Hey guys, forgot to ask you to press the Like button! But scroll up and do that... b/c it helps a ton! Also, the math isn't perfect in this video and I acknowledge that. If you are in a RENTING vs BUYING situation, I would definitely try to run the numbers yourself, try to figure out what appreciation rate and investing rate you can get, and try to factor in more phantom costs of ownership.... since I didn't in this video. This was one of the harder videos to make b/c it can go either way depending on your unique situation and its such a widely debated topic. Hope you enjoyed it regardless!
This video is disingenuous at best. Where is the investment of the difference between renting and buying? $1200 a month plus interest for 30 years is huge. Selling a house costs 7-10% of the price. This need to be noted. Taxes on investments are paid when sold and it would be ridiculous to sell all of the investment at once. Property taxes and rent tend to increase and this needs to be accounted for. And maintenance and insurance on an owner home. These kinds of videos are important tools to help people make smart decisions, yet this one is terribly misleading. The host is still a great money guy and his money philosophy is worthy or respect.
Realtors are the worst people to ask if you should rent or buy because they make money on people who end up buying. So, there’s already an inherent conflict of interest based on the monetary incentive they have to sell a home. Am I wrong about that? Also, great video! 👍
yeah I see your point for sure. in the future I'll try to bring on a "pro-renting" person who has been renting for 20-30+ years and ask them how they've fared. I know both of my realtor friends have rented for a long time in the past, and now they own homes... so there probably is some inherent leaning there toward buying, but they are looking out for the viewer based on the experiences they've seen with people that rent and try to go to the investing route. In my own experience, people that say they'll invest and people that actually invest -- there's a huge gap there haha so I think for most of the viewers buying is probably better than renting, it's kind of like why people say a 401k is good, because it forces people to save, even though I actually think having a 401k is not great if you are good with your own savings.
@@humphrey pro-renting people can be hard to find, though sometimes that dovetails with career advisers. For example, I used to be an academic scientist, and advisers would suggest not to buy until you’d ‘levelled up’ your career by doing a few international post docs. Just a thought!
@@humphrey Perhaps find financial advisors who are pro-buying vs pro-renting. Or at least, when you should buy. In 1998 Warren Buffet talked about the appreciation of homes vs, the market. But even if your home appreciates, that means the other houses in your neighborhood will appreciate as well. You will never get a better house unless you move to a cheaper area. I'm not antibuying per say but I don't really see how its an actual investment unless you have rental properties.
You are wrong in my opinion buying is 100% better because you lose no money if you rent you are just throwing money into someone else and gaining no asset
A better model would have taken all of the monthly costs of owning (mortgage principal, mortgage interest, property tax, homeowners insurance, maintenance costs, HOA dues) and compared it to the monthly costs of renting (rent payment. end of list.). On a monthly basis, the extra cash you have on hand from RENTING can be saved and invested (along with the cash you would've spent on a down payment). Base your model on these kinds of monthly contributions to a portfolio and you will see the financial benefit of renting.
Your method is incomplete. Calculate the cost of renting all the way until you die. A typical mortgage ends in 25 years while renters continue paying after that.
@@robocop581 I DO run this calculation well in to the future. In 25 years, the homeowner might own their home outright, which is fair. But the renter who has invested their extra money with discipline could still have a higher net worth. They could then sell their investments and buy the house next door with cash. Both are equal in terms of homeownership, but the renter/invester could easily have more cash leftover.
Last 2 people I would ask whether I would rent-buy would be 2 realtors. Cost of buying maybe, what the buying process is like etc - yes. In the end these are financial questions not real estate questions.
I liked both of them since they had rented for quite some time before buying a home (they are both homeowners), but I can see the issue here which is they're both realtors, perhaps I should have a long-term proponent of renting come on
In Florida, there are home Association costs, home insurance, flood insurance… There are a lot more costs to plan into that home buying budget to realistically compare against the cost of renting. The reality of climate change and living in coastal communities is not considered, only the appreciation since there is limited space… I feel this was basically a video promoting buying..
i see your point, i should have included more costs that I didn't think about like you said. I think it's hard to put a price on the climate change/coastal communities portion. That would be like trying to price in earthquakes/natural disasters/other intangibles that are hard to land on.
Equity built in a home isn’t passive income. It’s illiquid. This had so much to do with what your goal is. If you want to live in an area buy if you can afford. If you can’t or anticipate moving rent. Renting is insurance against uncertainty.
Honestly, the only reason not to buy a home is 1) it would consume too much of your income or 2) you expect to move. Most home vs. rent breakdowns have the home being worth it so long as you are there 5 years or more. Rent is the worst, I've given my landlord 48k dollars by the end of my lease (three years) - she is a nice lady, but I don't like BEING her passive income.
@@leborhal7450 I hear you. I rented an apt till i was 37. People said i was throwing my money away. However, it allowed me to be flexible to move around professionally and increase my income and savings. I went under contract and built a beautiful home I would never have been able to afford if I hadn't rented saved and waited.
