Reckful breaks down Renting vs. Buying A House
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- Опубліковано 4 лют 2018
- Explaining why it is sometimes better renting a house than to buy.
Twitch: / reckful
Twitter: / byron
Instagram: / byron.bernstein
Byron's favorite products: amazon.com/shop/reckful
Video edited by Hiryl
Twitter: / hiryl_ - Ігри
Made some mistakes in the video - it ended up favoring the renter even more when I corrected them. i.imgur.com/OMTboWr.png
Hi Byron, finance person here:
1. Glaring issue: doesn't make financial sense for a landlord to rent out a $1M property for half of what his monthly cash outflow is (mortgage + prop tax). This needs to be more realistic, otherwise your math is based on owning some part of a $1M house, in which case you are not reaping the benefits of the full asset to make a fair comparison between rent/ownership of said asset. Or the landlord already owns the property and the rental market is in the gutter over there? I live in a large metro area and you can't usually find rent for less than $4K a month on a property worth $1M.
2. If one of the benefits of renting is the versatility to move around a lot, that will also have a cost. In that sense you can't account for the the entire home maintenance expense (I know you didn't count it, but did allude to it as an issue of home ownership)
3. Similar to point 2, if versatility is a benefit for renting, then stability should be a benefit of ownership. When it is your own home you can customize it to your liking, grow your family in it, build memories. There are some intangible benefits for home ownership that you failed to touch on as well. Not to mention, you could have an asshole landlord when shit starts breaking down, or they could decide to kick you out for whatever reason bringing up something that is our of your control.
4. Your math is a bit off (no pun intended) and you'd have to be more precise (running full 30 yr schedule on payments, interest, etc), and use NPV to calculate future benefits discounted to today $. The schedule will help unearth some timing benefits as mortgage interest is front loaded and will provide a bigger tax benefit earlier on (which will in turn improve the NPV).
5. Not sure if you touched on this, but after about 5 years into home ownership you will have access to $200K of equity that you can in turn invest in the same portfolio (which will give you a return less the loan interest), and things might look quite different in the end.
6. Not sure where you got your real estate value appreciation figures, but should be somewhere between 5-8% easily (more in line with your return on portfolio if renting). This one is not as big an issue and really does depend a lot on the area.
7. Not everyone runs a business out of their home, so foregoing this tax benefit will make rent look pretty rough for people who are not self-employed.
OMGScoods
Ruski most folks can't save because of lack of discipline. For most folks the real benefit (if you were to look at same exact property, rent vs mortgage), is that the mortgage forces them to save. Logic here is you could access the principal you've paid on your mortgage later, whereas if you're renting you would be spending each month less vs. owning, but unless you save the difference you will not be better off. Point is there's little difference between them if you're disciplined, but if you're not mortgage can help you stash money away for access later. However, as Byron said it is worth to always do the math, and try to keep a 5 year life plan in mind when evaluating different scenarios. Something can make financial sense, but may not work in many other ways that cannot be easily quantified. Here's a good video that will explain much of what I'm describing in a bit more detail if you're interested ua-cam.com/video/NZR_vMTLfIk/v-deo.html
Also, Byron was calculating that the guy who is going to rent will have $200k in the beginning which doesn't add up to his logic because he said that the same guy will have an advantage overtime because he will save money. So the calculation there should be ((12x2.5kx1.06)+12x2.5k)x1.06 etc etc. Therefore he will not make 1.2M in the end. And as well, as Mr Finance guy said, it doesn't make sense for a house which monthly loan payment is 4.5k to be rented out for 2.5k. Too big of a difference. Therefore, if you don't need to move much -> buying pretty much always better, unless a catharsis happens.
like if u buying a 1mill house, its bc u make a lot of money and 19k a year is nothing for you, same with people that buys 200k houses, they end up paying 3.800 a year for a house, in the end its even cheaper than a rent.
Reckful's thinking was really interesting and I love that he used notepad to explain everything and write everything down so fast from his mind, I feel like he would be a good teacher or something.. RIP Reckful.
i learned so much from him ! he is telling more useful tips than my school lul. I wish he could teach me more stuff about finance :/
No disrespect to Reckful, but i would not take financial advice from him
@@Borrelaas ah yes don't take financial advice from a millionaire.
