Why I Rent - Renting vs Buying a House
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- Опубліковано 30 вер 2024
- The rent vs buy dilemma. In this video, I’ll go over why I choose to rent.
Timestamps: Disclaimer 0:38, Myth Renting is Dead Money 1:11, Extra Costs when Buying 2:47, Net Worth & Cash Flow 4:09, Why I Choose to Rent 8:10, Would I buy if $1 mill was to fall into my lap? 9:05
This is a personal decision and there is no one right way, but I know for me, renting puts me in a better financial decision.
I personally don’t buy into the argument that renting is dead money, it’s a way to be debt free and grow your net worth through other means rather than the house you live in.
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When you near the official retirement age will the pension asset test have any impact on if you decide to buy or continue renting? With / without an imaginary extra million.
Given that I don’t know what the pension will be like in 25-30 years and also not knowing the rental market, housing market and (most importantly) my own mind then ;) my only truthful answer is - no idea.
But let’s pretend I’m of retiring age right now. I decide to sell up most of my portfolio and buy a house. I’ll need to keep my assets under $250K to qualify for the full pension of just under $20K a year. And since I’m only allowed to earn max $84 a week extra before my pension is reduced that means I won’t be able to keep my dividend portfolio - too easy to go over.
Let’s also pretend I have a perfect house that doesn’t require maintenance EVER - so no plumbing fixes, appliance upgrades, new fences or council rates (easily $5K a year in reality).
That leaves me with around $1600 a month for bills and food.
Compare that with now. I have no maintenance costs, just rent. I bring in avg $5000 a month less the rent of $2000 a month, leaving me with $3000’ish for bills and food. It's also sustainable for the foreseeable future.
So no. Right now I would not buy a house so I could qualify for a pension :)
That because my own (paid off) house is the answer. I am 43 and never must worry or quessing what rental market will do in the future. I dont care. Why people dont geting it?? Look stories how old people are maxed out from rental market. Why anybody will risk?? Greetings from Finland!
@@landlord5552 Finland is likely very different to Australia where we have some of the most expensive housing in the world.
@@landlord5552 : What is property tax like in Finland. My old retired neighbor is paying monthly property taxes + maintenance that would easily cover one bedroom apartment in a nicer part of tow than her house is.
@@landlord5552 thank you for your comment and you answered my question if I should rent.
I’ve been going back and forth about buying and i have come to the conclusion i don’t want the responsibility
Congrats!
Same!
Good choice in my opinion. While owning a home for a few years in the state of CA and sold last year, renting has now reduced my stress level so much. Obviously pros and cons to both but I don't think I will ever want to buy again. Now able to put way more money into my 401K and my budget is solid.
Don't shy away from responsibility
@@Chaffinchcxr It can also be a financial burden. I had a plumbing incident that set me back almost $5K even with insurance. Oh then my insurer dropped me for filing the claim and had to pay triple in premiums to another insurer. Lots to think about when it comes to home ownership.
That is a really good explanation. I have been trying to justify to myself why I don't like the idea of a mortgage. I listened to this FX trader once explain that buying a house with a mortgage is crazy because you don't actually own an asset but have a liability (for 30 years in the example you mentioned). I like the 4 quadrant idea that you've used to explain this and it very clearly explains why buying a house will lead to you having a liability and reducing your cash-flow whereas investing the money in the stock market will give you dividend income. You're right about the "dead money"argument as well. We could say the same thing about paying for food --- you're actually helping the farmer pay his bills but then so what? You get a service or good in return. Thanks very much for the video.
Thanks people think if you just rent youre missing out on a dream of homeownership but to me I see the opposite. You can move around more easily with renting and just get rental insurance to protect you items. I'd rather stack my money invest and be debt free which I only have 1 debt right now no credit cards or car notes. There are some advantages in renting.
if you buy a house in a wise informed way, you can still move around by renting out the house and still have your properties pay for your rental liability if you have a job that keeps you moving around.
People renting now are basically paying for a new roof every year on top of the the mortgage. Wouldn’t want to be a renter today
Being forced to pay a mortgage, property taxes, and insurance/association costs EVERY month for 30 years with no easy way out is absolutely miserable. And knowing that you are paying thousands upon thousands of dollars extra in interest is complete misery. You can't just stop, move back in with relatives, or get roommates. You are STUCK with all of the monthly burden for 30 YEARS!.....I will rent and be flexible and free as a bird always.
@@areguapiri comment of the year!!!
@@areguapiri Yeah, rent is not an obligation LOL
I agree with you, especially if you're single without kids. You're living for today and not shooting to be a homeowner in your 70s. Owning a house has been encouraged by the banking sector, which makes a lot of money from the housing market.