Yes I live in Hawaii and to be honest it really depends. The problem is the risks of relying on your employer to provide you a steady salary to pay your monthly mortgage. If you don’t have additional streams of income to cover your mortgage then you can get into a lot of trouble if you end up on the chopping board of a layoff and unable to find a job timely to continue your mortgage payments. This could lead to a foreclosure and a loss of your home. With renting you can adapt more easily to your situation when times get tough since you are not as committed to it versus owning a home but your autonomy of living is limited to your landlord’s terms and if you fall in love with your place that you rent you can’t do anything if your landlord decides to sell the property and you are forced to move.
Great points! Another thing to keep in mind is when you rent, that’s typically the max you pay a month and when you buy, your mortgage is typically the minimum you pay a month (unexpected expenses or maintenance that a homeowner is liable for).
I'm sure it's been said a bunch in the comments already but you forgot to include dozens of tangible costs to owning a home that makes the renting/investing route a clear winner. Those tangibles include closing costs, loan interest, PMI, home insurance, disaster insurance, property taxes, home maintenance costs, yard care, water and garbage (which are usually included for renters), pest control, vandalism, HOA fees, security systems, HVAC costs, chimney and vent cleaning, snow and driveway shoveling, tree damage, and finally all the staging and repair costs when you're ready to sell, not to mention another round of fees to the real estate agent. There are also so many situations where climate change has ripped people's homes out of their hands, and will only get worse in the decades ahead, whether that be from wildfires, floods, hurricanes, tornadoes, mudslides, snow-caved roofs, insect infestations, mold colonies, sinkholes, beach erosion, etc. If you rent, you can just walk away and even sue! If you own, you're SOL. If all those ancillary costs are invested in a cross-between ETFs and crypto, you'll be the clear winner in retirement when you'll probably want to sell your home anyway and downsize (or move into senior living facility). If you really want to dip your feet in real estate without all the Karens telling you to take down your Halloween decorations or where you can and can't park on the street, then look into REITs.
Ongoing maintenance costs and taxes are annual costs that are not within the calculus for renting. Furthermore, as another commenter has said, equity is illiquid for a primary home, and is considered used asset. It might add onto someone’s net worth but I think the $ could be better served in the stock market. Definitely would like to see a pro renting perspective.
If fails to say it's not just getting a greater return in the stock market than you would from real estate for a mortgage not to be worth it you'd need a greater return that the appreciation of real-estate plus the money you are throwing away renting every month
Most Landlords earn a NET 3% to 15% from their rental properties. NET means all those maintenance and property taxes that you mentioned are paid by the tenant. Landlords are not in the business to lose money
I've been renting since 2014 in a suburb of Washington D.C. paying 1K a month for everything, including monthly cleaning. Stuff in the house breaks like the hot water heater, toilet, pipes burst and the landlord fixes it. You never really own a home if you still pay property taxes. If you can get an inexpensive rent, I think that's best unless you like doing handyman work plus mowing lawns, etc. because stuff breaks in a house.
There should be more houses in the city that you can rent out not everyone wants to live in a apartment or condo in the city . That’s what really makes me mad. I am looking for a house for rent and all I see are condos.
Buying is better than renting. Renting is good for flexibility, and that flexibility comes at a price. Your default position should be to buy. You should have a good reason to keep renting.
Really liked this video. I’m a soon to be college graduate and I’ve been thinking of buying property to then rent it out. This video really helped me understand the pros and cons of owning a property and not owning it 👍🏼.
What about a comparison between internment in stock market vs the price of real estate appreciation ( after subtracting all the cost over the years such as fixing, insurance...)
i think there are a lot of phantom costs to owning a home which in retrospect i should have tried to address more, those costs are hard to calculate over time, but i think the main point of the video i wanted to get across is that if you are in this situation you gotta run the numbers for yourself haha
I wish you talked more about lower priced housing. for example I can get a house in my area for 100k but it also wont go up enough in my area to making buying that price worth it.
I've been contemplating buying for years but never could get myself to do so. Being in a HCOL state and really believe that there can be greater returns for putting the capital elsewhere has been my main drivers for continuing to rent.
I feel you didn't address when things brake in the home or fixing thing in a home, plus maintenance on the house roof and outside property. Think it becomes even from renting and owning
The issue with renting is you're essentially paying off someone else's mortgage, however, buying a home isn't always easy either. Do your due diligence, research and understand the area and buy a home within your budget. It's a smarter long term investment and can provide you with a great start to your investing portfolio.
thanks for the comment 320. I did listen to a Ramit Sethi podcast the other day where he dispelled that "paying off someones mortgage" line of thinking everyone has - while renting you do *do that*, his point was that we have this thought of paying off someone elses mortgage as a bad thing, but we don't think about that same concept when we're eating a restaurant or at the movies. This was one of the harder videos to make b/c it can go either way and its such a widely debated topic. Also, I can tell by the comments already that some are just not happy with the math behind my particular version. Perhaps this video is too biased into home buying. I'll have to re-think my approach for future videos in light of this, also... yes it does require research & due diligence. Again, thanks for your comment - as always. I always see you on here
Having built houses I may be a bit biased but, if you are only go to be in that town for a year or two.. probably better to rent. 5 years better to buy. Inbetween.. kinda mixed.
