When you run the rent vs. buy numbers, make sure you take into account your entire lifetime. Don't stop at 5 or 10 years, include the numbers after the mortgage is paid off but the rent will still be due.
@@slumy8195 Where I live, rent is $2K a month minimum. That's $24K a year, minimum. I own my house. My taxes and maintenance are nowhere near that a year.
This happened with the 2004 housing boom - home prices were greatly inflated, meaning people couldn't sell later because they owed more on the house than they could sell for. I know quite a few people who bought then, thinking they were making a good investment to sell later, but it's taken until the COVID housing boom for the prices to come back to those original amounts.
To balance out your real estate holdings, I suggest investing in equities. If you're cautious, even the worst recessions can present fantastic buying opportunities. Additionally, volatility can produce fantastic short-term purchase and sell opportunities. This is not financial advise, but you should buy immediately away because money isn't king right now!
You're right. I was able to diversify my 450K portfolio across markets with the aid of an investment coach, and I was able to use high dividend yield stocks, ETFs, and bonds to generate a little over $830K in net profit.
Would you mind providing details on the advisor who helped you? saving for a pension through a corporate program since the age of 18. I hit greater tax along the road, so I increased my company pension with a SIPP (tax benefits). I'm now 50 and would love to expand my finances more aggressively; there are a few automobiles I still want to drive and a few mega-vacations that I still want to take.
'Vivian Jean Wilhelm a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you for this tip , I must say, Julie appears to be quite knowledgeable. After coming across her web page, I went through her resume and I must say, it was quite impressive. I reached out and scheduled a call
I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
Got it! Buying stocks during a recession when prices are down could be a good move. You might get them at a lower price and sell later when they go up. Just do your homework and be aware of the risks before diving in!
That's awesome! Investing in stocks with a reliable trading system can lead to great outcomes. It's fantastic that you've been working with a financial advisor for a year now. Starting with less than $200K and being just $19,000 away from making half a million in profit is impressive! Keep up the good work!
Carol Vivian Constable is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Thank you so much for your helpful tip! I was able to verify the person and book a call session with her. She seems very proficient and I'm really grateful for your guidance
I love this because it makes sense. I ran the numbers and was surprised that the house I want to buy is $15,000 cheaper to buy than to rent the equivalent. I messed with all the numbers and it still came out cheaper to buy. Thank you for this resource and explaining. It probably makes the most sense for people who don't have kids and like to live in town.
Yes, I am paying $1 per month per square feet a month now that I own my home, and when I rented I was playing almost $2.6 per month. For me makes sense to buy if you get good interest rate and good downpayment.
Two gripes: 1) 7% is not a normal interest rate, the overwhelming majority of homeowners have under a 4%, this is a blip in time where interest rates are extremely high. 2) rents are raised constantly, 30-year fixed mortgages are the same through the life of the loan. After 10 years, your rent on that 5400/month property may be upwards of 8k. Your mortgage will remain fixed. Additionally, at 10 years you've likely built an extremely significant amount of equity in the home from both principle payments and appreciation in the real estate market.
Your first point doesn't apply to buying a home now. Sure, most have under 4 percent now, but where as a first-time home buyer, am I getting under 4 percent now? The under 4 percent was a blimp in time where interest was extremely low and everyone refinced. You're the first person I have seen, say, the reverse. Please provide evidence if your going to claim getting this intrest rate is still possible or is bound to happen again soon. Second point depends on how long u stay in the house which is the whole point at looking at the numbers in the first place.
@@agent.4206The 30-year fixed mortgage rate is currently just below 6.5%, and we're at the start of a rate-cutting cycle. The effective federal funds rate is expected to decrease by 2.5-3% over the next two years. With core PCE inflation nearing the 2% target and the first rate cut anticipated in September, it's far more likely that mortgage rates will drop to 4% in the coming years rather than rise back to 7%. That on its own should be enough evidence. And I'm not even factoring in the unsustainability of US debt at high rates and the reversion of elevated MBS spreads yet.
@@agent.4206 rates were sub-5 from 2011-mid 2022, 11 years is hardly a “blip”. Additionally, No one who got in at 7% will be paying that for the life of the loan, they maybe have another 18 months before they can refi into the mid-5s.
@@PublicFreakout okay fair, but you're still making a prediction by assuming this is the blip of 7 percent currently. Since 1990-2006 ranged from 6 to 8 percent. With 2008-2021 being the lowest it has ever been.
My mortgage is dramatically cheaper than any rental situation would be for me, and for the first time I have my own space - a whole flat & garden, not a room. Even once I add in my bills, it’s cheaper than renting was for me, and certainly cheaper than it would be now (London rent is scary). Once I could afford the deposit - which is obviously the biggest barrier for so many people, and that needs addressing - it was an absolute no brainer for me and I feel very fortunate.
Less for me as well. Bought my house in Maryland 15 miles from work. Since the housing market did what I did, my house value went up by around 50%. Went from 300K to 430-450K. My mortgage is only $2100/mo. To rent a place my size it would be roughly $2800/mo.
your monthly payments might be cheaper but you are paying a huge amount over the long term in interest unless you put a large down payment or bought it outright
@@wolfstadt_ I put down a 45% deposit when I bought it 7 years ago. My monthly payment is £518, I also make an additional monthly £100 payment just to gently chip away further at it, particularly as I know the interest rate will increase in a couple of years. Will increase that as my income grows. Rent for a similarly sized flat here would be circa £1400-£1600.
@@hypersynesthesia Ahh ok yeah that 45% was good then. Congrats homie im glad its working out and you got something to call your own. Looking forward to grabbing my first property at the end of the year
Great advice and video. One thing you overlook, however, is that a person rents for his/her immediate needs and buys a house based on what he/she thinks will be the needs in 20 years. This leads to an even greater disparity between the cost of renting vs. buying.
I have owned a 4-plax to rent out, a condo, a luxury condo, and an acreage. I have also built a log house. Gave up homeownership and started renting in 2014. Less headaches! :) I am a physician and with the healthcare crisis across the country, I can move if I don't enjoy my work anymore or if I have a better offer somewhere. I am in the process of moving for 2x salary increase. Not planning to buy a house anytime soon, but I save and invest my money, so when the market crash, I can buy if I know where I want to be in old age.
@@xo7454 if you are a physician and have no worry about ever being financially pinched in retirement then go ahead and rent. For most people who don’t make 200-500k a year….for someone making 50k a year….buying yourself a nice 1 br 1 ba condo will pay dividends when you are 65.
@@martincagle9226 did you not read the part where they save and invest their money? Why does it matter how they get their wealth either through RE or other Investment $1 dollar is $1 dollar.
1. Your example in this video seem restricted to going from renting a condo to perhaps buying condo. Many people in the middle of the country are trying to go from renting a house (a single family dwelling) to buying a house. As a house renter, I don't have to repair the house, but I do have to maintain a rather large yard. 2. Unless the landlord fully owns the rental property outright, he/she has all of the expenses that a home byer would face. So, going on your example of the landlord being limited to charging rent base on market rates, he/she could be in a situation where the rent doesn't meet all of his/her costs, but would offset them - which I hadn't thought about before. Anyway, you've convince me that continuing to rent is the best thing for us.. Thank you
12:42 what makes this so tricky is that it would appear that Renting is cheaper. But if you're living in a single family home where the owner has to pay all the fixes, they can just up the monthly payment when the current contract finishes.
People think I am poor because I am living in an apartment. I don't care what other people think about me. I save so much money because I am renting an apartment. I am responsible for my life, so I don't listen to those who are trying to persuade me to buy a house.
I went a slightly different route. After my killer divorce wiped me out, and I got a good job, I began saving to buy property. [I was in my 50s, minimal investment, less savings.] I wanted to stay in the Boston area, but knew it was far too expensive. I ended up buying a historic duplex in a good neighborhood in an Upper Midwest city. Excellent location, nice interiors (which I could fix up), and I could afford to carry the rental if necessary. I like fixing old houses, so I fixed up the rental and keep doing so. [Added air conditioning to both units last spring.] Right now, the rental covers about half my mortgage payment. If the local economy goes up, due to location, I can probably cover my entire mortgage. And if not, it's no big hassle for me to cover it all. And yes, I ran the numbers every which way possible. In a previous career, I was an MBA level Financial Analyst - I run numbers for everything.
Thank you for saving me from doing the would have been the worst financial decisions of my life, buying a house & financing a car. I owe you my life man!!
Make sure you run the numbers for the particular house(s) you are interested in, the example he gave heavily favors renting because the rent price is extremely low for a 1.9m house. Still an incredibly educational video, I learned a lot too.
What's your plan for when you're old, disabled/unfit for the workforce, and on a fixed (usually relatively low) income? What if the landlord raises the rent? THIS is why it makes sense to buy - Not because housing is an investment, but because it's a basic physiological need, and you do not want to be at the whims of the market when you are vulnerable. As someone who cares for people in their sunset years, I have yet to meet a disabled 75-year-old renter who wasn't on the brink of being homeless.
Can you try to take an honest attempt at answering this yourself? Please keep in mind nobody's saying you should buy or rent forever. But if you choose to rent -- as I have, for now -- what might be the answer to your question about what to do in old age?
I’m in that situation now…60+, not working due to medical problems, no 401K or Roth. Moved to a bigger city 5 yrs ago when I was working. Debated the rent or buy dilemma, decided to play it safe & rent. Then a sports injury sidelined me. Can’t work. No insurance, no disability. Just a tad too many assets to qualify for state assistance, but too poor to afford private insurance. Landlord raises rent every year. Doesn’t tend to repairs. I can’t have a pet, garden, pool, clothesline, fire ring. He cut down the only 2 trees in the yard that shaded the south sun and brought the bird’s & squirrels. Laundry is in the basement & steps are difficult for me. I hate it here. Wish I’d bought in 2019, but who knew all the SHTF w the pandemic, riots, & real estate market?
In Canada what a lot of people don’t often factor in is yearly property taxes. So you have to think about that as well which could be anywhere from $3,000/$7500+ a yr depending on the size of your home and where you live.
Hello Remit. Thank you for all you do. My husband and I found you by watching your Netflix show. I was hooked, discovered your podcast, and rushed to buy your book. I purchased 2 copies. My husband and I had regrets about not purchasing a house. Everyone around us was buying and making us feel like we made a mistake. The numbers needed to make sense when we were looking for a house. You explained how you are not against home ownership. You are saying run the numbers! I'm happy and grateful that we found you because we invested the money we would put down on the house; we are pleased to say we are worth almost a million just by investing and keeping our bills low. We both are in the service industry and live our rich lives by renting a beautiful apartment. There is no way if we were to buy that house, it would be worth a million.
For me personally, the main reason to buy vs. rent is control. I love being able to do what I want to my house when I want. Pets, solar panels, changing the landscaping - the door is open where in an apartment it is shut tight. The other major reason is moving. I hate moving, and when I rented, I typically had to move about every 3-4 years just to keep my rent competitive. That being said, when I bought my house it was also in a period where rent was much higher than the cost of the house, even when factoring in 3% for maintenance. My total fixed housing costs were about 18% of my take-home pay, and I had large reserves saved up as well. I've done an annual assessment every year since I stopped renting, and at least to date my cost to own has been a fair bit below the cost of renting over time.
You are who I have been looking for when people try and talk me into buying a house!!!!! I knew the myths you stated and they are my reasons for not buying. Plus I'm not financially ready anyway. I don't mind renting forever. Thank you so much for this video that I just stumbled upon.
It all depends on the person's personality. If they can't save regularly and are always tempted to use up their savings, they should absolutely buy a house within their means. It's the only way to force yourself to build up some capital.
First, it's not always true. Secondly, overall the cost of living grows, which includes the cost of maintaining the rental place. So, if you own the place, you will spend more year over year for maintenance.
Owning a home could also be a big tax benefit if you have it under a LLC which is an advantage to owning. You can write off most of those maintenance expenses
He notes that insurance & taxes have risen in Florida - look at rental price increases! It makes sense to buy if you want to ENSURE you have a fixed payment that you can reasonably count on.
I agree he should consider that too since it's true most of the time but there are a fair amount of people that never raise the rent too. Mostly small time landlords
All I know is that my sister rented, while I bought the house. Six years down the line, she recieved an eviction notice, and cannot afford the rent or mortgage of the house she lives in (because the prices have doubled in the last six years, and her rent was considerably lower than the average in the area). Now, she regrets renting more than ever. I'm not saying you shouldn't rent, I rent my office. But with a house, 8 times out of 10, straightout buying is the way better option. Never have to worry about eviction notices or the rent going up, or running into a douche landlord, who will not maintain the property, or prohibit you from making tiny modifications to your home, which you conveniently skipped over.
Completely agree, moved three times in 5 years whilst renting and it was never my choice - landlords selling up and buyers were moving in rather than continuing to rent out. Whilst he talks about phantom costs, what about the phantom benefits of peace of mind, how much is that worth?
yeah i can definitely see how this could scare folks. i have the rare experience of having friends of different race, income and job. so i have friends who own homes and friends who rent. truth be told neither party has any money. the people with the houses did not consider their phantom costs and have not a shred of investments. and the renters are in the same boat but dont have the house pinning them down lol.
Same here i was renting before i bought my house back on 2018, i was considering on selling it now and go back to renting but then i read some reviews on some apartments and i see a consistent problems like neighbor smokes (even though its not allowed, i smell weed and we have bed bugs). I think now i reconsidered and will be staying instead. And just wanna say its different strokes for different folks, so not one size fits all in buying vs renting, and who say's you cannot own a home and still have investments like i do plus cash savings. I'm gonna hold on till i'm ready to retire in Thailand and then sell and make a killing in my area, i have a 5k sq ft home its just lonely cos i got divorced and all my adult children are out of the nest now. I used a VA loan so Zero down @ 4.70% and no property taxes for me lol.
Yeah don't worry about rent going up, just those rates, insurance and interest rates. Then when you want to do any modifications the fees and fact that you realise you do not own your home is the funny part!
Nice video, thank you for that. Owning a house gives also peace in mind. When you are young maybe it's not that important but above 40 I like to have a big garden and fix the kitchen the way you would like it. Get solar panels, better insulation etc. You don't need to worry rent goes up, mortgage is stable and don't need to move again. In my country rents are below 4% for >10 years mortgage. Actually interest goes down the longer you pay back the mortgage.
Rented most of my life pursuing education in different states. At most I paid about $1800/month for a townhouse in suburbs but far from renovated. I paid $1500/mo. for my first condo. Sold it 2 yrs later and made 80k profit. $2400/mo. for my first home; nearly 3500 sq ft, 4 yrs old -during Covid after looking at the comps. Signed PA before I toured it bc it made $ sense. Took a penalty free w/d from my 401k to cover closing costs. Used $ saved for closing in savings to do cosmetic work. Sold the home 2 years later and made a $200k profit. I rented 15 places before my 1st home purchase. I made $0.00 on those properties owned by someone else. Lack of Affordability and lifestyle are 2 reasons not to buy NOW. But, you cant leave your children a rented apartment; but you can leave them an asset: a home.
I believe the NYT rent vs. buy calculator actually includes an assumption around rent price increase. By default, I believe it's set to be at the same 3% as the house price appreciation assumption
Most people will need an house before their parents don't need it anymore... by the time you pass away, they will already have an house, bought or rented
@@joaocardoso9031 tomorrow isnt promised to anyone and i wont take the chance in that they will buy one in the future, especially with the prices of this housing market. I believe the days are coming wbere home and land ownership will be rare and a luxury for those who can afford to buy. Id rather buy property now. My grandparents had a home in puerto rico, the home i lived in during my youth, and they sold it. I wish they would have left it to us. They sold it in the 90's for cheap, now its worth about 300k in puerto rico which is alot. I would have kept it and pass it on to my kids.