In the end, it comes down to what you're comfortable with in your life today! Like Tracey, the position of being debt-free is appealing and less stress. In todays world, most people couldn't come up with $1000 if they needed it suddenly without borrowing or selling personal property. . . no thanks. And, in-the-end, no one gets out alive; and whether you die with a $500K home or $500k in a portfolio of some sort, it is still meaningless. Entrepreneurship is not near as meaningful as realizing that what you have is all that you want -- being content in whatever position you accept yourself in is PRICELESS.
good point
👍🌹Eckhart Tolle Approached 🌈😃 thank you for spreading wisdom and positivity around the world 🌎
Renters don't have debts? Do tell
Your first point was enough for me to SMASH the like button! Unless one is living off the land and off the grid, we are all paying someone else's lifestyle by purchasing something/a service. Rent went towards me living somewhere for that time, shoot!😊
I agree with you on many of your points they say rent is a waiste of money but so is paying interest. People are up to there eyeballs in debt and they can't afford any extra activities because they are living like tightasses. But just remember that like property the stock market can also crash reducing divendend paid to you.
Not necessarily true. For example, during the recent GFC, the Australian Foundation Investment Company (ASX:AFI) did not miss a beat paying dividends at exactly the same level as always. Had you never watched the news, you would have been blissfully unaware there was a financial crisis going on and just carried on.
Messrs. Dividend Aristocrats would beg to differ.
I would beg to differ. Home ownership even as a landlord is HIGHLY risky!
@@scottd1342 there has been a problem in the economy well before the news decided to start reporting it. Look at the numbers
You are a smart woman. I'm young. I won't be fooled into ever buying a home. You point out literally every flaw with owning. Cheers from the states.
Finally an Aussie financial budgeting channel!!
Ikr
One of my fave channel about finance!
Having a paid for house when you retire is the best financial advise. We purchased a new home about 15 years ago and we just now had to spend less than $10k to upgrade our heating/appliances etc. Our tax/insurance is less than a quarter of what our home would rent for right now. If you buy the right house in the right place, it's a no brainer that it's the best decision to own.
If you can pay it off cash you are correct
So is having enough funds in your portfolio to buy a house with cash when you retire - if you choose to.
You must be a boomer.
Tracey, I'm turning 22 this year and I want to be like you when I grow up! My lifestyle expenses to be mostly covered by passive income, none of the stress that comes with owning a property, and my assets to be producing income for me. That sounds like a bloody good life!
Having positive cash flow is the best financial decision I ever made. Good luck! 💕
@@TraceyEdwards Thank you 😄 What was your career was before you started living off passive income? I'm very curious to know if it was a high paying one. Could you please make a video talking about your life before and after switching to living off passive income full time? How your usual schedule looked and what you with your time now? Thank you 💕
Wait till you're 60. Dumb renters like you never factor in the cost of paying rent for 60 plus years. You only calculate the cost of the life of a mortgage, never after it. A mortgage is paid for after 25 years. You're paying rent until the day you die with nothing to show for.
I agree
As a doctor, and UA-camr, I change hospital rotations every year. It makes more sense for me to rent than to buy for now, until I have a fixed hospital placement.
This was a year ago but I needed to see this at this point in my life lol. New subbie
We have all been BRAINWASHED into this get a job, buy your own home BS. Renting, capital release and reinvest is by a galaxy the better decision.
And if you angle it right, you'll live and lease a car for FREE by virtue of your passive profits!
No brainer.
Fully agree, I have had houses and I have rented. I sold my house and invested the profits into the stock market, in a diversified portfolio as well as other assets. Love the flexibility to move to more anywhere in the world.
I am renting now because I sold my home recently to be closer to family. I can't wait to buy again. I hate renting. I was in my last home for a short period of time and I made 50k cash (after repairs and upgrades) off of it when I sold. Plus, I saved money because my mortgage was about $600-900 less than those renting in my neighborhood. I easily made/saved over 100k in less than 5 years. Buying was one of the best financial decisions I could make. The key is to be debt free THEN buy. I've ran cost analysis, opportunity costs and all of the other numbers and I always come up with owning being a better option.
If you are debt free and have reserves
After 30 years you might move to somewhere u like and rent there again. That's better ! You can go anywhere u like
@@nippermh 🤣 There are plenty of rentals cheaper than ever, and they're still empty....what planet are you on?
I like it. I was a home owner with loan, and although i sold it for handsome profit, the bank make more money than me, now i‘m even happier to rent anywhere i like with more liquid asset in dividend stocks. 🙏 thanks
Thank you for this information. I’m 53 why would I want to buy a house now??!!! I’m content with renting.
RIGHT
Makes perfect sense to me. Thanks for explaining.
Thanks, Candyce!
You know why I rent. Because houses are artificially inflated and can't fucking afford one even though I'm a middle class earner.
Nice, I like your thinking. Also you have the option of moving overseas and stretching that dividend income even further.
Can you please do an updated video for this 5 years on to see if your views are still the same, would be very interesting and beneficial to your subscribers.
Renting is better. When I die, I cannot take the home I worked so hard for with me. I love the freedom of picking up and go, not having to pay for repairs/maintenance, choosing the location and home I want to live in. Plus, I get to drive nice cars.