It really depends on the situation and a lot of people I know who were able to build equity from there home were actually lucky breaks. Not everyone I know timed the market right and actually bought in when the housing market was hot and mortgage rates were higher.
I love the discussion but there's some points I would like to discuss that stood out to me. - Fixed term doesn't mean fixed term for 30 years. Let be honest here. - no one wants to live in Dallas. That's just a funny below the belt shot. Choosing somewhere like California would have been better because people want to be closer to these metropolitan cities that give more opportunity than Dallas would. - as a home owner, I feel that there has been many other points that are crucial that could have been added in both categories of renting or buying. - also if the realtor could give a source or explaination of how they got that number for renting in Dallas specifically, that would have been helpful for me. - personal opinion, since I live in New Westminster, but located within the metro Vancouver area, the houses are extremely expensive here. And this goes for other major cities or regions such as the greater Toronto area or Montreal. So examining these major metropolitan areas but in the states could have been better because that's where people want to move to. I feel that Dallas is the equivalent of living in Calgary or Edmonton, places that are cheaper but there's nothing there, no social life, nothing exciting and so forth. But thank you so much for the video, I swear I'm not trying to come of as a Karen but just trying to get a good conversation going :)
You are missing a bunch of things on the buying part. For real comparison you also need to include the buying and selling closing costs which can be many thousands of dollars. Second owning a house is not fixed cost - your taxes will go up and so will all the maintenance. I’m addition, the longer you live in that house the higher your maintenance because you will need new roof, new heat pump or boiler, new water heater, maybe new carpets and in order to sell the house depending on the economy at the time you will need to spend thousands of dollars to pain the house and do cosmetic repairs
I was told you should buy a house. Then rent it out. You'll have to rent a house yourself, but hopefully any spare money you have, tax returns, work bonuses, etc should be used to pay off your rental so when it's paid off, you move into YOUR paid off house. Or you can use the equity in that to buy another rental.
better to rent or buy? in California $1800 for a 1 bedroom?? or buy a 2 bedroom mobile home for $975 a month mortgage?? all these youtubers talking me out of buying a house but do yall factor in the people who live in California??
Right now I rent, waiting to buy a home. I think of it in a couple ways. Home buyers pay property tax, more on heating and A/C, probably a bit more on electricity (more stuff), pay for maintenance, pay for sewer and water, and have to upkeep the outside (time), home insurance > renter's insurance. I would never rent the same square footage of a house I'd buy. Do most people do that? My rent right now is $580, very inexpensive (I'm single). With property taxes around $300/month and with all the extras I mentioned, I'm kind of throwing away the same amount of money while also being able to save a lot of money.
good point you bring up. When you're renting, you're most likely renting a 1BR or Studio (if you're single), whereas when you go to buy a house, rarely do people buy a 1BR/1BA, they usually like to look for a 3/2 or 2/2 and those are just not always what you would rent.
My mom is a single parent of two kids (me and my sister) we live in a two bedroom apartment. I’ve been wanting to move for the longest time because sharing a room is annoying. We’ve been living here for around 10 years so we don’t have to pay nearly as much rent then the newer people who are living in the complex. My mom was looking for a 3 bedroom apartment but The rent is Triple the Amount then what she’s paying for. i was wondering if it would be better just living here longer and save up to get a house or just move and pay the $2000 amount difference. If so is there any programs that would help get a house for a single parent ?
Does that mean if you gained a 1.2 mil $ profit does that mean your $320,000 home is now a million dollar home? Does that mean buying homes in the future will be that expensive? How will people afford homes in the future?
with a mortgage, having a fixed monthly payment is huge like his buddy said. Since the biggest part of your living expense is the same, you gradually grow richer. Esp as your income increases
What about buying for those who have jobs that make 50k or less? Recommendations for lower down payments pr government programs for first time buyers? Renting in areas that don’t have houses in great condition require A fixer-upper loan which adds on fees as well as some other conditions that may increase the cost over a long period of time. I would like to see your input on some of these issues as well as what would be pros for renting in different markets
I've even heard of people who are relatively high earners and want flexibility but still want to own something and/or like real estate. Supposedly, they purchase investment properties in areas and properties that are very good for renting, and then they just rent something (to live) wherever they want.
A 7% per year increase in property value? That is way higher than it should be. Also I think there is something missing in general maintenance and the large repairs that definitely happen if you live in a home for 20-30 years
In China in tier one cities the housing prices has gone insane over the past 17 years. For the past 17 years buy is better than renting. My apartment of 960 square feet was bought for 96000 usd in 2004....now the market price for it is.....2.1 million.....in hindsight I wish I bought three apartments back in 2004 lol. Great video Humphrey!!!!!!!