@@biglulm6 thats subjective, as a kid i wanted the house i grew up in in Puerto Rico. My grandparents sold it but i would have never sold it if they would have left it to me. The way im raising my children is to always leave an inheritence and make sure that you leave enough for your childrens children. By the time they get older the housing market will be untouchable, something only the elites will be able to afford.
If it's cheaper to rent, you could also rent and invest the difference. It could yield you a good amount of more money for your kids. It also could not. That's why running the numbers is a good idea.
Yes! Run the numbers! For me it made more sense buying. Also, don't forget that property normally appreciates with inflation and the mortgage amount stays the same.
Inflation is a negative and not a positive. Your house “appreciating” just means your purchasing power is depreciating therefore everything else getting more expensive over time. Plus a place you live in will never be an asset but a liability.
@@bisiriyutajudeen5728 What is this nonsense? "Inflation is negative and not a positive?" Inflation happens EVERY year. It's a totally normal thing. The benefit Curly is mentioning is that houses have historically OUTPACED inflation which literally increases the value of his asset. "A place you live in will never be an asset but a liability". That's an interesting comment. A house is literally an "asset".
@@jimbo4196 Perhaps you need to study the actual driver of inflation if you are struggling with the idea that inflation is a negative. If more units of money are printed and finds its way into the economy, it gives the illusion that "assets" are going up in value(positive) but in actuality, it is the purchasing power of money that is going down(negative) Paying property taxes, maintenance costs, insurance costs make your house a liability. It is funny we don't flinch when this applies to cars when you drive it off the lot. A house you live in is not an asset but a liability. A house which you rent out and receive cash flows from is an asset.
Let’s check if Ramit is correct and do the calculations on the property he identified in the video. The property in question is 776 Bryant St, Palo Alto, CA 94301. You can easily look it up and see all relevant publicly available information on any real estate aggregator site. The previous owner purchased the property on 10/26/2005 for $1,060k and sold it on 6/6/2018 for $2,150k. The question that we are going to ask here is whether that individual would have been better off renting this same property between these two dates and investing whatever money he saved in the stock market. I am going to make a number of assumptions and use the tools that Ramit suggested as much as possible. First off, let’s assume that on 10/26/2005 the previous owner made a 20% down payment ( $212k) plus closing costs around $10k excluding prepaid property tax (I’ll add that separately) and took out a mortgage of $848k. This would have been a jumbo loan, for which the median 30y fixed interest rate was 5.87% on that date. The payment for such a loan is $5,013.53 per month with the remaining balance at the time of sale of $623,314.31. Keep in mind that there was nearly a decade of time with countless opportunities to refinance this loan at 3.2%-3.5%, which would have drastically lowered the payment amount and the amount of interest paid. But, we are going to ignore that. The property tax is available from the public records. The annual amounts start at $13,227 in 2005 and go up to $15,886 in 2018. For simplicity sake, I will use an average of these numbers and divide by 12 to get a monthly amount of $1,213/month. The condo currently has HOA fees of $550/mo. The HOA takes care of all exterior maintenance/repairs including the roof and also provides homeowner’s insurance. I am going to assume that no supplemental insurance is required as is typically the case in that area. We have to adjust these fees for inflation to project what they were in 2005 and 2018. Using an inflation calculator, this amount is equivalent to $342.58 in 2005 going to $440.47 by 2018. Again, for simplicity, I’ll use an average of these numbers, which is $391.55/month. As far as maintenance expenses, since the HOA takes care of all of the exterior, we are going to allocate $50/month to a home warranty contract with $75 deductible and we will take a fairly reasonable $100/month to cover deductibles and any other maintenance issues. To keep things equivalent to a rental, I will assume no upgrade and remodeling expenses (you would not get that while renting). Here are the monthly expenses: Mortgage: $5,013.53, Prop Tax: $1,213, HOA fee: $391.55, maintenance: $150. Grand Total: $6768.08/month. Let’s now look at what it would cost to rent the place from 2005 to 2018. In 2018, the place was actually rented out at $5300/mo per MLS by the new owner. Since it was not a rental before that, I used US Census data for CA to project what the rent could’ve been in 2005. Their data shows a 56% increase between 10/2005 and 6/2018. Therefore, the rental price would have been $3,400/month in 2005 going up (assume linearly) to 5,300/month. Let’s assume a deposit of $10k for convenience (to cancel buying closing costs in the later calculation) Now, let’s assume that our owner decided to rent instead and put all the extra cash into S&P500 index fund. We are looking at the invested down payment of $212k plus monthly additions starting at $3,368.08/month linearly decreasing to $1,468.08/month over the course of 152 months. This requires some historical pricing data of S&P 500 and Excel. I can provide a link to google sheets if anyone is interested, but, at the time of sale (or move-out in this case) he would’ve had approximately 430 shares of S&P 500 worth $1.169M. That is certainly a large number, but the owner still ended up with a better deal: he pocketed $2.15 Mil - 7% commissions/closing costs - 623k mortgage balance = $1.376M. Keep in mind that I ignored many other factors favoring the owner, such as tax deductibility of mortgage interest and property taxes for the entire time of ownership, which would have been a huge benefit for the owner since it clearly exceeded the standard deduction. I also ignored the fact that the property could have been bought with no down payment or only 3% down, which would still let the owner get all of the appreciation with minimal opportunity cost. And, I deliberately excluded the fact that if the property was refinanced 3 years after the purchase at 3.5% per historical data, the total payment would have matched the rent at that time. Lastly, unlike gains from stocks, up to $500k in profits from the property is tax-free if used as primary residence. Buying was a clear win here. I am sure Ramit is a well-meaning guy and this post is not designed or intended to disparage him. But, if you take a certain position, do what you preach… run the numbers. Doing it on the past data to validate your premises on the example you chose is the least you can do.
This is an awesome analysis. THANK YOU! Even if you disagree with my analysis, I appreciate you running your analysis and sharing your assumptions here. Without replicating your analysis (but stipulating your math is likely correct), I would differ on your assumptions about maintenance and renovations. I also acknowledge that you didn't count tax benefits in your analysis. When those assumptions change, buying is not "a clear win" -- but what I most want is for people to run a detailed analysis before the biggest purchase of their lives.
good work, but like many people in the comment section you work in the past and the question is 'is it better to buy or rent _now_". we don't have a time machine.
Great math, and don't forget that in your calculations the assumption is that the person renting has to be super disciplined to invest for 30 years which is not usually the case.
Wow, hats off for taking the time to do all that...personally if my only options were renting or a house that costs that much I would move states 100% Decent break down
I’m a PhD economist that works on the decision between buying and owning, and while many of the points made are correct, many other are biased at best. Principal (not principle) is not a cost; interest for many people can be deducted; the market for rental and ownership is not the same and is not always possible to find a rental that provides the same service as an owner-occupied; renting puts people at the landlords decision on rent and moving costs are high; owning vs renting needs to be balanced, it can’t always be better to rent or be better to own, at current mortgage rates, either house prices decline or rents need to continue to increase to rebalance the market. No doubt that owning is not always better, but an unbiased analysis would have been welcome, I know you can do it.
Well, all of the things you listed are also biased based on the individual on the area in the cost analysis and won't apply to many people. In the end, the only objective analysis is the NY Times rent vs own calculator, and even then, all the values are biased based on the person inputting the numbers. You can't really have a completely unbiased analysis of rent vs own, as any figures used are also based on many assumptions as well, as is all economic data, and can be predictable on a long term scale or as a whole, but not on an individual basis. This analysis is by definition, personal, and therefore always biased.
@@rebeltheharem7028ok, if you say so… Note that bias and uncertainty are different things. You seem to be mixing the two concepts, but I could be mistaken…
Everything you are saying he already stated in the video. He made it clear that people should do a detailed analysis to make the decision. Of course he is including his opinion this is a persuasive piece. Who comes to YT for unbiased videos?
@@Giasemi55 not true, but that’s fine! About 66% of US households own and 34% rent (there are other small categories but those are irrelevant and I just omitted them), of this allocation, how much do you think is misallocation (i.e., people who should rent but own and people who rent but should own)? I can tell you it must be minimal because it has been like this for several decades! Given the housing market structure, very few people/households are doing the “wrong thing”. After watching this video, you would think it’s the other way around. I don’t expect unbiased commentary on YT and I see that all the time, and that’s why I comment when I think a comment is due.
Please show me where he said renting is always better lol. Also, give me a break with the whole “interest can be deducted” bs. Interest can SOMETIMES be deducted, if you itemize, up to a CERTAIN AMOUNT, and will ALWAYS cost more than if you hadn’t paid any interest at all.
I have to disagree. I paid my house off in two years lived super poor and put every penny into paying off. I'd rather pay taxes once a year than rent for life.
@@Rogue_Money not if you had huge steel balls and went to war and government says you ain't gotta pay them ever again. Tax free everything for me. I'm welcome, thanks to war.
I used to rent all my life, until my previous landlady kicked me out of the house after 10 years because her daughter wanted to move in. I had to find a new place in a very short time, and there were not any houses available to rent in good condition and at a reasonable price. I decided to buy my own house and I have not regretted it not even a tiny bit.
Since you say I don't own my rental property because it has a mortgage, the rental income should go to the bank then. But why is it I get to keep my rental income. I'm confused
My 91 year old grandma wants to go rent an apartment. She can't keep up with the house and do the stairs. Renting with home care is cheaper than assisted living. Its opened my eyes to that as an option later in life, too.
That’s a different situation than most who are looking for their first home to buy. For her it makes sense to sell so she can use the equity she built from owning her home to live comfortably for the rest of her days.
Riight. A 90 year old is going to move to a completely different country away from her family..everything that she ever knew. I just watched my husband's 103 year old grandma die and all they care about is not dying alone, without family by their side..@lons5472
I am so glad to have found you on UA-cam and look forward to learning more about investing. I owned a home for 20 years in North Atlanta and sold it at the top of the market 3 years ago. All my life, the American Dream was to pay cash for my house. When I paid cash for my little house by the water in Florida, my dream became a nightmare. Here in Florida, one bad storm can wipe out my home and therefor my life savings....And don't look to the criminal insurance companies to insure you or honor their policies. I am excited to sell my home before the next hurricane season, invest my cash, and become a happy and stress free RENTER!!!!
Amazing video Ramit! I’ve been hooked on your videos since watching your first rent vs buy video. I live pretty close to the Palo Alto house in the example. I rent a beautiful bayside water view apartment, while my coworker at the same level as I am, bought an identical condo down the street around the same time. The amount of horror stories he tells me of broken appliances (they were brand new too), HOA towing his car, and many sleepless nights makes me never want to buy in the Bay. Meanwhile, I’ve consistently invested in my 401k (with a 9% company match!), maxed Roth IRA (and another one for my wife too), and maxed HSA, I’ve seen my net worth skyrocket these past 3 years while my wife and I have been traveling the world. I can’t even imagine how much of my coworker’s mortgage is being thrown away to interest right now.
Thank you for sharing your knowledge and experience Ramit! My wife and I almost bought a house because we keep having friends & coworkers around us buying and it honestly gets to our head sometimes. After running the numbers we decided to stay renting. After seeing your Netflix series it made me feel better about our decision. We’ve been able to save/invest 3000 a month for the last couple years. Our savings and retirement is bigger than it’s ever been and it’s kind of addictive to watch it grow. It motivates me to work harder to be able to invest more! Thank you for all you do!
Glad your savings and investments are doing well. Because you will need it to pay rent for a couple of decades after you retire. Keep your fingers crossed there isn't a crash or bad recession.
More of house buying is a lifestyle choice honestly, and a financial one to some extent as you have to be able to afford it. I chose to buy a house because I owned a condo prior and could not stand listening to other people's racket constantly, there was never peace, and I owned an end unit!! Rental SFH are hard to come by around here and the cost of them would be about 1000 more a month then I pay in mortgage, taxes and insurance!! Makes more sense for some people to own vs rent. It isn't a black and white scenario! Also as the other poster above wrote, when you retire you will have to pay an ABSURD amount of rent each month, where those of use who have paid off homes or who have sold them and bought a smaller place with cash will only need to worry about taxes and insurance which will only equate to maybe 1000 a month by then if not less. Rents will be probably 3K and up by the time we retire, probably even more!
Not in USA but I know a guy who works his middle-class job. He saw a house for sale in the neighborhood and knowing that there is a good market for renting he took his shot. Went to the bank, explained the "business plan", bank was convinced, gave him a credit, he bought the house and after 1-2 months of renouvation and repairs it found its first customer. So my friend continues living his life like he did. Literally nothing changed. His new project completely pays of for itself. The bank makes profit and After 6-8 years the house will be in his ownership. My point is buying a house as an investment could work for you long term if the place is right and you reacted to the right circumstances in time.
As a single guy, happily renting an 850 square foot apartment within walking distance to work, the cheapest condo a bit further away would be almost $1000 a month more expensive right off the bat with a 20% down-payment. Depending on which rent vs buy calculator I use, I'd have to stay 25 years to never breaking even if I bought.
These buying/renting conversations are lively! I feel insanely lucky to have been able to buy a house back in 2018. We couldn't afford it today because prices have almost doubled. Re: amortization tables. Interest scared me too, which is why we made an extra payment every month until we could refinance down to 2.5%. Again, insanely lucky. Buying isn't for everyone! I anticipate owning this home for another 40 years+, but I look forward to selling and renting in the future for all the conveniences you mentioned. No yardwork, less cleaning, having fewer belongings for our loved ones to sort through when we die, etc.
I own a duplex, live downstairs and collect rent from the unit above. Old house I renovated with my father. House probably gained over 100 000$ value over the last 4 years since I bought it. The rent covers all my mortgage and then some, all while charging below market rate (he's an old man who's been there 20 years, I intend to keep him as long as he's willing). I have two whole floors to myself, while paying less month to month than I would with a roommate. Got lucky, I'm well aware of that, but in any renting market, if landowners start losing money, that's gonna put pressure on price. You can't just assume nobody runs their numbers. Eventually, rent prices are going to catch up.
@@rogergeyer9851 That would only be a problem if I intended to sell, but I've been lucky once, I don't intend to tempt fate. I'm good, I'm set, I'm staying put. People have been talking about a Canadian real estate crash for years now, and honestly I hope it does. Things have getting pretty crazy. New stats broke out recently about rent hikes in the province since the pandemic. The big cities have been making headlines for years, but I think the untold story is how it has begun to spill in much smaller cities. 33% rent hikes in 4 years in the capital where I live, but up to 50% in some places. 50 goddamn percent. It's just insane. I really hope, for all our sakes, that it will stop somewhere, sooner than later.
My rent has went up 4 times since c19. However for yrs it never went up so that's odd. Alot of folks moved here from California in 2020 and were well not so rural anymore. This has caused a supply and demand issue here so now here were it used to be cheap to rent its increasing rapidly and I'm a good renter never later and pay in full! I will also say this supply issues have made cheap $150000 homes before c19 sell for $250k or better now. It's not realistic in my opinion. Also blackrock is still buying up homes to only rent from now on. That's the biggest problem I believe with the inflation of homes. Cause they are literally buying entire neighborhoods to reduce the supply and benefit only investors. Blackrock is also in bed 🛏️ with the World Economic Forum!