We honestly need more voices like yours dispelling the myths that everyone needs to be a homeowner and that primary residences are assets. I did the math a couple years back and learned that my home would have to be pretty cheap for it to be even relatively beneficial. My spouse and I have decided to buy a home that's no more than twice our annual income (most banks would qualify us for 4x that amount). But after taxes and maintenance, owning a home is more like having insurance (a somewhat guaranteed "rent-stabilized" dwelling in exchange for doing your own repairs). But we realized investing in stocks is the way to go. Retire with only property taxes and insurance to really worry about, and have hired help when we get too old. We wish we could've reached FI early enough to just rent wherever whenever indefinitely.
I'm in the same situation. I had a house, it was nice. Sold it. True cash flow and freedom from a stock portfolio is amazing!
You might be paying more in interest, but your home value is gonna also increase at the same time, usually more than 4%, so after you paid off your home, it's gonna be worth close to 1mil from 500k, 30 years down the road.
According to the Wall Street Journal, over the past 30 years, house prices have risen 3.6% annually, so a $500,000 house would be worth $1,469,961 after 30 years (which you paid $1 mill for).
@King Everywhere I Go That's not right at all.
@TraceyEdwards so that's not so bad then.
Such a good video. I’ve never heard it explained in the concept of house rich but cash poor. Food for thought. 👍
Also if you are single and living in the big city rent a room that is all inclusive in the rent (hydro,internet etc.) and if possible no more than just another tenant accommodating apartment lesser the people less headache will be...also sell your car especially if you are in a big city no matter what make, what year it is a luxury to own it...I did this 2 thing renting a room, using public transit (for almost 10 years now) have a full time job and I saved tons of money
Tracy I love this video. We lived the American dream, owned houses and after living that and understanding the real costs that go with that we are now investor and high cash flow driven. This helped me focus tighter on what our goals should be and high cash flow principles we live by.
Ha ha ha. Put your money in stocks that can be worth zero in a New York minute or own real estate? They don't call it "real estate" for nothing. It's real, not hypothetical. You can always live there or rent it out. In the USA, it costs twice as much to rent than it does to buy. Math doesn't lie.
In the US, while house prices vary dramatically, a report by Nerdwallet found that across ALL states, homeowners do pay more (up to 33% to 93% more) than renters do for the same area. I can link to the study if you like :)
In Australia is cheaper to rent than buy.
@@TraceyEdwards Statistics can prove pretty much anything you want them to. They need to be controlled, for a multitude of variables.
vidstar7 - Australia is not the USA. Doest that make sense?
Same as in London. However in Perth, Australia, renting is indeed cheaper than buying by quite a margin, so Tracey's video does make sens, but only if the renter INVESTS the money saved regularly into shares, etfs, etc. Then yes, renting can be better.
Great video Tracey, I stumbled upon this same concept on accident, and as a result I agree with you; I was in the military, renting because I was only in the same city for 3 years at a time, even though I wanted to buy, and I invested 20 percent of my take home pay, into mutual funds and etfs. Now, years later, after getting an average of 10 percent returns for the last 15 years, I'm still renting but I have a huge passive income producing investment portfolio, that provides me MORE than my Officer pay in the military. So now, debt free, I can buy a home, CASH, in retirement. And still be debt free with 3 streams of income. Knowing me, I'll move, rent the home out, and rent again haha. This is such a foreign concept to most people, but when you realize how much you get back from NOT buying, it makes sense.
You made my day with your one sentence: "........ I can buy a home, CASH, in retirement." Thank you!!
@@mine1685 Yes I have since bought a 3 bedroom home outright that has increased in value. I would strongly recommend renting, because you have more cash to leverage elsewhere, whereas a house can make you "house poor" with all of the upkeep if you are in a 30 year mortgage with property taxes.
At this point I am considering renting my home out, taking a contractor assignment overseas, renting again and buying another property in about 8 years. Tracey knows what she is talking about, and these unorthodox methods can really put you in a good place down the road. Good luck to you!
Urgh I wish my hubby was ok to rent. He’s got the old school Italian mentality and “needs” a big flashy home. I grew up in an old farm house rental where I could see through the timber floor boards to the dirt below.. I didn’t feel like I missed out. But golly I feel the pinch of home ownership... I’m a stay at home mumma with 2 under 2. Any tips for how I can save money?? Xx
Is there anything around the house you no longer use that you could sell for quick cash? Also look into some side hustles you could do for extra cash flow, something you could do at home while the bubs are napping. :)
Tracey Edwards did your kids nap at the same time ? 😜😜 mine sure don’t. Yes I sell thinks on marketplace pretty regularly. Looking forward to the days when I can go back to work :)
Lol 😂 mine are in school now. Makes things sooo much easier 🤣
👏👏👏 "you're not paying $500,000 for that house, you're paying a million dollars". this is the truth. my dad always pushes on me that owning property is the biggest marker of financial success, and that he's set up for life (because he owns 3 properties). but at the same time i see him become outraged at seeing his land tax, council rates, etc go up (i get outraged too). he always boasts that the value of his properties keep going up and therefore he will make double what he paid for when he sells them, but one property has been on the privately listed market for 3 yrs now, and not a single buyer has shown strong interest.
i find him very silly and purposely ignorant for having such a black and white thinking, which he wants his children to have as well.
Wait until you get renovicted. You're at the mercy of your Landlord.