In your analysis, you didn’t factor investing what you would have paid in a mortgage (imaginary mortgage - rent = extra money to be invested). You only looked at investing the down payment.
you are right, I think it would depend on your (mortgage - rent) difference. in the Dallas example, our mortgage was "cheaper" than rent so i didn't include it. If your mortgage was MORE expensive than rent (say 3000 mortgage and 2200 rent), you could invest that difference... but if rent and mortgage are the same, then I think we could only invest the down payment
Loved the video. I think you missed out the opportunity for leveraging your loan. 3% of 320k is more than 7% of a 60k deposit. You can always rent out your home if you decide to move too.
Anyone got any opinions on manufactured homes ? Buying a house isn’t possible atm and was thinking of buying a trailer instead. I have potential roommates to help pay the mortgage and everything. Maybe in the future I can be a late bloomer and finally be able to afford a house and rent out the manufactures home
This last year is a terrible year to compare the stock market and the housing market. In no way are they typical. The first guy also fails to mention that 2020 ended up being a pretty good year for the market any way.
Doesnt the credit score you have also effect how much the bank will loan you with your down-payment meaning if you have a credit score of 630 you won't get as nice of a house as someone with 750 so you won't get that appreciation
One of the reasons why renting appears to be cheaper than owning is because most people rent places that are smaller than what they would live in if they bought a residence. Most people will rent a one bedroom 700 sq ft condo but will tend to buy a 2-bedroom 1,200 sq ft condo or a house. Compare the cost of buying that same property you’re renting and you’ll find out easily if it’s better to own or rent.
Leverage is key. 1mm home with 20% down at a 3% interest rate and 5% appreciation is 2% gain or $20,000. Thats a 10% roi which goes up every year. Rent out a couple rooms and you’re looking at way more impressive returns. Personally I put minimal down on properties and keep my cash invested in the market leveraging in on margin during any pull backs trimming off margin as it recovers.
Great video as always and certainly a mix of stocks and real estate is an excellent idea and probably ideal. However, if I had to choose, stock almost always outperforms real estate (if you know what you're doing) even despite crashes and corrections... and is more of a passive income than managing real estate and definitely way more liquid.
I think thats a good point you bring up. In your estimation do you think most people can outperform the RE market, or does it take your set of skills/knowledge to be able to do well despite crashes and corrections?
A property can outperform a stock portfolio because of leverage. Go and ask your bank if they would lend you $850,000 to start a $1,000,000 stock portfolio. I can apply for a $850,000 loan for a house but not for a stock portfolio
Im 16 and i want to know real esate vocabulary i am learing personal finance for 2 years i was hesitating to ask pleas e reply or make video on it ..🔥🧡
I like renting because it's $595/month for a nice, updated place and if something breaks then I don't have to spend money or time fixing it. West Texas btw.
Thanks for helpful video Humphrey, I am just a bit not clear about how you got that ~2M after 30years of appreciation. Can you help me out, please? Thank you
Super dislike how you select a realtor to talk about renting... what about being house poor?? What if you're a single parent and lose your job, then lose the house that society influences you to buy??? That demographic and perspective is always ignored and that's sad. Not everyone is married or financially stable or have multiple streams of income... as a renter preferring to save before purchasing a house, truly disappointed...
Hey guys, forgot to ask you to press the Like button! But scroll up and do that... b/c it helps a ton! Also, the math isn't perfect in this video and I acknowledge that. If you are in a RENTING vs BUYING situation, I would definitely try to run the numbers yourself, try to figure out what appreciation rate and investing rate you can get, and try to factor in more phantom costs of ownership.... since I didn't in this video. This was one of the harder videos to make b/c it can go either way depending on your unique situation and its such a widely debated topic. Hope you enjoyed it regardless!
This video is disingenuous at best. Where is the investment of the difference between renting and buying? $1200 a month plus interest for 30 years is huge. Selling a house costs 7-10% of the price. This need to be noted. Taxes on investments are paid when sold and it would be ridiculous to sell all of the investment at once. Property taxes and rent tend to increase and this needs to be accounted for. And maintenance and insurance on an owner home. These kinds of videos are important tools to help people make smart decisions, yet this one is terribly misleading. The host is still a great money guy and his money philosophy is worthy or respect.
Realtors are the worst people to ask if you should rent or buy because they make money on people who end up buying. So, there’s already an inherent conflict of interest based on the monetary incentive they have to sell a home. Am I wrong about that? Also, great video! 👍
yeah I see your point for sure. in the future I'll try to bring on a "pro-renting" person who has been renting for 20-30+ years and ask them how they've fared. I know both of my realtor friends have rented for a long time in the past, and now they own homes... so there probably is some inherent leaning there toward buying, but they are looking out for the viewer based on the experiences they've seen with people that rent and try to go to the investing route. In my own experience, people that say they'll invest and people that actually invest -- there's a huge gap there haha so I think for most of the viewers buying is probably better than renting, it's kind of like why people say a 401k is good, because it forces people to save, even though I actually think having a 401k is not great if you are good with your own savings.