To me, buying a house is to make sure my rent doesn’t increase when I’m retired. I live California and when I bought my house in 2018 my rent for the 1 bedroom apartment was $1800, my mortgage, property tax, insurance, and HOA was $3200 on the 3 bedroom house. Just before I turned in my notice, I received a renewal notice and the new rent was $2500. I just looked the other day to see how much it cost now to rent the same apartment and it’s $4000 a month. On the other hand my now mortgage, property tax, insurance, and HOA is now $2600 a month after the refi in 2022. Plus when I decide to move I get to sell my house and get all of my money back vs just moving with nothing.
Selling is not that easy and it's expensive. Also, if you are striving for higher pay or better job opportunities, you severely handicap yourself by buying a home. You can't just pick up and leave for the better job if you find it in a different location.
@@MT-yx5cu selling is not that hard, I sold a couple homes before and it took maybe 2 months. Both times I just moved out and signed a year lease with an apartment while I’m waiting. If you know how to budget and have an emergency fund, you should be fine.
I actually lost a lot of money and time on rent. The owner doesn't care about maintenance and I am forced to handle it on my own. I've cases where the owner forfeited my contact and just return my deposit when he decides he wants to sell the house, but I lost on moving costs and settling down costs. When something breaks in the rental house, you can argue it's wear and tear but the judgement right usually goes to your landlord, and he is holding your deposits. I ended up biting the bullet and got a loan to buy a house instead. Today I am happily paying back the loan with the interest and have a lot less BS in my life.
This is a short sighted argument. Owning a home manages the human factors. You aren’t at the mercy of market increases for rent. If you can afford the home, you can also pay it off and then cut your housing fee to maintenance and taxes. You pay a little more to remove a lot of the unpredictable parts of life
@@jaredrosenberg4965 the house isnt free, you have to spend a lot of money with maintenance and taxes, and you will have paid 5x the property value... you can get good and bad deals on both sides, good luck!
My landlord is providing a service. I am in a small town and pay less the $1K per month in rent. I put my money into R&D instead. While renting I accumulated 40 US patents. Each patent is approximately the value of a house locally. If I put my money into real estate, I would own one house instead. The main downside of renting is social perception: that is women like home owners more. The cost of ownership includes the cost of income taxes having a tie to the local community. In Canada the cost of ownership includes income taxes at 54%. By renting, I can sever the residency tie easily and move to a lower tax jurisdiction. I can save enough in income tax to buy a 8000 sq ft chalet in the Swiss alps free and clear in 4 years by moving to Switzerland. Not coincidentally, Switzerland has 16X more patents per capita than Canada because it is a better place for innovation.
I never made sense of mortgages because of the very example he showed here. I bought my house fully in cash (yes I was 32 and all my friends had houses for years before me), but I rented and made wise investment choices up to then, and now I own my house outright. It might have been more sensible for me to rent to free up capital, but I have to say it was the best feeling in the world to finally own my own house ftet working hard for it for years. I think there is a norm in the US that if you dont have a fat mortgage and a house you cant afford by the age of 21 you’re a loser, and this is killing a lot of financial dreams for young and uneducated people. I would rank in order: 1. Buy with cash if you can 2. Rent and invest 3. Get a mortgage
I appreciate your step-by-step analysis. Some locations have cheaper housing and very limited rental options. By following the process you showed, each houshold should be able to figure out what is best for their situation.
Buying a house is a major generator of wealth in this country, because for a large segment of the population, it is the only generator of wealth. If someone were to make a single $20,000 purchase of a diversified mutual fund and let it sit for 30 years , they would end up with 240,000 based on the average 10% return. I had a paid off house that I sold to move and take care of an ailing parent. I am now renting and have no intention of buying again. I invested the proceeds from my home to build up my retirement account. Buying vs renting is a personal decision and there is no right or wrong answer, but building wealth should not be the primary reason.
I have rented large houses for years and sublease a portion of it to my LLC; I use two rooms for my business and have the landlord install a separate meter for water and electricity. I am able to deduct my expenses from my taxes. My business pays for me to live there through my withdrawals and also pays for its own expenses. My LLC also carries the renter's insurance with an umbrella policy. I also rent houses overseas and use the same strategy. The houses I rent are now my assets because they make me money and cover the expenses. I sold both my houses 20 years ago after realizing the cost of owning was very high in Hawaii, about 60% higher than renting, and property tax is constantly increasing.
That is really interesting and smart! I live on Maui and price are insane for both. But still cheaper to rent with current interests rates. Where do you live now?
But he did the same thing with his housing example, imo he didn't give a fair assessment he brought forth more cons or potential cons than pros @alecpaulson1246
Only about 4 % of Americans out of a population of 335 million make over $400,000 a year! I don’t know why the hec people live in California if they’re not in that 4% when there are so many other places to live that are inexpensive and they can invest instead.
I used that NYT buy vs rent calculator and...... I saved myself $3,225,000 over 40 years by buying my condo rather than renting. Yay! 😁 And, really, it is probably way more than that because I took advantage of prepayment options and cut my 30 year amortizatiom down and will have it paid off in 10 years, so I saved myself probably over $100k alone in interest. 😊
paying off low interest debt early doesn't build wealth as quickly. While you are paying less in interest, you are also earning less in interest than if you had invested the money. If you make on average 8-12% returns in the stock market, then paying off 3-7% interest debt early will more often lower your future net worth.
@@susiex6669 and what if the market crashes and wipes out the entire equity of your house to the point that you're under water, lose your job, get foreclosed on, and then sued for the loss that the bank took. We can play the "what if" game all day.
@@susiex6669 Then you stay invested and see what happens. One of the biggest bull runs started after 2008 crash. This is the importance of having an emergency fund.
My mortgage is really low compared to rentals, and it's gone up since i bought it in 2020, from $804 to $986. I've had to pay $5k for plumbing, $300 when the AC went out, my HVAC needs $1k worth of work, my roof needs replacing, which insurance won't pay for and i need to get the massive oak trees trimmed, at the least, to reduce the pummeling of my roof. It's a lot to own a house, and I do miss renting because I'm so sick of maintenance. I'm currently renting it, but once my tenants move out, I think I'm going to sell it. I am currently staying with my mom, whose home is paid off, while I figure out where I want to move. Everything is so expensive, though, sometimes I feel like just staying indefinitely with my mom and paying for us to take trips and help her with anything she needs. It's been fun so far, and she's happy not to be here alone, especially at night. But we'll see. Everyone just needs to do what's going to work best for them.
You forget some very basics: there is nothing that can replace a garden you own. You can rent a place, but you cannot make the garden into your garden. There are few things as satisfactory in life as gardening. You're missing out on that, with your etfs, your money in the bank, investments... True life is working with your hands, in your own work place you designed, in your own garden you created, in your own interior you thought out.
Even if renting costs less than mortgage, don't you need to factor in the actual value of the house in the future? You can sell your house because you own it. Wouldnt it be (rent*months) va (mortgage*months + repairs - price of home in 30 years)? And if you plan to live in the home after the mortage is paid off, youd save money there too
There's one big drawback with rental, the owner may not want to renew a your lease when it expires . And you'll be left looking for another unit.. A feeling of uncertainty and insecurity will constantly bother you.
I ran the numbers, we'd save $186k over 8 years by renting. I'm glad you're putting this info out there because I have never really heard this side of the coin and frankly it makes a lot more sense. My husband and I are nowhere near deciding where we're going to live for 15+ years straight, and personally, I moved around a bunch as a kid and I turned out fine. Grew up in an apartment. I don't feel like I missed out on much by not having a white picket fence.
Do you know the size of coming rent increases? If that's not locked in, you're GUESSING about future savings -- just be aware of that. I lived in a cheap apartment, so my rent was so cheap it didn't matter much. Plus once I'd been there for a decade and established my rep as a great tenant, I got a discount and knew they wouldn't raise me a lot, as they wanted to keep me. (I was stable, followed the rules, got along with my neighbors, worked WITH the management and maintenance folks on any issues, etc. It's not hard to be a great tenant if you're surrounded by transients who won't follow the rules, tear up the place, fight with the neighbors, etc).
Closing costs, maintenance, transaction costs, and renovations are not monthly costs. These usually happen once or every so often. It depends on the house. The rest are usually included within your mortage.
@@alecpaulson1246 That is where an emergency fund is necessary. That is how you plan for unforeseen costs like those. Grouping them in as monthly costs is a bit misleading. For example, closing costs, are definitely paid once, unless you take it out as debt, which I think Ramit wouldn’t suggest.
Also, if you bought an old house in bad mechanical shape, if the city inspector finds Violations to city code, he will give you a date to fix it, and fine you. The city can take you to court too if you show non-compliant after the deadline.
Owning a home is about the priceless intangibles: the stability of having a place to truly call your own, where you can put down roots and build lifelong memories. It’s about the freedom to customize your space and create the perfect sanctuary without needing permission. Homeownership means leaving a lasting legacy for your family, a tangible asset that can be passed down through generations. In a world of constant change, owning a home offers the unparalleled comfort of permanence. While it's tragic that homes have become overpriced for young couples in major urban areas in 2024, in a normal market, owning a home for at least 7 years remains the preferred choice for most. We're almost mortgage-free, enjoy watching the trees we planted years ago, have built long-term relationships with neighbors, and now have peace of mind in a home that has more than doubled in value since 2006. Even with the phantom costs, the value still increased significantly.
I would add, when some violence moved into my neighborhood, it was the homeowners who cared enough about the place to do something about it. The renters see things moving in a bad direction and leave, the owners see it moving in a bad direction and do something to change it. This is just generalities, but it has proven true for the vast majority living around me.
For many, the emotional burden of renting (increasing rental costs, mean landlords, chance of having to move with short notice) seem to be worth the opportunity cost of not having money to invest. In the short term, for people who are in financially insecure circumstances, buying is the silver bullet to reducing the uncertainty around renting. But you’re only trading one insecurity for another and will more likely end up in debt or house poor considering the mortgage costs + property taxes + maintenance costs. If you really want to buy, buy a condo or buy something way under your means. For people who aren’t making millions (so for most ppl) this is the best option to ensure psychological safety and financial gain.
I never owned a home because i couldn't see myself having to deal with house things. So glad the landlord has to do all of that crap. I diligently invested sooo much money instead!
One must never assume rent on the same unit will never go up after 10, 20 or even 30 years. Inflation is eating ppl alive and having your own property as asset literally hedge against that. Your mortgage aint going to tripled in next 20 years but your rent will.
How about if the total cost of ownership is already 2x as high as the rent? Have you actually calculated how the numbers play out, even if rent triples?
My uncle and I are the same age he didn't believe in owning, so he rented. I bought my house. After 10 years, I sold it. I then downed sized and paid off my house. My uncle is paying $2800/mth for his apartment. I'm paying $500/mth on property tax and still have enough money to buy another house to rent out. 😊
Thing is a lot of these comments are saying they won’t have to work after they pay off the home. Property Taxes are gonna be the number one factor on if that’s true. Some people may have to pay 300-1000 or more a month in property taxes. Which for majority of people will require a job to pay for. And in 20-30 years it could be and most likely will be significantly higher.
Most people that own a home and plan to retire are saving for retirement. That means having money in a retirement account so you don't have to work. Also, even if property taxes and insurance are a combined $15K annually, you still have social security. At least for now anyway. Owning a home outright when you decide to retire provides you several options. You can potentially downsize into another home and pocket the leftover cash. You can move to another area where the cost of living is less and pay cash for another home. You could do both (downsize and move to lower cost of living area).
@@jimbo4196 most people suck at money. Most people won’t account for the rising market cost of owning a home no matter where you’re at. Most people will go bankrupt after something goes wrong with their home. A small segment may be successful. But MOST will not.
I 100% agree - and still caught myself falling for the myths embedded in my soul. We got a 370k mortgage and another 70k debt for renovation. We bought the house because "If we pay 1700 a month for the mortgage vs 1500 a month in rent ... that's a no brainer, right? This way ALL that money is equity for our retirement" Well... no. We 100% underestimated a) the hidden costs (oh hey, the boiler is actually getting a bit old and Putin decides to start a war, so gas becomes really expensive -> 20k for a new boiler; etc) b) the "life happens" side of things For a) we should have just done our homework of running the numbers a bit better... For b) ... You're not the same person you were 5 years ago. So chances are you're not gonna be the same person in 5 years from now! We thought the house made perfect sense, as we got a stable job in the area, planned to have kids, etc. - Then life came around and threw a few curveballs (both good and bad!) and now we're moving away for 3-6 years (to somewhere, where housing is provided for free). If we hadn't bought that house we'd pay 0€ in rent, basically giving us 2000€/month for investing... As it stands we're left with a house that we can't really rent out (German renting law... basically we'd have to do so much renovation it wouldn't be worth it) but also don't need for several years. TLDR: Don't underestimate the value of flexibility that renting grants you! A house really can "tie you down"!
Good analysis. By buying instead of renting, you will eventually own your house and stop paying, particularly if the price is correct. Personnaly, I'm 53 and finished paying my mortgage. Ok, it's only a tiny house but now I'm about to work halftime too.
Buy, easy. Buy because I want my own sovereignty. Buy so I can fix things when they break and not wait weeks or months. Buy so that I can own pets without paying monthly fees and forfeiting your initial deposit. Buy because I want a sense of permanent, stable housing. Buy because I want a garden and want to invest in a fence and soil. Buy because in my area, housing is still rapidly increasing. Buy because rent here is so unaffordable. Also, most of us do not live in NYC and LA where renting is often the more affordable option.
I’ve always thought that renting is legit. Me and my wife were able to rent in an area for 12 years that we absolutely could not afford to buy. And it was amazing living by the beach in California with an ocean view. Not a waste of money at all. Once we had a baby and we’re both working full time from home since Covid, we decided we needed a bigger place, so we moved to oregon and bought a house. It’ was quite expensive up front but we wanted the stability, space, and freedom of owning and a big yard for our daughter. It was worth it now for us
Imagine you had bought 12 years ago and didnt have multiple rental increases and then moved as you did Your new place would be paid off in 8 years time only 😊
The main reason I want to own my own property is to have more of a safety net, specifically when I finish paying the mortgage and then I don´t risk getting kicked out by a landlord when I´m 80.
I can understand that. What if, alternatively, you had such a large investment portfolio that your housing would never be at risk? That portfolio, which had grown and compounded over time, would pay your housing costs in perpetuity, whether you wanted to rent or own. Wouldn't that also be a safety net?
Not really. Landlords can sell to other terrible landlords. Force move outs just by making it living hell to live in a place. No amount of investment cushion can protect against that.
What % of renters get to that multi million dollar safety net do you think? 1%? And they'll be means-tested on that cash nest egg for access to healthcare, social care etc while the homeowner will have their primary residence wealth ring-fenced. It's an incredible gamble to opt out of ownership and trust the market to keep you alive.
@@ramitsethi Not sure. I didn't mean that I won't have the money to rent if I get evicted; my point was that even if I CAN afford to quickly rent another place, I don't think I want that kind of hassle when I'm 70 years old. I want to be able to retire at a place where I don't risk getting evicted. Does that make sense?
Thank you for this amazing video 🙏🏼 After running the numbers, I realized that it didn’t make sense for me to buy a house, I’m better off renting and investing in the stock market rather than paying a high mortgage.
I'm going to buy a cabin, own it outright, and all my income goes to investing and businesses. Depends on the market and where in the housing "bubble" you are. Buy at the bottom and you're golden.
I'll have to be financially stable in every sense before purchasing my first unit. The best thing to do with your money is to invest rightly because money left saving will end up with no returns.