@@robocop581 you’re at the mercy of the bank. Which one is worse?
@@ivandunn1334 A bank mortgage ends after 25 years. You pay rent until the day you die. You have to be really stupid if you choose lifetime renting
@@robocop581 I don’t want to pay any loan for 25 years let alone with interest on top of it. Most people who “own” their homes are not financially free. Buying a home is a liability not an asset. Yeah, you get bragging rights to your peers; “I own a house”. You still have to pay for property taxes and maintenance. There’s no other reason to own a home aside from the potential equity you’ll build. You’d have to be pretty stupid to commit to paying someone for 25-30 years just for you to say “I own it”. At the end of the day who cares, if I’m financially free renting while you’re screaming “I own”, “I own” from the rooftops with no real money?
@Ivan Dunn 👍🏾
Being forced to pay a mortgage, property taxes, maintenance, and insurance/association costs EVERY month for 30 years with no easy way out is absolutely miserable. And knowing that you are paying thousands upon thousands of dollars extra in interest is complete misery. You can't just stop, move back in with relatives, or get roommates. You are STUCK with all of the monthly burden for 30 YEARS!.....I will rent and be flexible and free as a bird always.
Would love to hear you views now 5 years after you did this video....my mortgage fixed rate for next 4 years is cheaper than most of my friends rent, 4 minutes in to this video "i like to chose where i live" fast forward to 2023 and no a renter does not as housing supply is low yet demand is high, theres even a chance you will be kicked out and someone else moved in as the landlord raises rent to cover % increase on mortgage, then where does this idea of renting get you ? Livining in a car and for some thats happened, this video was done when rates were at super low figures and people thought it would never end, well that party ended. I have a mortgage, have done for years and should i have to downsize when i hit retirement i have considerable equity built into it after all those years of renting to assist a failing pension system, what will you have after paying all that "dead" money as rent ? Nothing....average joe wont be able to save or invest anymore at present as both rent and mortgage repayments have sky rocketed so the theory of cheaper to rent than buy (due to additional costs with owning) and invest that part falls apart......no im sorry Tracey, my opinion is the rental avenue is pure BS based on outdated ideas of freedom to move as and when etc and this video needs updating to reflect current financial situation.
I do love your channel though :)
Hey Tracey! This was so helpful and just the advice that I needed right now. Thanks so much for sharing your tips! New subbie :) xx
Thanks so much! Love your channel :)
An important part you eluded to. Liquidity. You can't just pull your cash out of a property if you need it when it's already paid to the bank and well and truly gone! Yikes! Some people see owning houses as an asset. No that's what they've been told to think. It's a liability, with having to put so much money into something that is constantly deteriorating and then there's your own time too. With stocks, it's the opposite, your money is working for you, people are working for you, nothing is physically deteriorating, and you don't have to spend your time relatively to manage it (except for your due diligence and homework!).
Here's the difference, eventually, all your rent will pay off the owners home, and they will own it, but you will still have to rent it and then your rent is profit for the owner. You'll simply have nothing to show for your decades of rent. Oh, you think you'll save the extra income? Don't kid yourself, it doesn't happen like that, ever.
Crusty Gronk - Have you heard of investing? In assets other than property? I could afford to buy a house outright if I wanted. But I invest in the stock market and managed funds instead. I have a much better life than all of my friends who have huge mortgages and are indebted to the banks for the rest of their working lives - and undoubtedly beyond in some cases. I'm afraid your way of thinking is exactly what the banks rely on ... debts slaves.
@@maskellmaolseachlainn6347 Renters are not slaves of anything?
You explained that perfectly. Great to find another person on the same page as us. Subscribed. Not sure how I missed your videos.
This is what most people don't understand... You will be richer if you rent AND invest your money wisely. Buying a house to live isn't an asset, ESPECIALLY if you appl for a loan at the bank!
Honestly I have never understood why someone would pay so much interest to own a house, I think its madness - I rent, I have zero stress, I also get tax benefits. It's all about creating the life you want.
Exactly! Very well said.
Because when you finish paying the mortgage you will own an asset. You can sell it, rent it or borrow against it. Can't any of that when renting. There is no security in renting and it never ends. Statistics are proof that most people who own are far better offer financially in later years.
@@traderwarehouse6246 exactly. I am over renting. I am closing soon on my new home. Wouldn't trade this experience at all for staying in a apartment indefinitely .
But renting an apartment has increased so much thought out the years . So no saving there .
ive always been very unusual. when people see home ownership as a joy, i just see it as a burden, too much responsibility and i like just being free and calling maintenance when i got a problem; i don't like to be tied down to a property and dont want to go through the hassle of renting it out, i just like my nomadic energy--homeownership is a chore but like i said i know most people love it
A healthy stock portfolio is dependent on a healthy stock market isnt it?
Your one smart cookie Tracey, had three homes sold up a couple of years ago before the next decade of interest rates rises now pay rent and save baby save will buy a small house with cash when interest rates are high houses cheap.
Sounds like an excellent plan :)
Your full of shit mate, you'll be living in a caravan dickhead
In my opinion, buying a house is usually best if you are raising kids with your spouse.
