up with such good content! ? Looking forward to more !
Thanks Jeff! Just in case anyone in the comments isn't aware - Jeff and I will be going LIVE on UA-cam this FRIDAY 5:30EST - This is your chance to ask us your questions on real estate, real estate agents, investing, money, financial independence etc.
Do you have any suggested reading material that you would recommend?
Hi Walter - check out this video for some book recommendations: ua-cam.com/video/H0Yb7Pe9X2M/v-deo.html
You guys ALWAYS get this wrong! Why? Because rental costs ALWAYS go up and mortgage costs ALWAYS go down, eventually to zero. 24 years down the line the rent could easily be 3 or 4 times higher than it is today whereas the mortgage payments (in real terms) will be a fraction of what they are today (due to inflation). Remember, landlords must pay their BTL mortgage payments (which are more expensive than residential mortgages), all repair costs, taxes and insurances AND make a profit on top. This is ALL charged to the tenant. Remember too, he who holds the gold makes the rules.
For us it was more feasible to buy than rent. I'm in Wisconsin and not a major city like Milwaukee where renting would have been a better option because to buy there is very expensive. What we paid in rent and utilities only went up about $100 and we have more room (family of 3 plus a dog). We went from 800 sf 2 bedroom 1bath apartment for $800 to a 1400 sf house for $900. Our rent only including water, we paid gas and electric and had to pay for our dog extra $30 plus rent for our 2 parking spots another $30 and a $100 pool fee, we lived there for 8 years so it must not have terribly expensive to us lol. There are probably some things I'm forgetting. In the end we moved because we just wanted more space for the kid and dog. I still feel we made a good decision. Like the video some good advise. Maybe when my daughter goes off to college we'll rent it out.
Thanks for sharing your story! Really appreciate it when people share their experiences like this. Love that you were willing to share with the audience your exact numbers! I’m sure a ton of lurkers appreciate it
I wholeheartedly disagree. Rent is usually 1% of the property cost per month, meaning that $900 in rent equates to a $90,000 mortgage that you're paying for someone else. You can get a $200,000 home at a mortgage of around the same cost per month for the next thirty years.
By the time you're ready to retire, that mortgage is practically paid off. That's another $1,000 that you don't need to worry about each month. Additionally, you get to keep the $340,000 you put into it in the form of equity. What's rent going to cost after thirty years? Probably at least two or three times as much as it is now, and you're stuck paying it for the rest of your life.
If you suck at budgeting and self-control, then renting may be a better option. If you're an independent adult and don't give in to society, owning seems to be a much better option.
I'm curious if you watched the entire video? Regardless I stand by the arguments laid out in this video. There is no blanket answer that can be applied to everyone, no one size fits all. Like everything in life (and stated in the video) it's situational. The biggest factors are: 1. your local real estate market. (I disagree with your assumption that rent is usually 1% of the property - in large metro markets that's blatantly false - NY, GTA, LA etc rarely meet the 1% rule and those properties are exceptions). 2. How long will you be staying in your current city/market flexible/fluid lifestyles are becoming more and more common and the ability to be flexible with your living situation can result in the ability to say yes to more opportunities. Transaction costs are significant (as a %), if you're only going to be in the city for a couple years. The best choice (in most situations) in my opinion is house hack if profitable, otherwise rent hack. (as stated frequently on my channel). Thanks for watching!
Matt McKeever I sure did watch the whole video.
Living Downtown San Diego and in the area around it, I can assure you that rent pretty closely matches the 1% rule. Rent is $2,000 on the cheap end and seems to average around $3,000 to $4,000 per month. Similar apartments go for around $350k to $450k. If I were to buy, my mortgage would cost me around $1,700 per month. Add any costs for maintenance and taxes and I'm maybe up to $2,000 per month.
Similarly, I can get a decent place thirty minutes from the city for $250k, which is about $1,000 to $1,200 per month. I can't rent for that cheap out here.
Also, you seem to be neglecting early termination fees. If I still have five months on my lease, but need to move, I'm stuck with thousands of dollars worth of early termination fees. I recently had to move about an hour away, and was almost slammed with an $8,000 termination fee, since I had nearly a year left on my lease.
So by renting, I'm either stuck in my place until I'm done paying rent, or I'm stuck with huge fees for moving early. What's the difference in that and finding a lessee or selling the house? At least I get some equity back if I sell it. Also, I don't know what it's like in Canada, but I haven't been able to find a place where I could sublet. All my leases had clauses against it, and I can definitely see why.