No doubt being financially free and not having to worry much about health care , housing, and other expenses cannot be overemphasized, making smart plans and setting up diversified investment portfolios is quite essential.
the problem is that most don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could hope to earn a high in these challenging conditions.
Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional in order to navigate this recession and achieve potential high yields and taxation
This is silly. Owning a home builds wealth. Full stop. Fixed rate mortgages are a great hedge against inflation while at the same time holding an appreciating asset. Rents, on the other hand, will always go up. If you plan to stay in an area for more than a few years, buying is almost always better than renting. Stop blowing smoke at people.
@ yes. I currently own three rental properties. 2 in Santa Rosa California and one in Battle Creek MI. The reason I own those and rent them out is because the cap rate was attractive as an investment. That obviously means that in a short period of time the residents renting it will have paid for my property. If not, it would be charity. The ONLY things that could extend that cap rate is aggressive rent control policy or local bond measures written on property taxes. Again though, that just extends my horizon, it doesn’t negate my decision. If renting truly were cheaper than owning, there would be no landlords as there would be no money to be made.
I'm glad you have those properties! Your last line is incorrect. There are several reasons why a renter could rent a property for far cheaper than it would cost to own. Can you name at least 3? As an example, it would cost more than 2x more to own the current place I rent.
@@loudandclearmediaI rent a $1.8 mil property for $2500/month. Do you think my landlords ran the same calculations as you? Do you think they are building more wealth than I am as a result of our individual decisions?
All this is applicable to people who can afford to rent a 2 bedroom apartment but then go on to buy a 6 bedroom house. My rent was $1200. I bought a condo where I pay $1500 per month including property taxes and insurance. And the thing has appreciated by at least 20% in last 2-2.5 years. So, you can buy a house/condo if you don’t buy a $500k house when you could afford a rent of just $1000 per month.
Ramit Said: "SOMETIMES"!!!! renting can be a better financial decision. Be careful to assume that renting is ALWAYS a better financial decision. Renting SOMETIMES is a bad financial decision
I used to think the same on rent. Now renting makes good sense. When you rent you DON'T take on the risk of owning the home. I'm investing the difference.
Here’s the problem: you’re investing the difference currently. Often people start spending the difference then end up 70 without shelter. So long as you’re investing the difference you may be okay.
Without a doubt, this year will be worse than the last. I lost a lot of money last year as a result of bad investment choices that I would not have made if I hadn't been so worried about my portfolio. I kept investing, but I couldn't determine whether to start paying for a house. In the end, I sold my positions, and the house needed more work than I had planned. I'm not sure how long I can keep going like this
I don't think you understand that you will be at the mercy of landlords and rent increases. Have you seen the payoff of equity? I bought for 315k, with 3.5% down. and it's now 850k. Not even the stock market would have turned 15k into half a million in 5 years.
@joelwong3144 no, why would I sell if I'm getting positive cash flow from renting it. I bought several homes this way and now rent them. Part of my diversified portfolio. I can now retire before I have gray hair 😉
6:00 Imagine you go to a barber for a haircut / a dentist for a surgery and someone tells you you’re throwing your money away (for the service you got obviously).
Similar here in the Portland Oregon area. I could rent my house for 2k/mo and if I bought my house today at $440k at 7%, a mortgage would be 3k/mo on a 30yr ($497k paid in interest over the 30yrs) so total cost of $937k to buy my house. On a 15yr mortgage $4k/mo ($220k of interest paid over 15yrs) would cost $660k to buy my house. Renting for 30yrs with 1% rent increase per year would be just over $700k over that 30yr period. If you never sold your house within the 30yr period and never needed to fix anything (good luck with that) and did a 15yr mortgage or less instead of a 30yr, then it would make sense to buy in my area, plus use that extra 1k or 2k per month to invest then renting makes a lot more sense if you choose decent investments that hit the market average and not lose money.
I think observing rental price trends is also valuable when making house purchase decisions. I’ve found that while my initial mortgage payment felt somewhat high, over time, it’s become cheaper and cheaper as rental costs go up
I prefer renting, but I bought our house. Why? Because I don't like to have close neighbors. I am a light sleeper and sleeps early(9 or 10pm), so if I have neighbors close by like in a condo or apartment, most likely I won't be able to sleep due to the noise. Be nice to hear anyone's advice on renting vs buying if one of the need of my 'rich life' is peace and quiet after 9pm. :)
Find it strange renting is seen as throwing money away yet no one ever says bank interest is - especially the fact mortgages are weighted heavily towards interest at the start -nor other 'hidden costs'. Propaganda
I just did a video on this topic. So many don’t understand how effective renting can be in some situations. Two similar houses in Florida cost $5,600 to own or $3,500 to rent. The difference can be invested. And no phantom costs. Home 🏠 ownership is a good thing but not always. The American Dream has a lingering effect and people think renting is wasting their money. By looking at both sides you can easily see the differences.
I’ve been a homeowner twice. Can’t say I enjoyed it either time. The stress, the maintenance, the lousy neighbors ( keeping up with the Jones’ ), taxes/insurance. When you live in an apartment everyone is on equal footing. Not as much neighbor competition. Landlord takes care of lawn, maintenance, taxes. We love our 2 bedroom, 2 bath apartment. When you get older, you don’t need the headache.
i dont usually comment... but with a youtube name i will teach to you be rich and your opening line "im a multi-millionaire", i never clicked the back button so fast
If you want to talk about phantom costs of ownership that trip people up, please talk more about property taxes. Yes, everybody knows (or should know) that you have to pay property taxes. But did you know that when you see a "property tax" number on a real estate listing, that's NOT the amount that you'll have to pay? Rather, it's the amount that the current owner is paying - and what that means for how much YOU will pay depends on where you are. In many states, property taxes are stabilized for owner-occupants, so that regardless of how much the house value appreciates, property taxes only go up by a certain amount. In some states, that amount is zero - meaning that the owners are still paying taxes based on the assessed value when they moved in 10 or 20 years ago. If you put that number into your budget for property taxes, you're in for a very unpleasant surprise. And you MUST do your own research on this. As far as I can tell, there's no law - nor even any professional standard - that requires real estate agents or mortgage lenders to give you good information about property taxes. If you pay your property taxes through an escrow account on your mortgage, they can set your escrow payment to any old number that might have nothing to do with what your taxes are going to be. And you won't find out that anything is wrong until taxes come due and there's not enough money in the account - at which point your monthly payment will jump by many hundreds of dollars a month. You'll have no recourse against anybody when this happens. I know so many people (including me) who have gotten burned by this. But somehow, it seems like nobody talks about it, and I've never seen it mentioned in any first-time homebuyer information resources.
I dont mean to be rude, but this is wrong and misleading. First, the process for setting the escrow amount is standardized. It is the opposite of any old value. And you, as owner, have access to the documentation for it if you wanted to check. Even if your state has a Homestead protection on taxes that caps at zero increase, the assessments still happen. You can get those numbers easily as part of the process. Even Zillow or Redfin type site has assessed values and property taxes going back. If they look strange (or even if they don't) you can discuss what your property taxes would like with your realtor. Or talk to someone from the taxing government entity. If you are worried that first year will be a big debt due to some type of escalation (such a Homestead ending on ownership change) you can put extra into it. You are right that the longer a home is owned, the bigger the potential impact. But that is also a known value. While the concern is valid, treating this as unexpected or even phantom is not. Even in the rushed closing of today (mine was literally the first day the lender said they would be ready) you can still do this.
@@BenFranklin1776 I don't mean to be rude either, but I'm not just speaking academically. This actually happened to me, and you're in no position to tell me that it didn't. I bought my house at the end of 2021. The mortgage lender, for whatever reason, set the escrow payment based on what the previous owner was paying in property taxes in 2019. I thought the number seemed low - it was even lower than the number that appeared on the listing - so I asked them about it, and they assured me that it was right. In hindsight, I should have pushed back harder, but I was overwhelmed with all the other details of buying/moving, and it wasn't on my radar that it was my responsibility to double-check the lender's numbers. Taxes came due a year later, and there wasn't enough in escrow to cover them. My monthly payment jumped by $340, because I had to pay back the deficit that had built up and pay the higher amount that I should have been paying all along. If you're saying that my lender actually did something wrong here and there's someplace I can report them, do tell. Because I've looked into this already and have come up empty so far.
My favorite thing about Ramit - preaching the renting wisdom I've embraced for years and have always been chided for. When this came up on the Netflix show I couldn't believe it - THE VALIDATION
Series Idea! 💡 Debt to life (Dead to alive) Great idea for content for you, Ramit! Find 5 couples located in different places maybe even around the world that are drowning in debt & make a strong financial plan with them & follow up in intervals (1 month, 3, 6, annually) and eventually in five years & ideally for the rest of their life. Get some sponsors, pay the winner, have them audited by an accountant, some meetings can be in person. Some can be video call, they can be streamed live. It would be an amazing way to help people get out of debt and live financially responsibly.
ne of the greatest videos made, I always doubted the hype in Vancouver, and I rented a cheap place for 8 years (to this day) I just purchased a 10,000sqft of bare land less than 45minute away from downtown Vancouver. No mortgage
@@S93H794 Exactly. You have common sense. It make’s absolutely no sense to rent all of your life. No one can afford to throw money away like that unless you are wealthy meaning you never have to work. I’ve been stacking houses all my life so when I’m ready to stop working a job or running a business I will have a no worry place to live.
Like the video said investing along with renting is the key, when your old and can't take of yourself you loose your home in the end either way either through health or death, go retire in Asia and have a better life
A problem with owning later in life is that there is no way to spend the money tied up in equity. If you stay in the house until you die, you effectively die rich. Many retirees are equity rich but cash poor, which can seriously limit their quality of life. It's a tricky choice as renting when old whilst spending down wealth can also have disadvantages.
@@adm58 Why would you need to spend it. Housing and money are separate things. You need housing and money until you die. You can downsize when you’re older or sell it and rent and live off the proceeds. Either way you will leave something behind for your family.
If you look at a mortgage calculator 20% down on a $1million house, you end up paying around $1.1 million in interest at a 7% rate! That's $1 million that you pay for the house + $1.1 million in interest on top of that. So you are putting yourself in debt for $2.2 million. You are paying almost all interest in the first half of the loan. You really need to think about whether your situation is such that paying that much interest to the bank is ok.
How much are you paying for rent to have that 1 million dollar home? Now increase that price 3-5% every year until you die. Now buy that home for 1.1 million today….pay your 1 million in interest over 30 years. That 1.1 million dollar home in years in worth at a minimum 2.1 million and when you sell it you get back your purchase price and interest meaning you paid nothing to live there. (Except repairs and property taxes….which are waaaaaaaaay cheaper than your rent for that place increased over time)
My father pays $2000 for mortgage in the apartment that we grew up in he rents it out now for $2300 sure he bought the apartment 10 years ago, but he’s paying a mortgage on an apartment he bought for 230,000 that today is worth 350,000 and when we moved the average rent in the apartment building was about 1600 and now it’s 2700 so although it took 10 years he’s making all the extra money we spent on the apartment. In 15 more years When his mortgage is paid off, he will probably be making an extra 3000 to 3500 extra dollars per month from that apartment. Not every situation is the same but At least 70% of the time it is more worth it to buy than rent and make all that Money back for the rest of your life and for the rest of your children’s lives and for the rest of your grandchildren’s lives The white people are more rich in this country than immigrants and African-Americans is because they bought they built and they did not rent They grew their generational wealth and today they send their kids to college because most of them grew up in their parents grandparents uncles, great uncles or great grandparents house.
1. Never buy a condo. You own nothing and you continue to pay rent, disguised as condo fees. And you will likely pay more than an equivalent free-hold home. 2. There will be maintenance costs. Establish a slush fund and save up for the big stuff. When your roof needs replacing, the money should already be there. A home that has not been maintained will deteriorate rapidly. 3. If a landlord is charging less for rent than the mortgage payment, they are losing money. You may be able to rent there for a short while, but that landlord is going to unload that property at the earliest opportunity. Is renting better? In rare cases, for the short term, yes. But, in the large majority of cases, no.
Few points: 1. Rent will increase as well, but EMI will stay constant 2. EMI has an end date, but rent doesnt. do the same analysis for 60+ Years ( may be spans over two generations)
When you run the rent vs. buy numbers, make sure you take into account your entire lifetime. Don't stop at 5 or 10 years, include the numbers after the mortgage is paid off but the rent will still be due.
Property taxes are still due as an owner along with maintenance and potentially needed upgrades.
@@rdw1968 shh... they think a paid off mortgage will mean zero payments happily ever after!
@@slumy8195 Where I live, rent is $2K a month minimum. That's $24K a year, minimum. I own my house. My taxes and maintenance are nowhere near that a year.
@@db7084only if u brought your house 30 year ago
800k house tax is like 11k per year and 2k insurance and at least 6k per year in maintenance
This happened with the 2004 housing boom - home prices were greatly inflated, meaning people couldn't sell later because they owed more on the house than they could sell for. I know quite a few people who bought then, thinking they were making a good investment to sell later, but it's taken until the COVID housing boom for the prices to come back to those original amounts.
To balance out your real estate holdings, I suggest investing in equities. If you're cautious, even the worst recessions can present fantastic buying opportunities. Additionally, volatility can produce fantastic short-term purchase and sell opportunities. This is not financial advise, but you should buy immediately away because money isn't king right now!
You're right. I was able to diversify my 450K portfolio across markets with the aid of an investment coach, and I was able to use high dividend yield stocks, ETFs, and bonds to generate a little over $830K in net profit.
Would you mind providing details on the advisor who helped you? saving for a pension through a corporate program since the age of 18. I hit greater tax along the road, so I increased my company pension with a SIPP (tax benefits). I'm now 50 and would love to expand my finances more aggressively; there are a few automobiles I still want to drive and a few mega-vacations that I still want to take.
'Vivian Jean Wilhelm a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thank you for this tip , I must say, Julie appears to be quite knowledgeable. After coming across her web page, I went through her resume and I must say, it was quite impressive. I reached out and scheduled a call
I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
Got it! Buying stocks during a recession when prices are down could be a good move. You might get them at a lower price and sell later when they go up. Just do your homework and be aware of the risks before diving in!
That's awesome! Investing in stocks with a reliable trading system can lead to great outcomes. It's fantastic that you've been working with a financial advisor for a year now. Starting with less than $200K and being just $19,000 away from making half a million in profit is impressive! Keep up the good work!
I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
Carol Vivian Constable is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Thank you so much for your helpful tip! I was able to verify the person and book a call session with her. She seems very proficient and I'm really grateful for your guidance
I love this because it makes sense. I ran the numbers and was surprised that the house I want to buy is $15,000 cheaper to buy than to rent the equivalent. I messed with all the numbers and it still came out cheaper to buy. Thank you for this resource and explaining. It probably makes the most sense for people who don't have kids and like to live in town.
Outstanding work running the numbers. Which city, out of curiosity?
Trust me, you ran the numbers wrong
@@Rachmanfan4life why would he trust some random person xd
@@ramitsethi Out of curiosity do you own your own home or do you rent?
Yes, I am paying $1 per month per square feet a month now that I own my home, and when I rented I was playing almost $2.6 per month. For me makes sense to buy if you get good interest rate and good downpayment.
Two gripes:
1) 7% is not a normal interest rate, the overwhelming majority of homeowners have under a 4%, this is a blip in time where interest rates are extremely high.
2) rents are raised constantly, 30-year fixed mortgages are the same through the life of the loan. After 10 years, your rent on that 5400/month property may be upwards of 8k. Your mortgage will remain fixed. Additionally, at 10 years you've likely built an extremely significant amount of equity in the home from both principle payments and appreciation in the real estate market.