As a renter you have to allow inspections into your home. You get evicted when the owner wants to sell or move back in etc. You can't just leave you have to wait until the end of your contract lest you lose your bond. The real estate and landlord will always try to take the bond. You can't make modifications on your rented home.
Yep. Happened to my Wife and I in London, TWICE! So fed up with shitty landlords, horribly decaying buildings and houses, mould (holy Jesus, the mould, the effing mould!!), in promptu inspections out of the blue, etc. we just went and bought a flat that appreciated over £100,000 in just four years, plus the overpayments we made on it and the initial equity and the four years of repayments, allowed my Wife and I to buy a very big, beautiful beach side house in WA. If we had rented all this time and instead invested in the stockmarket, we could have lost a lot of our investment value or it could have remained the same and we would have never been able to buy our new house in WA. Also, our monthly repayment in London was LESS than the monthly rent for a single room!!!! Here in WA it is different I have to admit though, as rents here are ridiculously cheap compared to London and mortgages are higher as interest rates over there are just 2% or so while here, and only recently due to the RBA's rate cuts, are just over 3% which is a massive different in monthly repayments.
I'm going through this now
But own a home that you earning growing value of equity and when you sell is free tax on capital gain
U wrong when u said I have only 1 payment to do rent ? U forget
renter insurance, water,sewer, electrical,garbage , gas, and u have to be ready to pay move or move every time landlord wants increase rent is a nightmare bcz end.day.u own cero
Yup exactly when you live in a regular house like here in the states where I live. Your not just paying rent, your paying the other expenses that come with the house. The landlord wants you to cover it. So you pretty much gotta work overtime or a second job at that point. And yes your in danger of rent increase Every year cause rent never stays the same.
I don't agree with most of your points. Especially when you said you are not paying 500K, but you are paying a million to buy the house considering the interest you are paying. You know that a million is going to be paid over 25 or 30 years. Your house value also raises to multiple time more than its initial value in the course of 30 years. Let's say you got a 500K mortgage and bout a 600K house. Although you will repay close to 1 million dollars, your house value would be somewhere around 3 million or more after 30 years. Considering this factor, buying a house is still a winning card.
According to the Wall Street Journal, over the past 30 years, house prices in the US have risen 3.6% annually, so a $500,000 house would be worth $1,469,961 after 30 years.
Compared to the stock market which has risen an average of 11.1% over the past 30 years (again according to WSJ). If you had $500,000 in stocks, after 30 years you’d have $13,756,974.
You do you, and I’ll do me.
@@TraceyEdwards My parents bought the townhouse where i grew up, close to Oslo, in 1975, they paid NOK 50.000 for it. In 2010, I bought the house next to them, exactly the same, end of terrace, I sold it this year in January. I got NOK 3.450.000 for it. In 44 years, the value of the property has multipled by 69 times!
@@ibislife Same thing in Canada and Iran. Two countries I have lived in. She seems to be taking official numbers very seriously.
I think the key difference is knowing what the housing and rental markets are like where you live. I honestly don't believe that either renting or buying is better than the other, because there are so many different factors that come into it, so it's looking at individual specific circumstances, and evaluating from there. Both property AND the stock market will rise in value, and if you choose the renting option you will need to be investing to compensate, so it's choosing what makes more sense to you personally. Hope that helps :)
@@TraceyEdwards Then you need to pay rent, which is as expensive as paying a mortgage - in my area, AND invest in the stockmarket, which makes absolutely no sence. In addition, the factor that you need to know the stockmarket to go into high risk investments, in order to make money. I go the property route. :-)
I think maybe a good alternative is to have as a good mix in to your investment portfolio as is humanly possible....that could include stocks and shares, bonds, pension plan, regular savings account, and yes maybe also an investment property or 2 if your finances will stretch that far.
Hedge your bets and do not put all your eggs in one basket is my motto.
Could you do an updated video on this in todays circumstances?
I’m in America, so I’m not certain that this will be true for everyone in other countries. We have 30 years to pay off a mortgage, so in 30 years, I will own my property if I started a mortgage today.
🚨 With renting, I will be paying rent forever. 🚨
If you can purchase. What is required sometimes is discipline. Everyone tells you it's ok to rent now, when you're in your twenty's and thirties even forties. As if you'll die at 50. Imagine being a renter in your 70's and 80's. People need to be honest about the real possibilities. There is something called inflation and that has no respect for age and it's commodities or your pension. Thing long term... If and when you have the option.
You are brilliant thank you! I was already planning to buy and you changed my mind
You will look back on this vid and seriously regret your decision and your logic. Paying a mortgage doesn't last forever, renting will. And be sure rent will always go up. Owning is about the long term not the short term.
Jason Hockley You are right there is nothing like home forever but sometimes not everyone is capable of having that.
@@vessyioannou259 everyone is capable. Victim mentality is a root to poverty.
@High Frequency Radio there are two choices, rent or own. The fallacy of renting is the beginning, getting beyond 3 years and owning is always better by a long way, it's not even close. The foolishness of renting in your older age knowing you paid someone else mortgage.