@@humphrey pro-renting people can be hard to find, though sometimes that dovetails with career advisers. For example, I used to be an academic scientist, and advisers would suggest not to buy until you’d ‘levelled up’ your career by doing a few international post docs. Just a thought!
@@humphrey Perhaps find financial advisors who are pro-buying vs pro-renting. Or at least, when you should buy. In 1998 Warren Buffet talked about the appreciation of homes vs, the market. But even if your home appreciates, that means the other houses in your neighborhood will appreciate as well. You will never get a better house unless you move to a cheaper area. I'm not antibuying per say but I don't really see how its an actual investment unless you have rental properties.
You are wrong in my opinion buying is 100% better because you lose no money if you rent you are just throwing money into someone else and gaining no asset
facts
A better model would have taken all of the monthly costs of owning (mortgage principal, mortgage interest, property tax, homeowners insurance, maintenance costs, HOA dues) and compared it to the monthly costs of renting (rent payment. end of list.).
On a monthly basis, the extra cash you have on hand from RENTING can be saved and invested (along with the cash you would've spent on a down payment). Base your model on these kinds of monthly contributions to a portfolio and you will see the financial benefit of renting.
Your method is incomplete. Calculate the cost of renting all the way until you die. A typical mortgage ends in 25 years while renters continue paying after that.
@@robocop581 I DO run this calculation well in to the future. In 25 years, the homeowner might own their home outright, which is fair. But the renter who has invested their extra money with discipline could still have a higher net worth. They could then sell their investments and buy the house next door with cash. Both are equal in terms of homeownership, but the renter/invester could easily have more cash leftover.
Last 2 people I would ask whether I would rent-buy would be 2 realtors. Cost of buying maybe, what the buying process is like etc - yes. In the end these are financial questions not real estate questions.
I liked both of them since they had rented for quite some time before buying a home (they are both homeowners), but I can see the issue here which is they're both realtors, perhaps I should have a long-term proponent of renting come on
In Florida, there are home Association costs, home insurance, flood insurance… There are a lot more costs to plan into that home buying budget to realistically compare against the cost of renting. The reality of climate change and living in coastal communities is not considered, only the appreciation since there is limited space… I feel this was basically a video promoting buying..
i see your point, i should have included more costs that I didn't think about like you said. I think it's hard to put a price on the climate change/coastal communities portion. That would be like trying to price in earthquakes/natural disasters/other intangibles that are hard to land on.
Equity built in a home isn’t passive income. It’s illiquid. This had so much to do with what your goal is. If you want to live in an area buy if you can afford. If you can’t or anticipate moving rent. Renting is insurance against uncertainty.
Good points
Honestly, the only reason not to buy a home is 1) it would consume too much of your income or 2) you expect to move. Most home vs. rent breakdowns have the home being worth it so long as you are there 5 years or more. Rent is the worst, I've given my landlord 48k dollars by the end of my lease (three years) - she is a nice lady, but I don't like BEING her passive income.
@@leborhal7450 I hear you. I rented an apt till i was 37. People said i was throwing my money away. However, it allowed me to be flexible to move around professionally and increase my income and savings. I went under contract and built a beautiful home I would never have been able to afford if I hadn't rented saved and waited.
Yes I live in Hawaii and to be honest it really depends. The problem is the risks of relying on your employer to provide you a steady salary to pay your monthly mortgage. If you don’t have additional streams of income to cover your mortgage then you can get into a lot of trouble if you end up on the chopping board of a layoff and unable to find a job timely to continue your mortgage payments. This could lead to a foreclosure and a loss of your home. With renting you can adapt more easily to your situation when times get tough since you are not as committed to it versus owning a home but your autonomy of living is limited to your landlord’s terms and if you fall in love with your place that you rent you can’t do anything if your landlord decides to sell the property and you are forced to move.
Great points!
Another thing to keep in mind is when you rent, that’s typically the max you pay a month and when you buy, your mortgage is typically the minimum you pay a month (unexpected expenses or maintenance that a homeowner is liable for).
this is such a great way to thinka bout it. you are definitely correct. Renting is the max you pay!
I'm sure it's been said a bunch in the comments already but you forgot to include dozens of tangible costs to owning a home that makes the renting/investing route a clear winner. Those tangibles include closing costs, loan interest, PMI, home insurance, disaster insurance, property taxes, home maintenance costs, yard care, water and garbage (which are usually included for renters), pest control, vandalism, HOA fees, security systems, HVAC costs, chimney and vent cleaning, snow and driveway shoveling, tree damage, and finally all the staging and repair costs when you're ready to sell, not to mention another round of fees to the real estate agent.
There are also so many situations where climate change has ripped people's homes out of their hands, and will only get worse in the decades ahead, whether that be from wildfires, floods, hurricanes, tornadoes, mudslides, snow-caved roofs, insect infestations, mold colonies, sinkholes, beach erosion, etc. If you rent, you can just walk away and even sue! If you own, you're SOL.