This guy gets it
Your first point doesn't apply to buying a home now. Sure, most have under 4 percent now, but where as a first-time home buyer, am I getting under 4 percent now? The under 4 percent was a blimp in time where interest was extremely low and everyone refinced. You're the first person I have seen, say, the reverse. Please provide evidence if your going to claim getting this intrest rate is still possible or is bound to happen again soon.
Second point depends on how long u stay in the house which is the whole point at looking at the numbers in the first place.
@@agent.4206The 30-year fixed mortgage rate is currently just below 6.5%, and we're at the start of a rate-cutting cycle. The effective federal funds rate is expected to decrease by 2.5-3% over the next two years. With core PCE inflation nearing the 2% target and the first rate cut anticipated in September, it's far more likely that mortgage rates will drop to 4% in the coming years rather than rise back to 7%. That on its own should be enough evidence. And I'm not even factoring in the unsustainability of US debt at high rates and the reversion of elevated MBS spreads yet.
@@agent.4206 rates were sub-5 from 2011-mid 2022, 11 years is hardly a “blip”. Additionally, No one who got in at 7% will be paying that for the life of the loan, they maybe have another 18 months before they can refi into the mid-5s.
@@PublicFreakout okay fair, but you're still making a prediction by assuming this is the blip of 7 percent currently. Since 1990-2006 ranged from 6 to 8 percent. With 2008-2021 being the lowest it has ever been.
My mortgage is dramatically cheaper than any rental situation would be for me, and for the first time I have my own space - a whole flat & garden, not a room. Even once I add in my bills, it’s cheaper than renting was for me, and certainly cheaper than it would be now (London rent is scary). Once I could afford the deposit - which is obviously the biggest barrier for so many people, and that needs addressing - it was an absolute no brainer for me and I feel very fortunate.
Less for me as well.
Bought my house in Maryland 15 miles from work.
Since the housing market did what I did, my house value went up by around 50%.
Went from 300K to 430-450K.
My mortgage is only $2100/mo.
To rent a place my size it would be roughly $2800/mo.
your monthly payments might be cheaper but you are paying a huge amount over the long term in interest unless you put a large down payment or bought it outright
@@wolfstadt_ I put down a 45% deposit when I bought it 7 years ago. My monthly payment is £518, I also make an additional monthly £100 payment just to gently chip away further at it, particularly as I know the interest rate will increase in a couple of years. Will increase that as my income grows. Rent for a similarly sized flat here would be circa £1400-£1600.
yes putting 45% mixed with WHEN you got your house made all the difference. I don't think it would play out as well if that was done currently.
@@hypersynesthesia Ahh ok yeah that 45% was good then. Congrats homie im glad its working out and you got something to call your own. Looking forward to grabbing my first property at the end of the year
Great advice and video. One thing you overlook, however, is that a person rents for his/her immediate needs and buys a house based on what he/she thinks will be the needs in 20 years. This leads to an even greater disparity between the cost of renting vs. buying.
I have owned a 4-plax to rent out, a condo, a luxury condo, and an acreage. I have also built a log house. Gave up homeownership and started renting in 2014. Less headaches! :) I am a physician and with the healthcare crisis across the country, I can move if I don't enjoy my work anymore or if I have a better offer somewhere. I am in the process of moving for 2x salary increase. Not planning to buy a house anytime soon, but I save and invest my money, so when the market crash, I can buy if I know where I want to be in old age.
@@xo7454 nice!
@@xo7454 if you are a physician and have no worry about ever being financially pinched in retirement then go ahead and rent.
For most people who don’t make 200-500k a year….for someone making 50k a year….buying yourself a nice 1 br 1 ba condo will pay dividends when you are 65.
Not all doctors are smart
@@martincagle9226 this one is.
@@martincagle9226 did you not read the part where they save and invest their money? Why does it matter how they get their wealth either through RE or other Investment $1 dollar is $1 dollar.
1. Your example in this video seem restricted to going from renting a condo to perhaps buying condo. Many people in the middle of the country are trying to go from renting a house (a single family dwelling) to buying a house. As a house renter, I don't have to repair the house, but I do have to maintain a rather large yard. 2. Unless the landlord fully owns the rental property outright, he/she has all of the expenses that a home byer would face. So, going on your example of the landlord being limited to charging rent base on market rates, he/she could be in a situation where the rent doesn't meet all of his/her costs, but would offset them - which I hadn't thought about before. Anyway, you've convince me that continuing to rent is the best thing for us.. Thank you
yes, our rent is 3500 and mortage is close to 5k for the same unit. Rent definitely doesn't cover the mortgage.
12:42 what makes this so tricky is that it would appear that Renting is cheaper. But if you're living in a single family home where the owner has to pay all the fixes, they can just up the monthly payment when the current contract finishes.
People think I am poor because I am living in an apartment. I don't care what other people think about me. I save so much money because I am renting an apartment. I am responsible for my life, so I don't listen to those who are trying to persuade me to buy a house.
Renting is Great for me... I'm glad people think I'm poor ..l don't have to loan money to them😂
In modern world we living nobody care if we are rich or poor even your neighbors don't know you but you are right that's how ppl think renting is poor
@davidbrooks8809
Lol
But you do care what they think because you are bringing it up.
Dont listen to these people. You ain't Warren Buffet
I went a slightly different route.
After my killer divorce wiped me out, and I got a good job, I began saving to buy property. [I was in my 50s, minimal investment, less savings.] I wanted to stay in the Boston area, but knew it was far too expensive.
I ended up buying a historic duplex in a good neighborhood in an Upper Midwest city. Excellent location, nice interiors (which I could fix up), and I could afford to carry the rental if necessary.
I like fixing old houses, so I fixed up the rental and keep doing so. [Added air conditioning to both units last spring.] Right now, the rental covers about half my mortgage payment. If the local economy goes up, due to location, I can probably cover my entire mortgage. And if not, it's no big hassle for me to cover it all.
And yes, I ran the numbers every which way possible. In a previous career, I was an MBA level Financial Analyst - I run numbers for everything.
Thank you for saving me from doing the would have been the worst financial decisions of my life, buying a house & financing a car. I owe you my life man!!
Make sure you run the numbers for the particular house(s) you are interested in, the example he gave heavily favors renting because the rent price is extremely low for a 1.9m house. Still an incredibly educational video, I learned a lot too.
What's your plan for when you're old, disabled/unfit for the workforce, and on a fixed (usually relatively low) income? What if the landlord raises the rent? THIS is why it makes sense to buy - Not because housing is an investment, but because it's a basic physiological need, and you do not want to be at the whims of the market when you are vulnerable. As someone who cares for people in their sunset years, I have yet to meet a disabled 75-year-old renter who wasn't on the brink of being homeless.
Can you try to take an honest attempt at answering this yourself? Please keep in mind nobody's saying you should buy or rent forever.
But if you choose to rent -- as I have, for now -- what might be the answer to your question about what to do in old age?
I’m in that situation now…60+, not working due to medical problems, no 401K or Roth. Moved to a bigger city 5 yrs ago when I was working. Debated the rent or buy dilemma, decided to play it safe & rent. Then a sports injury sidelined me. Can’t work. No insurance, no disability. Just a tad too many assets to qualify for state assistance, but too poor to afford private insurance. Landlord raises rent every year. Doesn’t tend to repairs. I can’t have a pet, garden, pool, clothesline, fire ring. He cut down the only 2 trees in the yard that shaded the south sun and brought the bird’s & squirrels. Laundry is in the basement & steps are difficult for me. I hate it here. Wish I’d bought in 2019, but who knew all the SHTF w the pandemic, riots, & real estate market?
In Canada what a lot of people don’t often factor in is yearly property taxes. So you have to think about that as well which could be anywhere from $3,000/$7500+ a yr depending on the size of your home and where you live.
Same here in the US.
The scariest thing in Canada is that you can only lock your loan rate in for 5 years.
Hello Remit. Thank you for all you do. My husband and I found you by watching your Netflix show. I was hooked, discovered your podcast, and rushed to buy your book. I purchased 2 copies. My husband and I had regrets about not purchasing a house. Everyone around us was buying and making us feel like we made a mistake. The numbers needed to make sense when we were looking for a house. You explained how you are not against home ownership. You are saying run the numbers! I'm happy and grateful that we found you because we invested the money we would put down on the house; we are pleased to say we are worth almost a million just by investing and keeping our bills low. We both are in the service industry and live our rich lives by renting a beautiful apartment. There is no way if we were to buy that house, it would be worth a million.
Approved by the obama’s too!
For me personally, the main reason to buy vs. rent is control. I love being able to do what I want to my house when I want. Pets, solar panels, changing the landscaping - the door is open where in an apartment it is shut tight. The other major reason is moving. I hate moving, and when I rented, I typically had to move about every 3-4 years just to keep my rent competitive.
That being said, when I bought my house it was also in a period where rent was much higher than the cost of the house, even when factoring in 3% for maintenance. My total fixed housing costs were about 18% of my take-home pay, and I had large reserves saved up as well. I've done an annual assessment every year since I stopped renting, and at least to date my cost to own has been a fair bit below the cost of renting over time.
You are who I have been looking for when people try and talk me into buying a house!!!!! I knew the myths you stated and they are my reasons for not buying. Plus I'm not financially ready anyway. I don't mind renting forever. Thank you so much for this video that I just stumbled upon.
It all depends on the person's personality. If they can't save regularly and are always tempted to use up their savings, they should absolutely buy a house within their means. It's the only way to force yourself to build up some capital.
Something not taken into consideration is that rental prices generally increase year on year when mortgage is likely to decrease overtime.
First, it's not always true. Secondly, overall the cost of living grows, which includes the cost of maintaining the rental place.
So, if you own the place, you will spend more year over year for maintenance.
Owning a home could also be a big tax benefit if you have it under a LLC which is an advantage to owning. You can write off most of those maintenance expenses
He notes that insurance & taxes have risen in Florida - look at rental price increases! It makes sense to buy if you want to ENSURE you have a fixed payment that you can reasonably count on.
@sg9414 insurance rises for mortgage too
I agree he should consider that too since it's true most of the time but there are a fair amount of people that never raise the rent too. Mostly small time landlords
All I know is that my sister rented, while I bought the house. Six years down the line, she recieved an eviction notice, and cannot afford the rent or mortgage of the house she lives in (because the prices have doubled in the last six years, and her rent was considerably lower than the average in the area). Now, she regrets renting more than ever.
I'm not saying you shouldn't rent, I rent my office. But with a house, 8 times out of 10, straightout buying is the way better option. Never have to worry about eviction notices or the rent going up, or running into a douche landlord, who will not maintain the property, or prohibit you from making tiny modifications to your home, which you conveniently skipped over.
Completely agree, moved three times in 5 years whilst renting and it was never my choice - landlords selling up and buyers were moving in rather than continuing to rent out. Whilst he talks about phantom costs, what about the phantom benefits of peace of mind, how much is that worth?
yeah i can definitely see how this could scare folks. i have the rare experience of having friends of different race, income and job. so i have friends who own homes and friends who rent. truth be told neither party has any money. the people with the houses did not consider their phantom costs and have not a shred of investments. and the renters are in the same boat but dont have the house pinning them down lol.
That is why I bought a home.
Same here i was renting before i bought my house back on 2018, i was considering on selling it now and go back to renting but then i read some reviews on some apartments and i see a consistent problems like neighbor smokes (even though its not allowed, i smell weed and we have bed bugs). I think now i reconsidered and will be staying instead. And just wanna say its different strokes for different folks, so not one size fits all in buying vs renting, and who say's you cannot own a home and still have investments like i do plus cash savings.
I'm gonna hold on till i'm ready to retire in Thailand and then sell and make a killing in my area, i have a 5k sq ft home its just lonely cos i got divorced and all my adult children are out of the nest now. I used a VA loan so Zero down @ 4.70% and no property taxes for me lol.
Yeah don't worry about rent going up, just those rates, insurance and interest rates.
Then when you want to do any modifications the fees and fact that you realise you do not own your home is the funny part!
Nice video, thank you for that. Owning a house gives also peace in mind. When you are young maybe it's not that important but above 40 I like to have a big garden and fix the kitchen the way you would like it. Get solar panels, better insulation etc. You don't need to worry rent goes up, mortgage is stable and don't need to move again. In my country rents are below 4% for >10 years mortgage. Actually interest goes down the longer you pay back the mortgage.
Rented most of my life pursuing education in different states. At most I paid about $1800/month for a townhouse in suburbs but far from renovated. I paid $1500/mo. for my first condo. Sold it 2 yrs later and made 80k profit. $2400/mo. for my first home; nearly 3500 sq ft, 4 yrs old -during Covid after looking at the comps. Signed PA before I toured it bc it made $ sense. Took a penalty free w/d from my 401k to cover closing costs. Used $ saved for closing in savings to do cosmetic work. Sold the home 2 years later and made a $200k profit. I rented 15 places before my 1st home purchase. I made $0.00 on those properties owned by someone else. Lack of Affordability and lifestyle are 2 reasons not to buy NOW. But, you cant leave your children a rented apartment; but you can leave them an asset: a home.
My only criticism is that you’re numbers assume rent will not increase
you hit the bullseye there. everyone assume that interest will remain high and Rent will never rise.
I believe the NYT rent vs. buy calculator actually includes an assumption around rent price increase. By default, I believe it's set to be at the same 3% as the house price appreciation assumption
Also moving costs every two years or so if tenancy ends
Property taxes increase along with repair and maintenance costs. Regardless of renting or buying, costs will rise.
My reason for buying my house.... passing it down to my children and teaching them to pass it down to theirs.
Most people will need an house before their parents don't need it anymore... by the time you pass away, they will already have an house, bought or rented
@@joaocardoso9031 tomorrow isnt promised to anyone and i wont take the chance in that they will buy one in the future, especially with the prices of this housing market. I believe the days are coming wbere home and land ownership will be rare and a luxury for those who can afford to buy. Id rather buy property now. My grandparents had a home in puerto rico, the home i lived in during my youth, and they sold it. I wish they would have left it to us. They sold it in the 90's for cheap, now its worth about 300k in puerto rico which is alot. I would have kept it and pass it on to my kids.
Children don't care about the house ,they will sell it buy a boat cars and travel 😂
@@biglulm6 thats subjective, as a kid i wanted the house i grew up in in Puerto Rico. My grandparents sold it but i would have never sold it if they would have left it to me. The way im raising my children is to always leave an inheritence and make sure that you leave enough for your childrens children. By the time they get older the housing market will be untouchable, something only the elites will be able to afford.
If it's cheaper to rent, you could also rent and invest the difference. It could yield you a good amount of more money for your kids. It also could not. That's why running the numbers is a good idea.
Yes! Run the numbers! For me it made more sense buying. Also, don't forget that property normally appreciates with inflation and the mortgage amount stays the same.
Inflation is a negative and not a positive. Your house “appreciating” just means your purchasing power is depreciating therefore everything else getting more expensive over time. Plus a place you live in will never be an asset but a liability.
@@bisiriyutajudeen5728 What is this nonsense? "Inflation is negative and not a positive?" Inflation happens EVERY year. It's a totally normal thing. The benefit Curly is mentioning is that houses have historically OUTPACED inflation which literally increases the value of his asset. "A place you live in will never be an asset but a liability". That's an interesting comment. A house is literally an "asset".