@@Zack-lv5po How is that an argument? Someone who won the lottery might also be a millionaire, yet he has no knowledge about finances
@@Kain1805 Well that's not the case buddy, Reckful did not win the lottery
to the man that showed me how much a billion dollars is,may your soul rest in peace
Love when Byron pulls out the notepad
This was actually hella interesting
He didn't get to include all the fun shit like when you own the home you have to pay for maintenance and large purchases like water heaters, plumbing repair, etc. etc. Renters get to hit their landlord up for that shit.
Yeah
Demancend yeah, definitely learned things from that.
Tetsu yes and half a shitload of money in the bank that he can use to rent until he dies or even use it to get into an old age home
He can just move out if he has a shitty maintenance. The nicer the place you rent the nicer the maintenance is.
JUST RENT A HOUSE 4House
4House OMEGALUL
I love it when papa bern takes out the notepad
Why did he have to leave us? It's such a fast and straight to the point breakdown. Nobody else can have such discussions on twitch. We miss you man :(
If you look at the numbers, they honestly don't make sense. No disrespect, but he used a $1m house as the purchase example and compared it to a $2500 rental (which would be a property worth around $300k; if you look at Austin rental houses and the property values you will quickly see these numbers align almost perfectly). If you run the 30 year cost of the $300k house, it comes out to about half of renting the same property, assuming rent stays static.
He had so much he could teach us... Fucking hell I wish he was still here.
Dam Bro , Im a long time fan R.I.P, he was good people.
Inflation matters a *lot* in this situation. Cost of rent and the final value of the house would go up in both situations, but the increase is negative for renters and positive for buyers.
Kind of. It's usually accounted for in projections, but if you reinvest over the accounted potential inflation you still come out on top over buyers unless it's like a crazy buyers market at the time (spoiler alert there aren't many)
The edit is next level thank you
One thing is certain and that is Reckful was a very, very sharp mind. Tragic he is gone so young. May God rest his soul.
he was gifted in intellect but didnt live wisely
@@user-p6-3561 kinda like you but you weren't gifted in intellect
This was a really useful video reckful thank you! 'm 21 with not much knowledge on the property market and this was very interesting to think about.
Just get a trailer LLOOOOOOL BigBrother
KKonaW
like tyler
I'm glad you saw your mistake, I was about to type it, good job on the corrected version.
This kind of shit is really interesting and clearly you have the knowledge to make it a consistent thing. Teach us more
Yep, I like what he said. It is unique to you. If I had the right amount of money I think I would just travel the world and live in hotels or airbnb. And maybe for the short time I want to be home I would just have a bedroom with room mates. If I want to have a family I would buy a house because it just feels right.
Reckful can teach me this in 8 minutes while it takes my college professor a week.
DAD IS EDUCATING US POGGERS
POGGERS Clap
pain.
This was actually very helpful. You will be missed man.
RIP Reckful, you were an inspiration
More videos like this ! Actually really interesting
Why does UA-cam keep recommending Reckful videos. My heart is breaking.
Best video from byron in a loooooooooong time
Miss you buddy, thanks for the good video
watched this live feelsgoodman
Rip this was my favorite video of his.
W OMEGALUL R K
D OMEGALUL C
Enacoid H OMEGALUL U S E
OMEGALUL M E G A L U L
:cd: OMEGALUL
Economical Classes with Byron Bernstein ™
DON'T GET A HOUSE LOOOOOL 4HEad
this isn't true for everyone, the property tax is really high at Austin. plus renting there seems cheap, for example where I live a 550k house would rent at 3k, while where he lives a mil house rents for only 2.5k.
for me, I should JUST GET A HOUSE LOOOOOOOL 4HEad
Thanks for the tips bro
This really depends heavily on where you live, where im from renting is a huge money sink. We have very low mortgage rates, and property tax is not even percentage based, its based on the size of the house and what street its on. Most houses end up paying 0,1% of their house value per year. So with 1,9% mortgage rate and a market increase of 8-12% year over year. Owning a house gains you about 4-5% every year after all expenses at worst.