The biggest sticking point though is that I think you're looking at it from a very short term perspective. Now, I do agree that if you're young and still establishing yourself, you should rent. Once you've found your career and can park down somewhere, buying should be the way to go. You keep the equity, and there's a point in your life when you stop paying it.
I’m confused. If you have a mortgage you can refinance hence allowing to buy a rental property.
So I should buy and rent out?
Ps at 8:51 so I’m not done the video but this comes to mind.
Loved this video! Totally agree with everything you said
You're a living example of this type of advice - by adding your own apartment in your basement.
Thanks for another upload! What is the next topic?
What should he do ???
Hi Martin - These days I'm on a just in time inventory system for these videos (meaning I'm making them a day or two before - so I'm not even sure myself yet). But this Friday at 5:30 EST will be Jeff Wybo & My Live Show - Cashflow2Go
I have stocks and kryptos, and I own a house.
I don't want to miss any of these things
Bought a house, rented the upper unit and live in the basement. Rent is enough to pay my mortgage so I only pay property tax and insurance.
Buy is the best solution.
I've paid in 6 years of rent 75.000 Euro and got what... nothing.
I pay just to exist and sleep somewhere.
@Midousuji Akira Where I live a house in 200-250k, 500k is a villa. I don't need a villa
with 500k I can buy 3-4 apartments and rent them out.
This is so supid.. why buy when it's cheaper to rent... Well why rent if you can live in your car or mother's basement or in the woods etc.. it's a life style choice, a purchase.. not an investment..
I’ve always had a fantasy of following in Thoreau’s footsteps, or as they say on SNL ‘living in a van down by the river. Haha
For context this is a financial independence retire early and real estate investing channel.
Got a house paid for pay only about 300 in taxes every year I don't get how that's a bad idea composed of what for $500 600 a month just for rent in something
exactly, once its paid off, your left with utilities(if you choose to pay), food costs, insurance and two tax payments. with the money saved maintenance would be a breeze
If you have your house paid off yes. If not I don’t think so
moses272727272727272 I'm 26 home payed off
STEELCITY TV you are smart congrats. Only way to do it
That is because you live in a shithole...
Using a house as a savings account is stupid. That assumes you're planning to cash out, but if you do, you need to look for somewhere else to live. Plus, you have to pay to maintain your home. If it's not appreciating at a rate that covers the maintenance costs, you're not really making money. People also love to leave property taxes out of the equation.
If you want to maximize your personal situation, you better got on a freaking budget. Get out of debt and stay out of debt so you have more money to spend on yourself on each paycheck. Make investments on something other than real estate. Live below your means. Don't spend more just because you have more. Even if you do buy, don't buy more house than you need.
You cash out when you're older and rent something that's fully maintained. bam, you got your money back totally and can use it for rent in your old age. Also, if you're renting at the VERY least you're paying for the taxes and insurance on the rental. You're not getting a rental that isn't covering those totally, and 99% of the time will cover those and a good portion of the mortgage the owner has. Unless you think landlords are taking giant loses for you.
"Just remember a stranger is a friend you haven't met" that's the most Canadian thing I've heard all day.
...or a mugger, scammer, psycho,...
How about renting vs buying a house for a bargain price paying it in full (no mortgage)?
You are taking about single person or couple. What about family with kids who needs to go to school? What suggestions do you have
I'm going to be doing a whole video series on house hacking options and we'll dive into 6-12 various examples of alternatives, and I'l have a few specifically focused on families. Thanks for watching!
Matt McKeever I'll be also looking forward to this videos. Especially if you have a family and bought a house already but want to invest
How did you get your Moleskine to stay suspended on that giant glorious whiteboard? And where did you get that gorgeous whiteboard from, anyway!?
Thanks for watching! The Whiteboard I made (out of a sheet of metal and whiteboard paint, two cans of it). Metal cost about $100 for the sheet and $40 a can for the paint. So about $200 all in on it. But what I really like is, since it's metal I can use magnets, so I just have a couple strong magnets I put on the back of the moleskine and it hold it up there. (super handy for making these videos) or hanging clipboards etc etc.
Wow! Simplicity! Thanks for the reply.
If you own your home outright, you are saving X amount of what you would have spent on renting or on a mortgage. That is the same math as owning a rental property