@@jimbo4196 Perhaps you need to study the actual driver of inflation if you are struggling with the idea that inflation is a negative. If more units of money are printed and finds its way into the economy, it gives the illusion that "assets" are going up in value(positive) but in actuality, it is the purchasing power of money that is going down(negative)
Paying property taxes, maintenance costs, insurance costs make your house a liability. It is funny we don't flinch when this applies to cars when you drive it off the lot. A house you live in is not an asset but a liability. A house which you rent out and receive cash flows from is an asset.
Let’s check if Ramit is correct and do the calculations on the property he identified in the video.
The property in question is 776 Bryant St, Palo Alto, CA 94301. You can easily look it up and see all relevant publicly available information on any real estate aggregator site.
The previous owner purchased the property on 10/26/2005 for $1,060k and sold it on 6/6/2018 for $2,150k. The question that we are going to ask here is whether that individual would have been better off renting this same property between these two dates and investing whatever money he saved in the stock market.
I am going to make a number of assumptions and use the tools that Ramit suggested as much as possible.
First off, let’s assume that on 10/26/2005 the previous owner made a 20% down payment ( $212k) plus closing costs around $10k excluding prepaid property tax (I’ll add that separately) and took out a mortgage of $848k. This would have been a jumbo loan, for which the median 30y fixed interest rate was 5.87% on that date. The payment for such a loan is $5,013.53 per month with the remaining balance at the time of sale of $623,314.31. Keep in mind that there was nearly a decade of time with countless opportunities to refinance this loan at 3.2%-3.5%, which would have drastically lowered the payment amount and the amount of interest paid. But, we are going to ignore that.
The property tax is available from the public records. The annual amounts start at $13,227 in 2005 and go up to $15,886 in 2018. For simplicity sake, I will use an average of these numbers and divide by 12 to get a monthly amount of $1,213/month.
The condo currently has HOA fees of $550/mo. The HOA takes care of all exterior maintenance/repairs including the roof and also provides homeowner’s insurance. I am going to assume that no supplemental insurance is required as is typically the case in that area. We have to adjust these fees for inflation to project what they were in 2005 and 2018. Using an inflation calculator, this amount is equivalent to $342.58 in 2005 going to $440.47 by 2018. Again, for simplicity, I’ll use an average of these numbers, which is $391.55/month.
As far as maintenance expenses, since the HOA takes care of all of the exterior, we are going to allocate $50/month to a home warranty contract with $75 deductible and we will take a fairly reasonable $100/month to cover deductibles and any other maintenance issues. To keep things equivalent to a rental, I will assume no upgrade and remodeling expenses (you would not get that while renting).
Here are the monthly expenses: Mortgage: $5,013.53, Prop Tax: $1,213, HOA fee: $391.55, maintenance: $150. Grand Total: $6768.08/month.
Let’s now look at what it would cost to rent the place from 2005 to 2018. In 2018, the place was actually rented out at $5300/mo per MLS by the new owner. Since it was not a rental before that, I used US Census data for CA to project what the rent could’ve been in 2005. Their data shows a 56% increase between 10/2005 and 6/2018. Therefore, the rental price would have been $3,400/month in 2005 going up (assume linearly) to 5,300/month. Let’s assume a deposit of $10k for convenience (to cancel buying closing costs in the later calculation)
Now, let’s assume that our owner decided to rent instead and put all the extra cash into S&P500 index fund. We are looking at the invested down payment of $212k plus monthly additions starting at $3,368.08/month linearly decreasing to $1,468.08/month over the course of 152 months. This requires some historical pricing data of S&P 500 and Excel. I can provide a link to google sheets if anyone is interested, but, at the time of sale (or move-out in this case) he would’ve had approximately 430 shares of S&P 500 worth $1.169M.
That is certainly a large number, but the owner still ended up with a better deal: he pocketed $2.15 Mil - 7% commissions/closing costs - 623k mortgage balance = $1.376M.
Keep in mind that I ignored many other factors favoring the owner, such as tax deductibility of mortgage interest and property taxes for the entire time of ownership, which would have been a huge benefit for the owner since it clearly exceeded the standard deduction. I also ignored the fact that the property could have been bought with no down payment or only 3% down, which would still let the owner get all of the appreciation with minimal opportunity cost. And, I deliberately excluded the fact that if the property was refinanced 3 years after the purchase at 3.5% per historical data, the total payment would have matched the rent at that time. Lastly, unlike gains from stocks, up to $500k in profits from the property is tax-free if used as primary residence.
Buying was a clear win here.
I am sure Ramit is a well-meaning guy and this post is not designed or intended to disparage him. But, if you take a certain position, do what you preach… run the numbers. Doing it on the past data to validate your premises on the example you chose is the least you can do.
This is an awesome analysis. THANK YOU! Even if you disagree with my analysis, I appreciate you running your analysis and sharing your assumptions here.
Without replicating your analysis (but stipulating your math is likely correct), I would differ on your assumptions about maintenance and renovations. I also acknowledge that you didn't count tax benefits in your analysis.
When those assumptions change, buying is not "a clear win" -- but what I most want is for people to run a detailed analysis before the biggest purchase of their lives.
good work, but like many people in the comment section you work in the past and the question is 'is it better to buy or rent _now_".
we don't have a time machine.
Great math, and don't forget that in your calculations the assumption is that the person renting has to be super disciplined to invest for 30 years which is not usually the case.
Completely incorrect…
Wow, hats off for taking the time to do all that...personally if my only options were renting or a house that costs that much I would move states 100%
Decent break down
I’m a PhD economist that works on the decision between buying and owning, and while many of the points made are correct, many other are biased at best. Principal (not principle) is not a cost; interest for many people can be deducted; the market for rental and ownership is not the same and is not always possible to find a rental that provides the same service as an owner-occupied; renting puts people at the landlords decision on rent and moving costs are high; owning vs renting needs to be balanced, it can’t always be better to rent or be better to own, at current mortgage rates, either house prices decline or rents need to continue to increase to rebalance the market. No doubt that owning is not always better, but an unbiased analysis would have been welcome, I know you can do it.
Well, all of the things you listed are also biased based on the individual on the area in the cost analysis and won't apply to many people.
In the end, the only objective analysis is the NY Times rent vs own calculator, and even then, all the values are biased based on the person inputting the numbers.
You can't really have a completely unbiased analysis of rent vs own, as any figures used are also based on many assumptions as well, as is all economic data, and can be predictable on a long term scale or as a whole, but not on an individual basis.
This analysis is by definition, personal, and therefore always biased.
@@rebeltheharem7028ok, if you say so… Note that bias and uncertainty are different things. You seem to be mixing the two concepts, but I could be mistaken…
Everything you are saying he already stated in the video. He made it clear that people should do a detailed analysis to make the decision. Of course he is including his opinion this is a persuasive piece. Who comes to YT for unbiased videos?
@@Giasemi55 not true, but that’s fine! About 66% of US households own and 34% rent (there are other small categories but those are irrelevant and I just omitted them), of this allocation, how much do you think is misallocation (i.e., people who should rent but own and people who rent but should own)? I can tell you it must be minimal because it has been like this for several decades! Given the housing market structure, very few people/households are doing the “wrong thing”. After watching this video, you would think it’s the other way around. I don’t expect unbiased commentary on YT and I see that all the time, and that’s why I comment when I think a comment is due.
Please show me where he said renting is always better lol. Also, give me a break with the whole “interest can be deducted” bs. Interest can SOMETIMES be deducted, if you itemize, up to a CERTAIN AMOUNT, and will ALWAYS cost more than if you hadn’t paid any interest at all.
I have to disagree. I paid my house off in two years lived super poor and put every penny into paying off. I'd rather pay taxes once a year than rent for life.
Which state? I'm from NY, and it's crazy in the urban area to buy.
Aren’t taxes for life as well? Just like rent. 😂
@Rogue_Money yup but significantly cheaper than rent and not to mention housing going up too so you can sell your house for more
@@Rogue_Money not if you had huge steel balls and went to war and government says you ain't gotta pay them ever again. Tax free everything for me. I'm welcome, thanks to war.
@@mist2469 Florida my man. 360k new build 2086 sqf put everything in it, I don't pay taxes thanks to me going to war so benefits of the military.
I used to rent all my life, until my previous landlady kicked me out of the house after 10 years because her daughter wanted to move in. I had to find a new place in a very short time, and there were not any houses available to rent in good condition and at a reasonable price. I decided to buy my own house and I have not regretted it not even a tiny bit.
The problem is in the confusion with the term "buy."
You don't "own" a home if you have a mortgage, people. The bank 🏦 does. 😳
Since you say I don't own my rental property because it has a mortgage, the rental income should go to the bank then. But why is it I get to keep my rental income. I'm confused
I guess their point is if you can’t find a tenant to pay the rent and you also can’t make the payments on the rental the bank can take it ?
No, the bank owns the debt and the house is the collateral. It's a very important difference.
@@natashawilliams1694 You're assuming a landlord can't afford a mortgage without a tenant which is silly
@javier123454321 this exactly! This guy doesn't know
My 91 year old grandma wants to go rent an apartment. She can't keep up with the house and do the stairs. Renting with home care is cheaper than assisted living. Its opened my eyes to that as an option later in life, too.
She could sell the home and pull out the equity and buy a 1 bedroom condo.
Assisted living is ridiculously expensive!
That’s a different situation than most who are looking for their first home to buy. For her it makes sense to sell so she can use the equity she built from owning her home to live comfortably for the rest of her days.
Tell her to move to either Philppines or Thailand and get home care 24/7 for a hell of lot less, lol. Its what i'm gonna do after i hit pass my 70's.
Riight. A 90 year old is going to move to a completely different country away from her family..everything that she ever knew. I just watched my husband's 103 year old grandma die and all they care about is not dying alone, without family by their side..@lons5472
I am so glad to have found you on UA-cam and look forward to learning more about investing. I owned a home for 20 years in North Atlanta and sold it at the top of the market 3 years ago. All my life, the American Dream was to pay cash for my house. When I paid cash for my little house by the water in Florida, my dream became a nightmare. Here in Florida, one bad storm can wipe out my home and therefor my life savings....And don't look to the criminal insurance companies to insure you or honor their policies. I am excited to sell my home before the next hurricane season, invest my cash, and become a happy and stress free RENTER!!!!
Amazing video Ramit! I’ve been hooked on your videos since watching your first rent vs buy video. I live pretty close to the Palo Alto house in the example. I rent a beautiful bayside water view apartment, while my coworker at the same level as I am, bought an identical condo down the street around the same time. The amount of horror stories he tells me of broken appliances (they were brand new too), HOA towing his car, and many sleepless nights makes me never want to buy in the Bay. Meanwhile, I’ve consistently invested in my 401k (with a 9% company match!), maxed Roth IRA (and another one for my wife too), and maxed HSA, I’ve seen my net worth skyrocket these past 3 years while my wife and I have been traveling the world. I can’t even imagine how much of my coworker’s mortgage is being thrown away to interest right now.
Thank you for sharing your knowledge and experience Ramit! My wife and I almost bought a house because we keep having friends & coworkers around us buying and it honestly gets to our head sometimes. After running the numbers we decided to stay renting. After seeing your Netflix series it made me feel better about our decision. We’ve been able to save/invest 3000 a month for the last couple years. Our savings and retirement is bigger than it’s ever been and it’s kind of addictive to watch it grow. It motivates me to work harder to be able to invest more! Thank you for all you do!
Glad your savings and investments are doing well. Because you will need it to pay rent for a couple of decades after you retire. Keep your fingers crossed there isn't a crash or bad recession.
More of house buying is a lifestyle choice honestly, and a financial one to some extent as you have to be able to afford it. I chose to buy a house because I owned a condo prior and could not stand listening to other people's racket constantly, there was never peace, and I owned an end unit!! Rental SFH are hard to come by around here and the cost of them would be about 1000 more a month then I pay in mortgage, taxes and insurance!! Makes more sense for some people to own vs rent. It isn't a black and white scenario! Also as the other poster above wrote, when you retire you will have to pay an ABSURD amount of rent each month, where those of use who have paid off homes or who have sold them and bought a smaller place with cash will only need to worry about taxes and insurance which will only equate to maybe 1000 a month by then if not less. Rents will be probably 3K and up by the time we retire, probably even more!
Hands down the best rent vs own video I've seen, was great
Saved me watching this video. Thanks from Brooklyn NY
Not in USA but I know a guy who works his middle-class job. He saw a house for sale in the neighborhood and knowing that there is a good market for renting he took his shot. Went to the bank, explained the "business plan", bank was convinced, gave him a credit, he bought the house and after 1-2 months of renouvation and repairs it found its first customer.
So my friend continues living his life like he did. Literally nothing changed. His new project completely pays of for itself. The bank makes profit and After 6-8 years the house will be in his ownership.
My point is buying a house as an investment could work for you long term if the place is right and you reacted to the right circumstances in time.
As a single guy, happily renting an 850 square foot apartment within walking distance to work, the cheapest condo a bit further away would be almost $1000 a month more expensive right off the bat with a 20% down-payment. Depending on which rent vs buy calculator I use, I'd have to stay 25 years to never breaking even if I bought.
These buying/renting conversations are lively! I feel insanely lucky to have been able to buy a house back in 2018. We couldn't afford it today because prices have almost doubled. Re: amortization tables. Interest scared me too, which is why we made an extra payment every month until we could refinance down to 2.5%. Again, insanely lucky. Buying isn't for everyone! I anticipate owning this home for another 40 years+, but I look forward to selling and renting in the future for all the conveniences you mentioned. No yardwork, less cleaning, having fewer belongings for our loved ones to sort through when we die, etc.
I own a duplex, live downstairs and collect rent from the unit above. Old house I renovated with my father. House probably gained over 100 000$ value over the last 4 years since I bought it. The rent covers all my mortgage and then some, all while charging below market rate (he's an old man who's been there 20 years, I intend to keep him as long as he's willing).
I have two whole floors to myself, while paying less month to month than I would with a roommate.
Got lucky, I'm well aware of that, but in any renting market, if landowners start losing money, that's gonna put pressure on price. You can't just assume nobody runs their numbers. Eventually, rent prices are going to catch up.
This is my dream. I probably won't make it so please enjoy it for me
Exactly, Ramit just spews disinformation to make his points seem valid. Its maddening.
Just don't assume real estate will always rise rapidly just because your house did recently.
@@rogergeyer9851 That would only be a problem if I intended to sell, but I've been lucky once, I don't intend to tempt fate. I'm good, I'm set, I'm staying put. People have been talking about a Canadian real estate crash for years now, and honestly I hope it does.
Things have getting pretty crazy.
New stats broke out recently about rent hikes in the province since the pandemic. The big cities have been making headlines for years, but I think the untold story is how it has begun to spill in much smaller cities. 33% rent hikes in 4 years in the capital where I live, but up to 50% in some places. 50 goddamn percent. It's just insane. I really hope, for all our sakes, that it will stop somewhere, sooner than later.
My rent has went up 4 times since c19. However for yrs it never went up so that's odd. Alot of folks moved here from California in 2020 and were well not so rural anymore. This has caused a supply and demand issue here so now here were it used to be cheap to rent its increasing rapidly and I'm a good renter never later and pay in full! I will also say this supply issues have made cheap $150000 homes before c19 sell for $250k or better now. It's not realistic in my opinion. Also blackrock is still buying up homes to only rent from now on. That's the biggest problem I believe with the inflation of homes. Cause they are literally buying entire neighborhoods to reduce the supply and benefit only investors. Blackrock is also in bed 🛏️ with the World Economic Forum!