Rip reckful
I already miss his laugh
I dont think reckful took in consideration that the rent prices will go up through out the years, when u get your house its a fix rate.
Indeed. The landlord is going to want more money for the rented place because of improvements that had been made to it. Also I don't think whatever monthly rent he put for the apartment is anywhere near worth as much as a million dollar house, so kind of an unfair comparison.
Maxwaehrens okay and you also forget the maintenance that is associated with owning a home
@@bobsnieder4382 If renting was so much cheaper than owning, how come that there are companies making a lot of money off owning appartments and houses which they renting to people long term? People invest money in property and rent the property because it's a profittable bussiness.
@@Maxwaehrens I thought I was taking crazy pills because no one else in this entire comment section has mentioned this simple and basic bit of Common Sense. If it was somehow better to rent, all the wealthy people on the Earth wouldn't own all of the land and buildings - how the fuck is this even in question? Those owners then go on to rent and then make profit on that rent, it's so overtly obvious that owning is better than renting just from these facts alone that I simply cannot believe this man got so popular with such a terrible video
@@aeriagloris4211 Very specific to Reckful I’d say. I don’t think he was suggesting it to everyone lol he’s just saying that renting is fine for those that don’t want to deal with the whole house bs and property taxes and less money to invest as well.
I was here during the stream :)
One more expense you have to add is maintenance and upgrades to the house.
But there also the option of buying a larger house and having students rent rooms, should be enough to cover the interest at least.
My mom bought our house even before I was born, now it's worth a bit more, but the building is going to be completely destroyed and rebuilt (3 stories to about 30+), the house will probably cost around 700k-900k (USD). Our current house is worth about 300k-400k, mainly because there are 2 elementary schools nearby, a highschool pretty close, a lot of shops, a new mall is being built, and the trading center is about 2 minutes of walking... In this scenario I think buying the house was way better than renting it. (EU btw)
piece-wise function in thumbnail PogChamp
I watched this live. He made good points. He also didn't mention logistical things such as house upgrades and fixes and the freedom renting can give you. Rip reckful.
This is very area and country specific though, when my house is paid off I just have to pay 27USD a week... thats it.
He also didn't mention 10000 reasons why it's always better to own than rent. This video is frankly terrible, coming from a financial advisor - the simple fact that wealthy people still choose to own all of the land and buildings in the world should automatically tell you that this video is wrong.
R.I.P. Byron you were a great soul.
I love this video because I've been reading a lot about this stuff recently. 1 thing you forgot to mention is that you have to pay for repairs when you own, which makes it even worse.
How much do you think the average person saves on top of rent though? Most people go thier whole lives with very meagre savings, then end up in retirement with jack shit.
In 25 years my parents house went from 150k to 350k. Rent from the same place went up from 400 to 1100. Now you going to tell me how you end up better with renting.
@@virtue696 this exactly renting is only better for people with the willpower to invest the difference which 99% of people dont. People buy because they are terrible with money and its the only way to build some sort of net worth.
@@DaisyBnr Agreed, I am terrible with money.
To me the biggest thing is owning a home ties you down. I would hate not being able to just uproot and move elsewhere if I feel like it. Renting to me would be preferable at least until I have kids.
Best streamer of this February.
i would love for byron to be my economy teacher
I miss him so much
waiting for Ashton Kutcher to tweet this
4HEad
The first video I watched by him. R.I.P Byron. You won't be forgotten.
RIP Reckful. He didn't take into account a couple things, first, is that property tax percentages can go up. Second, your rent isn't going to stay at $2500 for 30 years. That rent could be $5000 or more after 30 years. The best part about renting is not paying maintenance for big things like repainting, water heater, major appliances, roofs, plumbing issues. To make owning a house even more attractive is having a room mate, this can cut a huge chunk off of your costs as well. It's a toss up, it just depends on what suits your lifestyle better.
you only get to write off the interest on the loan, not the entirety (meaning the principal)
Miss you
I believe the biggest flaw is assuming you would buy a $1,000,000 house with a $200,000 down payment - If you did a $300,000 house with a $30-40,000 down payment on 15 years and invested 150-170k, you would get pretty similar results. But ultimately I think it would come down to your lifestyle, if you have a wife with 2-3 kids and didn't travel too often I would say buying a house is ideal but if you're a single dude that travels often then I would say renting would be ideal.