If all those ancillary costs are invested in a cross-between ETFs and crypto, you'll be the clear winner in retirement when you'll probably want to sell your home anyway and downsize (or move into senior living facility). If you really want to dip your feet in real estate without all the Karens telling you to take down your Halloween decorations or where you can and can't park on the street, then look into REITs.
Ongoing maintenance costs and taxes are annual costs that are not within the calculus for renting. Furthermore, as another commenter has said, equity is illiquid for a primary home, and is considered used asset. It might add onto someone’s net worth but I think the $ could be better served in the stock market.
Definitely would like to see a pro renting perspective.
If fails to say it's not just getting a greater return in the stock market than you would from real estate for a mortgage not to be worth it you'd need a greater return that the appreciation of real-estate plus the money you are throwing away renting every month
Most Landlords earn a NET 3% to 15% from their rental properties. NET means all those maintenance and property taxes that you mentioned are paid by the tenant. Landlords are not in the business to lose money
I've been renting since 2014 in a suburb of Washington D.C. paying 1K a month for everything, including monthly cleaning. Stuff in the house breaks like the hot water heater, toilet, pipes burst and the landlord fixes it. You never really own a home if you still pay property taxes. If you can get an inexpensive rent, I think that's best unless you like doing handyman work plus mowing lawns, etc. because stuff breaks in a house.
There should be more houses in the city that you can rent out not everyone wants to live in a apartment or condo in the city . That’s what really makes me mad. I am looking for a house for rent and all I see are condos.
Urban sprawl isn’t efficient. High density housing works out better for everyone in the long run
How about buying/creating a business instead of buying a house?
Buying is better than renting. Renting is good for flexibility, and that flexibility comes at a price. Your default position should be to buy. You should have a good reason to keep renting.
Really liked this video. I’m a soon to be college graduate and I’ve been thinking of buying property to then rent it out. This video really helped me understand the pros and cons of owning a property and not owning it 👍🏼.
What about a comparison between internment in stock market vs the price of real estate appreciation ( after subtracting all the cost over the years such as fixing, insurance...)
*investments
i think there are a lot of phantom costs to owning a home which in retrospect i should have tried to address more, those costs are hard to calculate over time, but i think the main point of the video i wanted to get across is that if you are in this situation you gotta run the numbers for yourself haha
@@humphrey were the appreciations mentioned in the video before or after inflation?
0:47 Room for ants! Sad but funny that in the UK that would be considered huge
France here thinking the same. 2 bathrooms!!
Where can we find that rent/buy Excel sheet you made? Would be awesome if you could share!
I wish you talked more about lower priced housing. for example I can get a house in my area for 100k but it also wont go up enough in my area to making buying that price worth it.
I've been contemplating buying for years but never could get myself to do so. Being in a HCOL state and really believe that there can be greater returns for putting the capital elsewhere has been my main drivers for continuing to rent.
understood!
I feel you didn't address when things brake in the home or fixing thing in a home, plus maintenance on the house roof and outside property. Think it becomes even from renting and owning
As I mentioned earlier, that jar makes the money look more valuable!
The issue with renting is you're essentially paying off someone else's mortgage, however, buying a home isn't always easy either. Do your due diligence, research and understand the area and buy a home within your budget. It's a smarter long term investment and can provide you with a great start to your investing portfolio.
thanks for the comment 320. I did listen to a Ramit Sethi podcast the other day where he dispelled that "paying off someones mortgage" line of thinking everyone has - while renting you do *do that*, his point was that we have this thought of paying off someone elses mortgage as a bad thing, but we don't think about that same concept when we're eating a restaurant or at the movies. This was one of the harder videos to make b/c it can go either way and its such a widely debated topic. Also, I can tell by the comments already that some are just not happy with the math behind my particular version. Perhaps this video is too biased into home buying. I'll have to re-think my approach for future videos in light of this, also... yes it does require research & due diligence. Again, thanks for your comment - as always. I always see you on here
You don’t own a home until that mortgage is paid off 👀
Rent vs sell next for homeowners!
Having built houses I may be a bit biased but, if you are only go to be in that town for a year or two.. probably better to rent. 5 years better to buy. Inbetween.. kinda mixed.
It really depends on the situation and a lot of people I know who were able to build equity from there home were actually lucky breaks. Not everyone I know timed the market right and actually bought in when the housing market was hot and mortgage rates were higher.
I love the discussion but there's some points I would like to discuss that stood out to me.
- Fixed term doesn't mean fixed term for 30 years. Let be honest here.
- no one wants to live in Dallas. That's just a funny below the belt shot. Choosing somewhere like California would have been better because people want to be closer to these metropolitan cities that give more opportunity than Dallas would.
- as a home owner, I feel that there has been many other points that are crucial that could have been added in both categories of renting or buying.
- also if the realtor could give a source or explaination of how they got that number for renting in Dallas specifically, that would have been helpful for me.
- personal opinion, since I live in New Westminster, but located within the metro Vancouver area, the houses are extremely expensive here. And this goes for other major cities or regions such as the greater Toronto area or Montreal. So examining these major metropolitan areas but in the states could have been better because that's where people want to move to.