To me, buying a house is to make sure my rent doesn’t increase when I’m retired. I live California and when I bought my house in 2018 my rent for the 1 bedroom apartment was $1800, my mortgage, property tax, insurance, and HOA was $3200 on the 3 bedroom house. Just before I turned in my notice, I received a renewal notice and the new rent was $2500. I just looked the other day to see how much it cost now to rent the same apartment and it’s $4000 a month. On the other hand my now mortgage, property tax, insurance, and HOA is now $2600 a month after the refi in 2022. Plus when I decide to move I get to sell my house and get all of my money back vs just moving with nothing.
Selling is not that easy and it's expensive. Also, if you are striving for higher pay or better job opportunities, you severely handicap yourself by buying a home. You can't just pick up and leave for the better job if you find it in a different location.
@MT-yx5cu Yes, you can. You can rent out your place.
@@MT-yx5cu selling is not that hard, I sold a couple homes before and it took maybe 2 months. Both times I just moved out and signed a year lease with an apartment while I’m waiting. If you know how to budget and have an emergency fund, you should be fine.
Exactly. Owning your home is buying rent control. God help you if you're still renting on the private market in retirement on fixed income.
@@Music-yq8qc I've done it before. Its not easy, not cheap, and can be headache dealing with tenants. No thank you.
I actually lost a lot of money and time on rent. The owner doesn't care about maintenance and I am forced to handle it on my own. I've cases where the owner forfeited my contact and just return my deposit when he decides he wants to sell the house, but I lost on moving costs and settling down costs. When something breaks in the rental house, you can argue it's wear and tear but the judgement right usually goes to your landlord, and he is holding your deposits.
I ended up biting the bullet and got a loan to buy a house instead. Today I am happily paying back the loan with the interest and have a lot less BS in my life.
Thank you. You just saved me from buying a home in panic
This is a short sighted argument. Owning a home manages the human factors. You aren’t at the mercy of market increases for rent. If you can afford the home, you can also pay it off and then cut your housing fee to maintenance and taxes. You pay a little more to remove a lot of the unpredictable parts of life
You are also st the mercy of interest rates...
@@guillaumedion6033 until its paid off. when i retire my housing will be free and your 3k per month rent will be 10k
@@jaredrosenberg4965 the house isnt free, you have to spend a lot of money with maintenance and taxes, and you will have paid 5x the property value... you can get good and bad deals on both sides, good luck!
My landlord is providing a service. I am in a small town and pay less the $1K per month in rent. I put my money into R&D instead. While renting I accumulated 40 US patents. Each patent is approximately the value of a house locally. If I put my money into real estate, I would own one house instead. The main downside of renting is social perception: that is women like home owners more. The cost of ownership includes the cost of income taxes having a tie to the local community. In Canada the cost of ownership includes income taxes at 54%. By renting, I can sever the residency tie easily and move to a lower tax jurisdiction. I can save enough in income tax to buy a 8000 sq ft chalet in the Swiss alps free and clear in 4 years by moving to Switzerland. Not coincidentally, Switzerland has 16X more patents per capita than Canada because it is a better place for innovation.
I never made sense of mortgages because of the very example he showed here. I bought my house fully in cash (yes I was 32 and all my friends had houses for years before me), but I rented and made wise investment choices up to then, and now I own my house outright. It might have been more sensible for me to rent to free up capital, but I have to say it was the best feeling in the world to finally own my own house ftet working hard for it for years. I think there is a norm in the US that if you dont have a fat mortgage and a house you cant afford by the age of 21 you’re a loser, and this is killing a lot of financial dreams for young and uneducated people.
I would rank in order:
1. Buy with cash if you can
2. Rent and invest
3. Get a mortgage
I appreciate your step-by-step analysis. Some locations have cheaper housing and very limited rental options. By following the process you showed, each houshold should be able to figure out what is best for their situation.
Buying a house is a major generator of wealth in this country, because for a large segment of the population, it is the only generator of wealth. If someone were to make a single $20,000 purchase of a diversified mutual fund and let it sit for 30 years , they would end up with 240,000 based on the average 10% return. I had a paid off house that I sold to move and take care of an ailing parent. I am now renting and have no intention of buying again. I invested the proceeds from my home to build up my retirement account. Buying vs renting is a personal decision and there is no right or wrong answer, but building wealth should not be the primary reason.
I have rented large houses for years and sublease a portion of it to my LLC; I use two rooms for my business and have the landlord install a separate meter for water and electricity. I am able to deduct my expenses from my taxes. My business pays for me to live there through my withdrawals and also pays for its own expenses. My LLC also carries the renter's insurance with an umbrella policy. I also rent houses overseas and use the same strategy. The houses I rent are now my assets because they make me money and cover the expenses. I sold both my houses 20 years ago after realizing the cost of owning was very high in Hawaii, about 60% higher than renting, and property tax is constantly increasing.
That is really interesting and smart! I live on Maui and price are insane for both. But still cheaper to rent with current interests rates. Where do you live now?
Can an IC also sublease and use an LLC?.
Completely dependent on where you live, property taxes and insurance. Dont buy a house in CA, unless you make $500k a year
Great job summarizing his overarching premise. Numbers are going to be different everywhere.
But he did the same thing with his housing example, imo he didn't give a fair assessment he brought forth more cons or potential cons than pros @alecpaulson1246
Only about 4 % of Americans out of a population of 335 million make over $400,000 a year! I don’t know why the hec people live in California if they’re not in that 4% when there are so many other places to live that are inexpensive and they can invest instead.
I used that NYT buy vs rent calculator and...... I saved myself $3,225,000 over 40 years by buying my condo rather than renting. Yay! 😁 And, really, it is probably way more than that because I took advantage of prepayment options and cut my 30 year amortizatiom down and will have it paid off in 10 years, so I saved myself probably over $100k alone in interest. 😊
paying off low interest debt early doesn't build wealth as quickly. While you are paying less in interest, you are also earning less in interest than if you had invested the money. If you make on average 8-12% returns in the stock market, then paying off 3-7% interest debt early will more often lower your future net worth.
@@zackcinq-mars2129And what if the market crashes and wipes you out clean like in 2008?
@@susiex6669 and what if the market crashes and wipes out the entire equity of your house to the point that you're under water, lose your job, get foreclosed on, and then sued for the loss that the bank took. We can play the "what if" game all day.
40 years? What a joke… What an absolute joke you missed the entire point of the whole video.
@@susiex6669 Then you stay invested and see what happens. One of the biggest bull runs started after 2008 crash. This is the importance of having an emergency fund.
My mortgage is really low compared to rentals, and it's gone up since i bought it in 2020, from $804 to $986. I've had to pay $5k for plumbing, $300 when the AC went out, my HVAC needs $1k worth of work, my roof needs replacing, which insurance won't pay for and i need to get the massive oak trees trimmed, at the least, to reduce the pummeling of my roof. It's a lot to own a house, and I do miss renting because I'm so sick of maintenance. I'm currently renting it, but once my tenants move out, I think I'm going to sell it. I am currently staying with my mom, whose home is paid off, while I figure out where I want to move. Everything is so expensive, though, sometimes I feel like just staying indefinitely with my mom and paying for us to take trips and help her with anything she needs. It's been fun so far, and she's happy not to be here alone, especially at night. But we'll see. Everyone just needs to do what's going to work best for them.
You forget some very basics: there is nothing that can replace a garden you own. You can rent a place, but you cannot make the garden into your garden. There are few things as satisfactory in life as gardening. You're missing out on that, with your etfs, your money in the bank, investments... True life is working with your hands, in your own work place you designed, in your own garden you created, in your own interior you thought out.
Even if renting costs less than mortgage, don't you need to factor in the actual value of the house in the future? You can sell your house because you own it. Wouldnt it be (rent*months) va (mortgage*months + repairs - price of home in 30 years)? And if you plan to live in the home after the mortage is paid off, youd save money there too
There's one big drawback with rental, the owner may not want to renew a your lease when it expires . And you'll be left looking for another unit.. A feeling of uncertainty and insecurity will constantly bother you.
I ran the numbers, we'd save $186k over 8 years by renting. I'm glad you're putting this info out there because I have never really heard this side of the coin and frankly it makes a lot more sense. My husband and I are nowhere near deciding where we're going to live for 15+ years straight, and personally, I moved around a bunch as a kid and I turned out fine. Grew up in an apartment. I don't feel like I missed out on much by not having a white picket fence.
Do you know the size of coming rent increases? If that's not locked in, you're GUESSING about future savings -- just be aware of that.
I lived in a cheap apartment, so my rent was so cheap it didn't matter much. Plus once I'd been there for a decade and established my rep as a great tenant, I got a discount and knew they wouldn't raise me a lot, as they wanted to keep me.
(I was stable, followed the rules, got along with my neighbors, worked WITH the management and maintenance folks on any issues, etc. It's not hard to be a great tenant if you're surrounded by transients who won't follow the rules, tear up the place, fight with the neighbors, etc).
Closing costs, maintenance, transaction costs, and renovations are not monthly costs. These usually happen once or every so often. It depends on the house.
The rest are usually included within your mortage.
But taken as a while they can be averaged to a monthly % making it easier to plan for because most income is monthly or biweekly
@@alecpaulson1246 That is where an emergency fund is necessary. That is how you plan for unforeseen costs like those. Grouping them in as monthly costs is a bit misleading. For example, closing costs, are definitely paid once, unless you take it out as debt, which I think Ramit wouldn’t suggest.
Thank you finally someone gets it and breaks it down in reality for 80% of people
Also, if you bought an old house in bad mechanical shape, if the city inspector finds Violations to city code, he will give you a date to fix it, and fine you. The city can take you to court too if you show non-compliant after the deadline.
Owning a home is about the priceless intangibles: the stability of having a place to truly call your own, where you can put down roots and build lifelong memories. It’s about the freedom to customize your space and create the perfect sanctuary without needing permission. Homeownership means leaving a lasting legacy for your family, a tangible asset that can be passed down through generations. In a world of constant change, owning a home offers the unparalleled comfort of permanence. While it's tragic that homes have become overpriced for young couples in major urban areas in 2024, in a normal market, owning a home for at least 7 years remains the preferred choice for most. We're almost mortgage-free, enjoy watching the trees we planted years ago, have built long-term relationships with neighbors, and now have peace of mind in a home that has more than doubled in value since 2006. Even with the phantom costs, the value still increased significantly.
I would add, when some violence moved into my neighborhood, it was the homeowners who cared enough about the place to do something about it. The renters see things moving in a bad direction and leave, the owners see it moving in a bad direction and do something to change it. This is just generalities, but it has proven true for the vast majority living around me.
For many, the emotional burden of renting (increasing rental costs, mean landlords, chance of having to move with short notice) seem to be worth the opportunity cost of not having money to invest. In the short term, for people who are in financially insecure circumstances, buying is the silver bullet to reducing the uncertainty around renting. But you’re only trading one insecurity for another and will more likely end up in debt or house poor considering the mortgage costs + property taxes + maintenance costs.
If you really want to buy, buy a condo or buy something way under your means. For people who aren’t making millions (so for most ppl) this is the best option to ensure psychological safety and financial gain.
I never owned a home because i couldn't see myself having to deal with house things. So glad the landlord has to do all of that crap. I diligently invested sooo much money instead!
The landlord is rich and you are not.
Actually...I just retired early cuz I diligently invested since my 20s...now can go wherever I want
@@dietzyfly 🧢🧢🧢🧢🧢
@@kahledalbert1210 that's gone...believe what you want 57 year old woman currently living my best life on the road
@@kahledalbert1210 it's cool...believe what you want. 57 year old woman living my best life on the road.
One must never assume rent on the same unit will never go up after 10, 20 or even 30 years. Inflation is eating ppl alive and having your own property as asset literally hedge against that.
Your mortgage aint going to tripled in next 20 years but your rent will.
How about if the total cost of ownership is already 2x as high as the rent? Have you actually calculated how the numbers play out, even if rent triples?
My uncle and I are the same age he didn't believe in owning, so he rented. I bought my house. After 10 years, I sold it. I then downed sized and paid off my house. My uncle is paying $2800/mth for his apartment. I'm paying $500/mth on property tax and still have enough money to buy another house to rent out. 😊
Thing is a lot of these comments are saying they won’t have to work after they pay off the home. Property Taxes are gonna be the number one factor on if that’s true.
Some people may have to pay 300-1000 or more a month in property taxes. Which for majority of people will require a job to pay for. And in 20-30 years it could be and most likely will be significantly higher.
Most people that own a home and plan to retire are saving for retirement. That means having money in a retirement account so you don't have to work. Also, even if property taxes and insurance are a combined $15K annually, you still have social security. At least for now anyway.
Owning a home outright when you decide to retire provides you several options. You can potentially downsize into another home and pocket the leftover cash. You can move to another area where the cost of living is less and pay cash for another home. You could do both (downsize and move to lower cost of living area).
@@jimbo4196 most people suck at money. Most people won’t account for the rising market cost of owning a home no matter where you’re at. Most people will go bankrupt after something goes wrong with their home. A small segment may be successful. But MOST will not.
I 100% agree - and still caught myself falling for the myths embedded in my soul.
We got a 370k mortgage and another 70k debt for renovation. We bought the house because "If we pay 1700 a month for the mortgage vs 1500 a month in rent ... that's a no brainer, right? This way ALL that money is equity for our retirement" Well... no. We 100% underestimated
a) the hidden costs (oh hey, the boiler is actually getting a bit old and Putin decides to start a war, so gas becomes really expensive -> 20k for a new boiler; etc)
b) the "life happens" side of things
For a) we should have just done our homework of running the numbers a bit better...
For b) ... You're not the same person you were 5 years ago. So chances are you're not gonna be the same person in 5 years from now! We thought the house made perfect sense, as we got a stable job in the area, planned to have kids, etc. - Then life came around and threw a few curveballs (both good and bad!) and now we're moving away for 3-6 years (to somewhere, where housing is provided for free). If we hadn't bought that house we'd pay 0€ in rent, basically giving us 2000€/month for investing... As it stands we're left with a house that we can't really rent out (German renting law... basically we'd have to do so much renovation it wouldn't be worth it) but also don't need for several years.
TLDR:
Don't underestimate the value of flexibility that renting grants you! A house really can "tie you down"!
That's Germany
@@crazydaddy4934 yep, This happens in the USA everyday.
I squatted for a couple of years best financial decision I ever made.
Why was this not a compulsory subject in my high school? Feels great to meet people who are so good at what they do in any field of their interest.
Good analysis.
By buying instead of renting, you will eventually own your house and stop paying, particularly if the price is correct.
Personnaly, I'm 53 and finished paying my mortgage. Ok, it's only a tiny house but now I'm about to work halftime too.
Buy, easy. Buy because I want my own sovereignty. Buy so I can fix things when they break and not wait weeks or months. Buy so that I can own pets without paying monthly fees and forfeiting your initial deposit. Buy because I want a sense of permanent, stable housing. Buy because I want a garden and want to invest in a fence and soil. Buy because in my area, housing is still rapidly increasing. Buy because rent here is so unaffordable. Also, most of us do not live in NYC and LA where renting is often the more affordable option.
I’ve always thought that renting is legit. Me and my wife were able to rent in an area for 12 years that we absolutely could not afford to buy. And it was amazing living by the beach in California with an ocean view. Not a waste of money at all. Once we had a baby and we’re both working full time from home since Covid, we decided we needed a bigger place, so we moved to oregon and bought a house. It’ was quite expensive up front but we wanted the stability, space, and freedom of owning and a big yard for our daughter. It was worth it now for us
Whatever goofications you need to justify.
@@johnmeehan7884 making up words automatically makes you look...goofy.