Forgot to factor rent increasing over a 30y period whereas a fixed rate mortgage would not.
because a fixed rate mortgage for 20years would already have higher interest rate %. you end up paying 200k for a house here in UK for the next 20years from which 60k will go to interest rates , not to even mention house/life insurance + house maintenance. after 20years will you be able to resell for atleast 300k to make profit ? doubt it.
He forgot to factor in he could just buy the house in cash and not pay a mortage.....
@@endlessslumber441 assuming majority of the working class people got spare million bucks... ? Sure buying the house without mortgage is the most ideal case scenario, but to save that money up you do need to rent/live with others in a shared house.
@@Daminionz Pretty sure he was ask why HE doesnt just buy a house which he could easily do in cash. Also, you can a giant fucking house with a ton a property right outside Austin for like 300k. It's not California houses are cheap in most places.
If only he had those maths skill at blizzcon kappa
Give this man a break , at tournament situations, people always mess up the easiest of things..
Good editor
OMEGALUL Normie editor didnt use 4House LOOOOOOOOOOL
The flaw in his math is at 3:00. Rent prices are increasing and increase pretty much all the time. There’s almost no way you’d be able to pay just that same amount of rent for 30 years.
First of all, it would be compared to a 4k rent not 2500. Then your rent will increase in 30 years, probably end at 6-7k a month easy. He calculated 2500 rent freeze for 30 years in his example. We can also have a normal scenario of your mortgage payed under 15-20 years instead of 25
good times ..
Miss you, buddy.
Rip reckful
It's the property taxes and mortgage that gets ya. We paid $60k cash for a 6 bd 4 bath brick home on 2 acres in Hungary. Property tax: $40/year.
He was so smart. Miss him.
If that were true, he'd not have conjoined with bitumen in the prime of his life.
@@shoahkhan5670 Talking shit about a dead person is your character. Noted.
@@Skeptic2006 👌😂
So when's the next lecture Professor Reckful ?
.. Kappa
its crazy, i live in a shithole but rent for newer apartment buildings, not even houses, apartment building is 2k for 1 bedroom not including utilities
JUST BUY MORE MONEY 4HEad
Does anyone know the name of that beautiful song at the beginning of the video?
TONGO - ZOMBIE is the song name
damn reckfuls looking handsome man!
Not the place I thought I would learn something from
I miss you man🤕
Rip brother
See You Space Cowboy
Not to mention how much of a money sink a house can be. While when you're renting your protected by a set of rights that your landlord has to abide by.
Didn't account for rent going up (which it will, 100%). If you could pay $900/mo for 30 years then I would agree.
And you could get a shitty landlord who can kick you out if they decide to sell up
Rent goes up but so does cost of living.
I wish he did the math on renting vs fully paying off the house without a loan and compared the two.
He did on one of his streams
Just think for 2min, if you have 2mil $, why would ever spend it all on a house and end up with no money when you can pay it over the years at low interest rate and invest your 2mil into way higher interest things that will exponentially increase over time. Thats the exact reason you should never repay early debt that have very low interest rate as long as you know how to correctly invest your money (unless its just bothering you but its not financially logical)
Late on the draw for this one, but this also assumes that the renter and buyer are interested in the same property, where in reality most people choose between renting a much smaller, cheaper space and buying a larger, more expensive one.
The tl;dw is that, sure, monthly payments on a house are investing in your house, but only if your house is the best investment possibly available to you is it worth it to splurge for a house you don't need when renting an apartment works for you.