@@jasonhockly8655 There are people who are happier while renting than people who are owning and that is a fact. Everyone has a different journey.
@High Frequency Radio A house is an asset because its your home and you don't have to keep moving.
Yeah sadly we always get told and lied to that renting is what keeps you poor and taking a mortgage will make you better off financially. Btw what do you think of the Dave Ramsey plan? He’s quite big in the UA-cam budgeting community and over in America.
Is that the Baby Steps plan? (I just googled it - lol). I've always been a fan of his debt snowball method. :)
Tracey Edwards Yes it is. Thanks
most of us is doing his baby steps to our own degree lol
Dear Tracey, I agree with you on the high cost of owning a house. A house is a liability not an asset. It depends of the country you live in and the housing market if it makes money or worth owning it. The stock market is in a bubble now, same as the housing market. Both will correct eventually. I rent and build my savings in precious metals. Hard assets are not income producing ones but you can combine the two. Also cryptocurrencies, classic cars, art are a good way to mitigate risk just to mention a few. I will buy a house if the market crashes by 75-80% only. If it never happens then it is better for the people.
You said a house is a liability, not an asset. You are absolutely completely 100% wrong. A house is an asset. Your thinking is wrong. I repeat, a house is an asset.
In monetary facts, a house is an asset because you own it. It builds equity. An apartment does not gain.
Fantastic and thought-provoking video. I have watched it a number of times. I moved from South Africa to Melbourne a number of years ago and am still renting and find most are property (home ownership) obsessed here. Lots of pressure to own. Thank you. If you don't mind me asking, are you still renting today?
Yes I still rent at the same place I did when I made that video :)
@@TraceyEdwardsHi Tracey, I'm in the UK and in a similar situation as the commenter above where there's just so much pressure from everyone to buy. I'm still ignoring all the pressure as I like the freedom of renting. But I was wondering if you have real estate as part of your portfolio in one way or the other? i.e. while you rent where you currently live, do you own other property which you rent out, or do you own REITs, or anything else like that? Trying to figure out if I'm missing out on something by not owning or being invested in real estate in one form or the other, and how best to approach adding it to my portfolio if I choose to continue to rent the roof over my head 🙂 thanks for any insight you could share
terrific points... I try to explain this to people but many just fail to understand it because they just are brainwashed to believe that home ownership is the key to wealth when it is clearly not.
Of course it's better to rent. Your Landlord is obviously worse off than you.
You're not debt free as a tenant. Youre paying another persons debt your whole life 😐. If you dont pay the rent, you dont have a roof over youre head. Therefore, you live permanently in debt.
Well, if you default on your mortgage repayment, you also don't have a roof over your head. Why do you think the property is considered as 'security' by the bank - it's because they can take possession of it if you go default, so that they can recover their money.
Also, when you pay interest to your bank/lender, you are effectively paying rent to use their money to fund your property purchase.
@@uberboiz thats an extreme example. However, why would you wait for the bank to repossess the property? Thats stupid. You would sell it first and take the profits or rent it out and then move back when you were ready. Most people own their property within 20 years. Tenants pay rent their entire life. Also, mortgage payments reduce over time and your income goes up, giving you a better life style.
@@zooks3894 Why is that an extreme example -How many people have their houses repossessed when the 2008 mortgage crisis hit the US?
Also, what makes you so confident that you can immediately sell your house (not to mention for profits) when you are selling it in a position of weakness?
Mortgage payment reduce overtime, but you still have to pay other outgoing costs which usually increase overtime in line with inflation. I find it insane that many people think the only cost associated with home ownership is just the mortgage repayment/interest. Isn't that stupid?
Good on you if your income goes up - most people have their wages stagnant in the last decade or so, and these are the same people who rush into borrowing a significant amount of money to buy a single property.
I'm not against home ownership - I do have a rental property myself. I just think people who say owning is definitely better than renting without considering individual circumstances are very misinformed.
@@uberboiz Youre right. The US is a mess. Wouldnt want to live there. We are talking generally here. And owning is better than renting. Show me all the wealthy people who rent and dont own their own home? Almost none. The smart money is on owning.
@@zooks3894 You raised some fair points, but wealthy people own properties because they can afford it (also, their wealth is not necessarily created through property ownership).
As I said, there's nothing wrong with property ownership, as long as you know what you sign up for (and as long as you can afford it comfortably). Similarly, there's nothing wrong with renting as long as the money that you decide not to spend on property down payment is invested wisely in other assets (e.g. dividend paying shares). It all depends on individual preferences and circumstances. The problem is there are so many people out there who rush buying properties thinking that it is the only path to create wealth, or thinking that owning is definitely smarter than renting, without questioning why that's the case or testing the assumption. It takes a considerable amount of knowledge to realise one's own ignorance.
Hi Tracey ,
Great video! You have revealed the unspoken truth about home ownership & it's real cost. Most people never deduct their incurred purchase costs, interest, maintenance/upgrades, inflation etc., etc., etc... from the sale price of their home. It always amazes me that Aussie parents will often discuss how difficult it will be for their kids to get into the housing market but ironically will encourage them to purchase a house at the earliest opportunity without expressing their concerns of affordability or options such as rent vesting. Mortgage = There goes your best YOLO lifestyle!