I feel that Dallas is the equivalent of living in Calgary or Edmonton, places that are cheaper but there's nothing there, no social life, nothing exciting and so forth.
But thank you so much for the video, I swear I'm not trying to come of as a Karen but just trying to get a good conversation going :)
Dallas is a major city and one of the fastest growing cities. You need a new argument
You are missing a bunch of things on the buying part. For real comparison you also need to include the buying and selling closing costs which can be many thousands of dollars. Second owning a house is not fixed cost - your taxes will go up and so will all the maintenance. I’m addition, the longer you live in that house the higher your maintenance because you will need new roof, new heat pump or boiler, new water heater, maybe new carpets and in order to sell the house depending on the economy at the time you will need to spend thousands of dollars to pain the house and do cosmetic repairs
I was told you should buy a house. Then rent it out. You'll have to rent a house yourself, but hopefully any spare money you have, tax returns, work bonuses, etc should be used to pay off your rental so when it's paid off, you move into YOUR paid off house. Or you can use the equity in that to buy another rental.
When you pay a mortgage. Your first 15 years your basically paying majority of interest so it’s just like renting. It’s money you don’t get back.
better to rent or buy? in California $1800 for a 1 bedroom?? or buy a 2 bedroom mobile home for $975 a month mortgage?? all these youtubers talking me out of buying a house but do yall factor in the people who live in California??
Right now I rent, waiting to buy a home. I think of it in a couple ways. Home buyers pay property tax, more on heating and A/C, probably a bit more on electricity (more stuff), pay for maintenance, pay for sewer and water, and have to upkeep the outside (time), home insurance > renter's insurance. I would never rent the same square footage of a house I'd buy. Do most people do that? My rent right now is $580, very inexpensive (I'm single). With property taxes around $300/month and with all the extras I mentioned, I'm kind of throwing away the same amount of money while also being able to save a lot of money.
good point you bring up. When you're renting, you're most likely renting a 1BR or Studio (if you're single), whereas when you go to buy a house, rarely do people buy a 1BR/1BA, they usually like to look for a 3/2 or 2/2 and those are just not always what you would rent.
My mom is a single parent of two kids (me and my sister) we live in a two bedroom apartment. I’ve been wanting to move for the longest time because sharing a room is annoying. We’ve been living here for around 10 years so we don’t have to pay nearly as much rent then the newer people who are living in the complex. My mom was looking for a 3 bedroom apartment but The rent is Triple the Amount then what she’s paying for. i was wondering if it would be better just living here longer and save up to get a house or just move and pay the $2000 amount difference. If so is there any programs that would help get a house for a single parent ?
Realtors have personal interests in this matter the best you can do is ask personal finance experts
Does that mean if you gained a 1.2 mil $ profit does that mean your $320,000 home is now a million dollar home? Does that mean buying homes in the future will be that expensive? How will people afford homes in the future?
with a mortgage, having a fixed monthly payment is huge like his buddy said. Since the biggest part of your living expense is the same, you gradually grow richer. Esp as your income increases
Don't get a mortgage ever. It's a waste of money. I have three houses and have never paid a dime in mortgage.
What about buying for those who have jobs that make 50k or less? Recommendations for lower down payments pr government programs for first time buyers? Renting in areas that don’t have houses in great condition require A fixer-upper loan which adds on fees as well as some other conditions that may increase the cost over a long period of time. I would like to see your input on some of these issues as well as what would be pros for renting in different markets
I've even heard of people who are relatively high earners and want flexibility but still want to own something and/or like real estate. Supposedly, they purchase investment properties in areas and properties that are very good for renting, and then they just rent something (to live) wherever they want.
A 7% per year increase in property value? That is way higher than it should be. Also I think there is something missing in general maintenance and the large repairs that definitely happen if you live in a home for 20-30 years
Obligatory bitter internet comment: cool, i would love to be able have the choice of buying or renting
Lol 😂
Thank you for this one, can you make one video on investing from your pocket upfront vs taking loan from bank while setting up business. Cheers 🙌
thank you!
In China in tier one cities the housing prices has gone insane over the past 17 years. For the past 17 years buy is better than renting. My apartment of 960 square feet was bought for 96000 usd in 2004....now the market price for it is.....2.1 million.....in hindsight I wish I bought three apartments back in 2004 lol. Great video Humphrey!!!!!!!
Im a Proud homeowner since 2017 and I just turned 30.
But Maaaaan I'm always broke trying to make ends meet .
This is all great; but I can afford monthly rent and I can’t afford a down payment where I live.
do you rent or did you buy in bay area? im also in bay area but i rent, think is too expensive for a 1970's old house
Another outstanding content from this dude. His channel should be as popular as Graham Stephan and the likes. Keep up the great work.
thanks Adrian, with time, hopefully it will be. :)
Thanks for the video, how can I calculate the appreciation rate for another city or state? do you know a good resource?