:thinking:
Owning a house is better for many reasons. You also get to leave your house behind to your children to either keep or sell. I’m 21 and this is the most informative stuff I’ve seen on this matter lmao. School hasn’t taught me shit about this real world shit
The whole point is that the money saved from renting instead of buying a house could be used to invest to get you money that could be used for anything, including: future renting or buying a house in the future
This whole argument is assuming you stay in the house, for the full term, and paying the minimum payments the entire time. With no down payment. Realistically, you have a chunk of money, which goes against the initial amount. If the house appreciates AT ALL in the next 10 years (which it usually does, land always goes up unless it's after a world war), you can use that capital to pay into your mortgage even more.
i like
Should be education as a category
Bro those two hypothetical situations are not equivalent at all my dude.
Million dollar home vs 2500 dollar rent. WTF? This is not even close to accurate.
yeah million dollar home is close to 4k rent
@@MyNameIsTwitted i pay 400,- a month for a 4 bedroom house with front and backyard in the city. Renting is better where i live (Netherlands). If i where to buy it, would cost me 300K.
So thanks but no thanks.
it's raining men
JUST LIVE WITH MUMMY TriHard 7
Damn, I miss Byron. :(
As much as I love the guy, he ended up being wrong in the case of Austin. If he had bought a house here in 2018 (at the time of this video) the median house value was $375,760 to compared to $585,000 in 2021 at the time of writing. Over 200k rise just for an average house, let alone the good one’s he could have afforded. Austin was a gold mine for those that bought in 2018 or before. I know people that have trebled their house value here. That said its all personal preference and his information wasn't bad at all for the time it was given.
*Drops the mic*
QUICK MAFFS
Buying > renting. Basically giving money away buy renting. Of course not everyone can afford to buy, but if you had both options buying is the way to go
I own an apartment, but buying is also giving away money. You give away interest to the bank, which usually is a pretty substantial sum of money.
Robert Quartet yeah true, but you can sell your house later on. It’s an investment.
Robert Quartet same for apartment
what was the game at the beginning?
In Sweden its like, build a house for 70k, sell it in 3 years for 350k
robin sjökvist what the heck? isn't that too overpricing? i mean.... build a 70k house in my country its like a 110k-140k within 3 years?
You are lucky if you can find a 1 room apartment in the big cities for 300k in sweden lol
yeh but who wants to live in swedistan? ANELE
Alexander Kalkainen exactly, I can't even move out from my parents. Education ends at 23-25 and I'll need to have a stable income for a place. I'll be about 28 when I move out. If I'm lucky that is.
Chris Hansen Not too bad. Nothing wrong with living with parents as long as you’re not being a NEET.
Reckful. Love from saudi arabia
jimmy alferd ANELE
OMEGALUL
اول سعودي اشوف يتابع ركفل
ANELE Clap
Sending love from Tunisia.
Until the landlord wants to sell the house / raise the rent every 3 months :)
There are a million things he doesn't take into account in this video, and frankly the simple fact that wealthy people still opt to own homes and land rather than renting, immediately nullifies anything he says in this video because if it wasn't a good idea these people wouldn't allllll be doing it.
It's frankly common sense.
what game does he play in the start
HYPERHOUSE
JEW WISDOM AT WORK PagChomp
This doesn't take a lot into account per people circumstance.
The best part of owning a house, besides the equity you're putting in via mortgage, is rent control. Reckful didn't cover this at all. Rents will always go up by a lot each year, by getting a mortgage you're pricing yourself in at a set price. Also, he used a 30 year mortgage as an example which sucks. If at all possible, you should do a 15 year mortgage. if you do a 30 year mortgage you're essentially paying for a second house in the interest you pay. Also, if you don't live in a shitty urban sprawl like Austin Texas, your property tax won't be 1.9% (thats insanely high) also RIP reckful.
where the problem with these "calculations" occur, a Million dollar home is roughly $4k payment per month... in the scenario presented, the rental property only equates to a home approximately worth $500k giving a very conservative estimate of $2500 rent which would only yield the owner of the property $200 a month in rental income. That in itself is unreasonable. If you want a true comparison, you would want to compare the difference between renting or buying the SAME property.