FYI, Landlords earn between 3% to 15% net profit from their rental properties. If you don't understand this then go ahead, keep thinking to yourself you're living maintenance and property tax free in a rental property.
I think your perspective is great and exactly what i have been doing .Everyone keeps pushing me to buy , yet i make a whole additional income from my investments which consist of mainly high end P2P lending , crypto lending , and a few other things .I try to tell people that because of my cash flow from interest i could borrower and have that pay down mortgage , i still have a way to go before im very cash flow rich so it was so nice to hear you talk on this and i feel even more convinced im on the right track.
Thank you, very helpful.
Buying a house will destroy your life. You become a slave to ongoing labor and repairs and problems, mentally physically emotionally and financially. Don’t do it. Renting is NEVER throwing your money away, how when you LIVE THERE? I don’t wish home ownership on my worst enemy. Don’t let traditions manipulate you out of your freedoms.
Well put!
Your first point about the interest is kinda missing the point. You are paying a sum of money each month. That is all that matters. Whether that is interest or the bank takes it and blows it on hookers and cocaine is irrelevant. Once you write the cheque that month and post it off it makes zero difference to you what it is used for. Remember, when you pay money to your landlord there is a good chance THEY will be using it to pay the interest on THEIR mortgage. That money ends up paying interest either way. You comment that you look at rent that way, comparing it to a movie ticket, so you should look at your mortgage payment the same way.
What you need to look at is what you would be paying over the next thirty years in mortgage (your monthly mortgage payment times thirty times twelve) and compare it to what you would be paying in rent (your monthly rent times thirty times twelve AND working out how much that rent will increase over the years.) Saying "You will have paid a million dollars" for your home is meaningless until you compare it to a renter who will have paid two million in rent in the same time.
I bought my house twenty five years ago, and my monthly mortgage payment is now 15% of what I'd be paying if I was renting. And in a couple of years that mortgage payment ends, forever, while rent will carry on going up and up forever. I am now the one with plenty of free money each month and that will continue. It is a renter who will have to carry on finding more and more money year after year in rent, forever.
And I can use that money I save every month to buy stocks if I want, meaning I will end up with a mortgage-free home AND a stock portfolio.
In the short term you may well be better off now but it may well be that in twenty or thirty years and beyond your friends who struggled for a few years will be the ones who are far better off. They took the long term view.
Karl Bassett Exactly
Makes sense. And you got valid points. However we still want to buy our own home...
Cool! Good luck with your search 😊
You know in my religion bank loans is forbidden because of the interest is considered asa way of steeling or make benefits from your weakness. So I can't buy house until I have good assets to buy it cash 🤷♀️. Listening to your opinion is satisfying 😊
As long as there is a such things as property taxes, you will never own your house. From a strictly financial standpoint, It only makes sense to own a house if appreciation is greater then the sum of property taxes, maintenance costs, and the opportunity cost lost by not investing. At a certain point, it doesn't make sense to pay a mortgage vs renting. There is a neighborhood I want to live in where after my down payment of 45%, my mortgage will still be over $3k. Houses cost a million and I have $400k for a down payment. I can rent for the same amount. Why would I pay $400k for this scenario? I'm thinking I should rent for the same amount, and take the $400k and invest it.
You must be regretting not buying by now LOL
This video validates those who are struggling to buy their own property right now.
But rent comes with their own stresses too. Since you don't own it it can be taken away from you at any time. Not to mention the stresses of finding a new (and decent) place to live without competing with many others. Rent is a physical burden rather than a financial one.
In the USA HOA fees can run you sometimes the cost of renting a house some people
Pay $700 a month in HOA fees that’s absolutely ridiculous there are just too many worries about owning a home taxes, maintenance, Insurance... chance of losing your home completely sure insurance will cover some of the cost of losing the home but is it really worth it with so many natural disasters? There is just too many risky business of your mega rich sure buy a home you won’t have much to lose if your a multimillionaire but if you aren’t making over $50k a year don’t buy a home
Firstly this was a great video, Thank you. Main takeaway for me is dont buy a house unless u really have the financial means to do it comfortably. I dont want to own a House but have barely money left over monthly. I will Rent and invest in stocks until I make enough.
Good vid. I disagree on some points and agree on others. However, 1 million in the stock market and cash, will be taken into account for the pension, as you have 1 million in liquid assets. IF, you buy a house, it is NOT included in the assets test. So, yes..you may pay double for buying a house over 30 years..but then, you have cashflow..for the last 10 years or so of working life. No rent to pay and you get a full pension. If you own 1 mill in stocks or cash etc.... NO pension. The market value of any assets that you or your partner own will be assessed by the Department of Human Services (via Centrelink) to determine your potential eligibility for the Age Pension. It’s important to understand that your residential home is not included in the Age Pension assets test. According to the last census conducted by the Australian Bureau of Statistics, 6% of pensioners lived in owner-occupied homes worth over $1 million in 2016.