In your analysis, you didn’t factor investing what you would have paid in a mortgage (imaginary mortgage - rent = extra money to be invested). You only looked at investing the down payment.
you are right, I think it would depend on your (mortgage - rent) difference. in the Dallas example, our mortgage was "cheaper" than rent so i didn't include it. If your mortgage was MORE expensive than rent (say 3000 mortgage and 2200 rent), you could invest that difference... but if rent and mortgage are the same, then I think we could only invest the down payment
Also buying at the top of the market limits your appreciation
Loved the video. I think you missed out the opportunity for leveraging your loan. 3% of 320k is more than 7% of a 60k deposit. You can always rent out your home if you decide to move too.
Good point!
Anyone got any opinions on manufactured homes ? Buying a house isn’t possible atm and was thinking of buying a trailer instead. I have potential roommates to help pay the mortgage and everything. Maybe in the future I can be a late bloomer and finally be able to afford a house and rent out the manufactures home
Is a condo a great investment instead of renting
I thought it was 10% a year for the stock market and between 3% to 4% for real estate on average of last 30 years?
Yeah it’s 10%. And real estate is 3.1
This last year is a terrible year to compare the stock market and the housing market. In no way are they typical. The first guy also fails to mention that 2020 ended up being a pretty good year for the market any way.
Lucky Americans. Your houses are guaranteed to go up on value. Not to mention how easy it is to take out loans compared to other countries.
Good material, Humphrey! Keep videos like these coming!!
You got it!
Doesnt the credit score you have also effect how much the bank will loan you with your down-payment meaning if you have a credit score of 630 you won't get as nice of a house as someone with 750 so you won't get that appreciation
New format was fun to watch! I hope this video turns into a series :D All great things to consider
Glad you enjoyed it!
Hey thanks humphrey for the video. It helped me to analyze my stats.👍
My rent is $800 buying would be at best $1300 a month...
Always buy and if you can't only then you should rent
Really liked this video and new format! Keep it up!
Awesome, thank you!
One of the reasons why renting appears to be cheaper than owning is because most people rent places that are smaller than what they would live in if they bought a residence. Most people will rent a one bedroom 700 sq ft condo but will tend to buy a 2-bedroom 1,200 sq ft condo or a house. Compare the cost of buying that same property you’re renting and you’ll find out easily if it’s better to own or rent.
This is incredibly helpful! I’m contemplating renting or buying right now and everyone added such useful perspectives.
Glad it was helpful, make sure to read a lot of the comments too because there are great points there.
*off topic* Can you make a video about investing with cash app please
Nice video, but I think you should talk more about what happens under the median
noted!
Leverage is key. 1mm home with 20% down at a 3% interest rate and 5% appreciation is 2% gain or $20,000. Thats a 10% roi which goes up every year. Rent out a couple rooms and you’re looking at way more impressive returns. Personally I put minimal down on properties and keep my cash invested in the market leveraging in on margin during any pull backs trimming off margin as it recovers.
Another great video! Smashed that like button.
Great video as always and certainly a mix of stocks and real estate is an excellent idea and probably ideal. However, if I had to choose, stock almost always outperforms real estate (if you know what you're doing) even despite crashes and corrections... and is more of a passive income than managing real estate and definitely way more liquid.
I think thats a good point you bring up. In your estimation do you think most people can outperform the RE market, or does it take your set of skills/knowledge to be able to do well despite crashes and corrections?
@@humphrey I typed a really long reply but I'm not sure if it went through lol
A property can outperform a stock portfolio because of leverage. Go and ask your bank if they would lend you $850,000 to start a $1,000,000 stock portfolio. I can apply for a $850,000 loan for a house but not for a stock portfolio
Im 16 and i want to know real esate vocabulary i am learing personal finance for 2 years i was hesitating to ask pleas e reply or make video on it ..🔥🧡
Thanks~~~
I like renting because it's $595/month for a nice, updated place and if something breaks then I don't have to spend money or time fixing it. West Texas btw.
If you are a renter, congrats you are someone else's passive income...
Thanks for helpful video Humphrey,
I am just a bit not clear about how you got that ~2M after 30years of appreciation.
Can you help me out, please?
Thank you
i liked the new content!
Thanks!
yo are you coming back for me on nokia stock
You never own your own home. You rent from the govt. Property taxes
A CENTER FOR ANTS!!!
Super dislike how you select a realtor to talk about renting... what about being house poor?? What if you're a single parent and lose your job, then lose the house that society influences you to buy??? That demographic and perspective is always ignored and that's sad. Not everyone is married or financially stable or have multiple streams of income... as a renter preferring to save before purchasing a house, truly disappointed...
Good stuff!
Glad you enjoyed it
I refuse to move to Azeroth
damnit
Wow, this is such incomplete and misguided advice, check out Ben Felix's 5% rule and Alex Avery's "The Wealthy Renter"
dallas realtor :0 hell yea
he's great!
@@humphrey i agree!
Renting is like being in a casino. The longer you stay the House eventually wins.
lets gooooooooooooooooooo
yessss
3rd? 😂
love an early comment ty
2nd
love an early comment!
First
love a first!