Imagine you had bought 12 years ago and didnt have multiple rental increases and then moved as you did
Your new place would be paid off in 8 years time only 😊
@@pauljansen6650 didn’t have enough money to put a down payment until recently… nice to dream though
The main reason I want to own my own property is to have more of a safety net, specifically when I finish paying the mortgage and then I don´t risk getting kicked out by a landlord when I´m 80.
I can understand that. What if, alternatively, you had such a large investment portfolio that your housing would never be at risk? That portfolio, which had grown and compounded over time, would pay your housing costs in perpetuity, whether you wanted to rent or own. Wouldn't that also be a safety net?
Not really. Landlords can sell to other terrible landlords. Force move outs just by making it living hell to live in a place. No amount of investment cushion can protect against that.
What % of renters get to that multi million dollar safety net do you think? 1%? And they'll be means-tested on that cash nest egg for access to healthcare, social care etc while the homeowner will have their primary residence wealth ring-fenced. It's an incredible gamble to opt out of ownership and trust the market to keep you alive.
@@ramitsethi Not sure. I didn't mean that I won't have the money to rent if I get evicted; my point was that even if I CAN afford to quickly rent another place, I don't think I want that kind of hassle when I'm 70 years old. I want to be able to retire at a place where I don't risk getting evicted. Does that make sense?
Thank you for this amazing video 🙏🏼 After running the numbers, I realized that it didn’t make sense for me to buy a house, I’m better off renting and investing in the stock market rather than paying a high mortgage.
I'm going to buy a cabin, own it outright, and all my income goes to investing and businesses.
Depends on the market and where in the housing "bubble" you are. Buy at the bottom and you're golden.
Honestly this cannot be overemphasized, helping people mitigate unforseen circumstances and mistakes .It's always good to have a financial plan,
I'll have to be financially stable in every sense before purchasing my first unit. The best thing to do with your money is to invest rightly because money left saving will end up with no returns.
No doubt being financially free and not having to worry much about health care , housing, and other expenses cannot be overemphasized, making smart plans and setting up diversified investment portfolios is quite essential.
yeah that's a good path, focus on a good strategy, relax back and watch it compound within the years. In good time you'll see returns.
the problem is that most don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could hope to earn a high in these challenging conditions.
Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional in order to navigate this recession and achieve potential high yields and taxation
So the viewers of this video are all multimillionaires and they don't know whether to rent or own? it baffles me.
This is silly. Owning a home builds wealth. Full stop. Fixed rate mortgages are a great hedge against inflation while at the same time holding an appreciating asset. Rents, on the other hand, will always go up. If you plan to stay in an area for more than a few years, buying is almost always better than renting. Stop blowing smoke at people.
Have you ever run a buy-vs-rent analysis? If so, in which city?
@ yes. I currently own three rental properties. 2 in Santa Rosa California and one in Battle Creek MI. The reason I own those and rent them out is because the cap rate was attractive as an investment. That obviously means that in a short period of time the residents renting it will have paid for my property. If not, it would be charity. The ONLY things that could extend that cap rate is aggressive rent control policy or local bond measures written on property taxes. Again though, that just extends my horizon, it doesn’t negate my decision. If renting truly were cheaper than owning, there would be no landlords as there would be no money to be made.
I'm glad you have those properties!
Your last line is incorrect. There are several reasons why a renter could rent a property for far cheaper than it would cost to own. Can you name at least 3?
As an example, it would cost more than 2x more to own the current place I rent.
@@loudandclearmediaI rent a $1.8 mil property for $2500/month.
Do you think my landlords ran the same calculations as you?
Do you think they are building more wealth than I am as a result of our individual decisions?
All this is applicable to people who can afford to rent a 2 bedroom apartment but then go on to buy a 6 bedroom house.
My rent was $1200. I bought a condo where I pay $1500 per month including property taxes and insurance. And the thing has appreciated by at least 20% in last 2-2.5 years. So, you can buy a house/condo if you don’t buy a $500k house when you could afford a rent of just $1000 per month.
Ramit Said: "SOMETIMES"!!!! renting can be a better financial decision. Be careful to assume that renting is ALWAYS a better financial decision. Renting SOMETIMES is a bad financial decision
I used to think the same on rent. Now renting makes good sense. When you rent you DON'T take on the risk of owning the home. I'm investing the difference.
Here’s the problem: you’re investing the difference currently. Often people start spending the difference then end up 70 without shelter. So long as you’re investing the difference you may be okay.
Without a doubt, this year will be worse than the last. I lost a lot of money last year as a result of bad investment choices that I would not have made if I hadn't been so worried about my portfolio. I kept investing, but I couldn't determine whether to start paying for a house. In the end, I sold my positions, and the house needed more work than I had planned. I'm not sure how long I can keep going like this
We've all made mistakes at some point. You should consider financial planning
Do you mind sharing your financial planner ?
@@agentjacob4099 SCAM
Who is making money today?
@@bereketubekbay582 everyone lol
I don't think you understand that you will be at the mercy of landlords and rent increases. Have you seen the payoff of equity? I bought for 315k, with 3.5% down. and it's now 850k. Not even the stock market would have turned 15k into half a million in 5 years.
Did you sell it for $850K? If not, you haven't made a cent.
Elon has billions in stocks but according to your logice he hasn’t made a cent if he hasn’t sold any
Will you now sell your house and buy another one for 315k?
@neth77 smart investors don't sell their real estate right away. It's part of a diversified portfolio to accumulate wealth.
@joelwong3144 no, why would I sell if I'm getting positive cash flow from renting it. I bought several homes this way and now rent them. Part of my diversified portfolio. I can now retire before I have gray hair 😉
6:00 Imagine you go to a barber for a haircut / a dentist for a surgery and someone tells you you’re throwing your money away (for the service you got obviously).
Similar here in the Portland Oregon area. I could rent my house for 2k/mo and if I bought my house today at $440k at 7%, a mortgage would be 3k/mo on a 30yr ($497k paid in interest over the 30yrs) so total cost of $937k to buy my house. On a 15yr mortgage $4k/mo ($220k of interest paid over 15yrs) would cost $660k to buy my house. Renting for 30yrs with 1% rent increase per year would be just over $700k over that 30yr period. If you never sold your house within the 30yr period and never needed to fix anything (good luck with that) and did a 15yr mortgage or less instead of a 30yr, then it would make sense to buy in my area, plus use that extra 1k or 2k per month to invest then renting makes a lot more sense if you choose decent investments that hit the market average and not lose money.
I think observing rental price trends is also valuable when making house purchase decisions. I’ve found that while my initial mortgage payment felt somewhat high, over time, it’s become cheaper and cheaper as rental costs go up
I prefer renting, but I bought our house. Why? Because I don't like to have close neighbors. I am a light sleeper and sleeps early(9 or 10pm), so if I have neighbors close by like in a condo or apartment, most likely I won't be able to sleep due to the noise.
Be nice to hear anyone's advice on renting vs buying if one of the need of my 'rich life' is peace and quiet after 9pm. :)
Find it strange renting is seen as throwing money away yet no one ever says bank interest is - especially the fact mortgages are weighted heavily towards interest at the start -nor other 'hidden costs'. Propaganda
I just did a video on this topic. So many don’t understand how effective renting can be in some situations. Two similar houses in Florida cost $5,600 to own or $3,500 to rent. The difference can be invested. And no phantom costs. Home 🏠 ownership is a good thing but not always. The American Dream has a lingering effect and people think renting is wasting their money. By looking at both sides you can easily see the differences.
I’ve been a homeowner twice. Can’t say I enjoyed it either time. The stress, the maintenance, the lousy neighbors ( keeping up with the Jones’ ), taxes/insurance. When you live in an apartment everyone is on equal footing. Not as much neighbor competition. Landlord takes care of lawn, maintenance, taxes. We love our 2 bedroom, 2 bath apartment. When you get older, you don’t need the headache.
i dont usually comment... but with a youtube name i will teach to you be rich and your opening line "im a multi-millionaire", i never clicked the back button so fast
That's OK. I'll see you on Netflix
@@ramitsethi no really try to be more pretentious
If you want to talk about phantom costs of ownership that trip people up, please talk more about property taxes. Yes, everybody knows (or should know) that you have to pay property taxes. But did you know that when you see a "property tax" number on a real estate listing, that's NOT the amount that you'll have to pay? Rather, it's the amount that the current owner is paying - and what that means for how much YOU will pay depends on where you are.
In many states, property taxes are stabilized for owner-occupants, so that regardless of how much the house value appreciates, property taxes only go up by a certain amount. In some states, that amount is zero - meaning that the owners are still paying taxes based on the assessed value when they moved in 10 or 20 years ago. If you put that number into your budget for property taxes, you're in for a very unpleasant surprise.
And you MUST do your own research on this. As far as I can tell, there's no law - nor even any professional standard - that requires real estate agents or mortgage lenders to give you good information about property taxes. If you pay your property taxes through an escrow account on your mortgage, they can set your escrow payment to any old number that might have nothing to do with what your taxes are going to be. And you won't find out that anything is wrong until taxes come due and there's not enough money in the account - at which point your monthly payment will jump by many hundreds of dollars a month. You'll have no recourse against anybody when this happens.
I know so many people (including me) who have gotten burned by this. But somehow, it seems like nobody talks about it, and I've never seen it mentioned in any first-time homebuyer information resources.
I dont mean to be rude, but this is wrong and misleading. First, the process for setting the escrow amount is standardized. It is the opposite of any old value. And you, as owner, have access to the documentation for it if you wanted to check.
Even if your state has a Homestead protection on taxes that caps at zero increase, the assessments still happen. You can get those numbers easily as part of the process. Even Zillow or Redfin type site has assessed values and property taxes going back. If they look strange (or even if they don't) you can discuss what your property taxes would like with your realtor. Or talk to someone from the taxing government entity.
If you are worried that first year will be a big debt due to some type of escalation (such a Homestead ending on ownership change) you can put extra into it. You are right that the longer a home is owned, the bigger the potential impact. But that is also a known value.
While the concern is valid, treating this as unexpected or even phantom is not. Even in the rushed closing of today (mine was literally the first day the lender said they would be ready) you can still do this.
@@BenFranklin1776 I don't mean to be rude either, but I'm not just speaking academically. This actually happened to me, and you're in no position to tell me that it didn't.
I bought my house at the end of 2021. The mortgage lender, for whatever reason, set the escrow payment based on what the previous owner was paying in property taxes in 2019. I thought the number seemed low - it was even lower than the number that appeared on the listing - so I asked them about it, and they assured me that it was right. In hindsight, I should have pushed back harder, but I was overwhelmed with all the other details of buying/moving, and it wasn't on my radar that it was my responsibility to double-check the lender's numbers.
Taxes came due a year later, and there wasn't enough in escrow to cover them. My monthly payment jumped by $340, because I had to pay back the deficit that had built up and pay the higher amount that I should have been paying all along. If you're saying that my lender actually did something wrong here and there's someplace I can report them, do tell. Because I've looked into this already and have come up empty so far.
My favorite thing about Ramit - preaching the renting wisdom I've embraced for years and have always been chided for. When this came up on the Netflix show I couldn't believe it - THE VALIDATION
well hes not right so...
@mr_num_numz so? It is possible someone can live differently than you think we should and still be successful.
You use Netflix shows and UA-camrs for validation?
@pauljansen6650 I use them for education, most definitely! The validation follows, because the education fixed my financial struggles.
Series Idea! 💡
Debt to life (Dead to alive)
Great idea for content for you, Ramit! Find 5 couples located in different places maybe even around the world that are drowning in debt & make a strong financial plan with them & follow up in intervals (1 month, 3, 6, annually) and eventually in five years & ideally for the rest of their life.
Get some sponsors, pay the winner, have them audited by an accountant, some meetings can be in person. Some can be video call, they can be streamed live. It would be an amazing way to help people get out of debt and live financially responsibly.
ne of the greatest videos made, I always doubted the hype in Vancouver, and I rented a cheap place for 8 years (to this day) I just purchased a 10,000sqft of bare land less than 45minute away from downtown Vancouver. No mortgage
I would buy a house so when I'm 65 years old, i don't have to wake up at 5am to go to work with back and knee pain to pay my 700 p/w rent.
too bad there are plenty of folks older than that who still have an even higher housing fee lol
@@S93H794 Exactly. You have common sense. It make’s absolutely no sense to rent all of your life. No one can afford to throw money away like that unless you are wealthy meaning you never have to work. I’ve been stacking houses all my life so when I’m ready to stop working a job or running a business I will have a no worry place to live.
Like the video said investing along with renting is the key, when your old and can't take of yourself you loose your home in the end either way either through health or death, go retire in Asia and have a better life
A problem with owning later in life is that there is no way to spend the money tied up in equity. If you stay in the house until you die, you effectively die rich. Many retirees are equity rich but cash poor, which can seriously limit their quality of life. It's a tricky choice as renting when old whilst spending down wealth can also have disadvantages.
@@adm58 Why would you need to spend it. Housing and money are separate things. You need housing and money until you die. You can downsize when you’re older or sell it and rent and live off the proceeds. Either way you will leave something behind for your family.
If you look at a mortgage calculator 20% down on a $1million house, you end up paying around $1.1 million in interest at a 7% rate! That's $1 million that you pay for the house + $1.1 million in interest on top of that. So you are putting yourself in debt for $2.2 million. You are paying almost all interest in the first half of the loan. You really need to think about whether your situation is such that paying that much interest to the bank is ok.
Or pay off someone else's investment and set your money on fire.
How much are you paying for rent to have that 1 million dollar home? Now increase that price 3-5% every year until you die.
Now buy that home for 1.1 million today….pay your 1 million in interest over 30 years. That 1.1 million dollar home in years in worth at a minimum 2.1 million and when you sell it you get back your purchase price and interest meaning you paid nothing to live there. (Except repairs and property taxes….which are waaaaaaaaay cheaper than your rent for that place increased over time)
@@michaeldwyer977 did you watch the video?
@@mmms1979 yup! Did you read my comment?
My father pays $2000 for mortgage in the apartment that we grew up in he rents it out now for $2300 sure he bought the apartment 10 years ago, but he’s paying a mortgage on an apartment he bought for 230,000 that today is worth 350,000 and when we moved the average rent in the apartment building was about 1600 and now it’s 2700 so although it took 10 years he’s making all the extra money we spent on the apartment. In 15 more years When his mortgage is paid off, he will probably be making an extra 3000 to 3500 extra dollars per month from that apartment. Not every situation is the same but At least 70% of the time it is more worth it to buy than rent and make all that Money back for the rest of your life and for the rest of your children’s lives and for the rest of your grandchildren’s lives The white people are more rich in this country than immigrants and African-Americans is because they bought they built and they did not rent They grew their generational wealth and today they send their kids to college because most of them grew up in their parents grandparents uncles, great uncles or great grandparents house.
1. Never buy a condo. You own nothing and you continue to pay rent, disguised as condo fees. And you will likely pay more than an equivalent free-hold home.
2. There will be maintenance costs. Establish a slush fund and save up for the big stuff. When your roof needs replacing, the money should already be there. A home that has not been maintained will deteriorate rapidly.
3. If a landlord is charging less for rent than the mortgage payment, they are losing money. You may be able to rent there for a short while, but that landlord is going to unload that property at the earliest opportunity.
Is renting better? In rare cases, for the short term, yes. But, in the large majority of cases, no.
Few points:
1. Rent will increase as well, but EMI will stay constant
2. EMI has an end date, but rent doesnt. do the same analysis for 60+ Years ( may be spans over two generations)