Great video. I wish I rented. My wife keeps trying to improve our house. I see it as a money pit. If we sold our house, our cash flow would go through the roof as I would buy dividend-paying stocks.
I also rent and am not planning on buying a home in my state. I am however thinking of investment property in another country. Thanks for the info .)
Awesome. Let me know how it goes :)
Hi mate. Be very careful about property overseas. I fell for that trap and after 8 years I still cannot sell the property nor does it produce enough to offset even the monthly charges and fees.
Renting is the biggest mistake you ever do in your life . Renting is making other people rich . Renting is good when you sell off all your assets and buy dividend stocks and just live of it and pay rent
That's such a ignorant statement, clearly shows how deft to the world u are, first of all, unless u have cash to buy your home outright mortgage IS MAKING SOMEONE ELSE RICH, whats more u're making the rich richer because the cost of the mortgage alone besides all the fees u pay the lawyers and g'ment {making them richer) u're paying give or take %40 more than the property is worth {making the banks richer}, then u have maintenance cost which means {u'll be making all the different repair companies richer} then theres insurance 'biggest rip off of all, u'll also be {making them richer}, and what about the running cost while making all of these people and agencies richer?, how bout annual property taxes {making the g'ment richer again} or monthly costs? electricity, heating, cooling, the yardboy, cable, internet, etc (u are even making them richer) in most cases these are all included in the rent, I live in a 3rd world country and ost times these are included in the rent, so in conclusion basically just living within a socially developed country u are making other people rich, just going to the grocery store or owning a car makes other people rich, I have seen and know a lot of people struggling to maintain a house while paying a mortgage and except for a choosen few u don't get to have a live, u spend most of your good years paying off the mortgage and hoping to not get fired from your job cause then u lose the home and have to end up renting anyways main difference is that 20-40 percent downpayment and all the years of paying insurance is down the drain, shit happens everyday and the system is designed to keep the rich rich
Wow love the video. Was thinking about buying a house. Still young and single too but now really don’t think I will.
Buy house don’t listen to her, I’m 50 years old and Realestate is my life that haw I get reach. Home value grow in value, mortgage always stay the some while rent increase every 2 years. She is 100% wrong. Just buy as much you can afford don’t buy expensive home at first try to build equity.
Thanks for the great explanation, really changed my perspective on owning a house. Great video!
Dear Tracey, I am not agreeing completely with what you say. If you buy a property, and yes the majority of your mortgage payments the first years goes towards the interest of the loan. But, you are not concidering the increase in value of the property. I have been buying and selling property, to climb the ladder to where I am today. I would not have been able to afford this property if it wasn´t for the increased value of each property. Now, I own the most expensive property I have ever owned, and with only a 50% mortgage on it. This is my forever home, and is my investment for retirement. I can then choose to sell, or stay in it for as long as I am able to, keep chickens or grow vegetables... (I built it with old age in mind, with all amenities on the ground floor) I do live in Norway, we do not have property taxes, insurance is low, most people own their property, and we were not affected by the financial crisis or the recession. I have no clue of the stock market, I have a small savings every month into a fund.. also extra savings for retirement. Also the feeling of being secure. A renter can choose to sell your home at any time. The most important thing is to be aware of pros and cons. And I do understand the reason why you are renting. :-)
Great video and I agree with your points. Seems like if your even considering buying homes for investing than you have to be able to pay cash to avoid the interest fees.
Lastly, it seems to be an insecurity thing when you tell people you rather rent and they look at you funny cause your going against the general thought of wanting to buy a home.
Hi Tracey, I found this video very insightful and I think what a lot of people don't understand is by renting and investing in the stock market rather than buying a property you can actually achieve a better lifestyle faster and perhaps passively. Rental yields for expensive properties are typically lower than average/middle-class properties. If you compare the worst houses in the worst suburbs to good houses in the best suburbs you can see they cost 6-8x more to buy but only about 3x more to rent so it takes a lot of time & effort to move up the ladder buying rather than renting. Then by the time you're in retirement age you will have several millions of dollars in stocks so who cares if you're still renting in old age lol.
This was INCREDIBLY helpful! Thanks!
Holding a home isnt high net worth versus low cash flow. Your net worth is your assets less your liabilities. If your net worth is high then you own your house and you wouldnt struggle with the bills
Nicely done. I have not seen anyone get to the point like this. At some point buying a home just becomes a status symbol thing as all your friends buy and you want to keep up. A house is a great thing for facebook photos to soothe egos. Also most folks buy more home than they rent. While renting, folks rent a 1500 sq feet in the burbs, but when they buy they splurge on a 3500 sq ft home. in usa, in cold wether, you also have the headache of plowing the snow from driveway and also most folks mow a lawn. I would rather spend my weekend watching Netflix, having my investment portfolio compound than rake leaves and do more back breaking work around the home. I hate being a handyman and worrying about which contractor to call to fix the plumbing, or any appliance in the house. It might work if folks strictly bought a small house within their means. But most see a homeownership as a pride thing and want a super luxuriously large home compared to the little place they rented
I will never buy a house! I do not want the responsibility of caring for a house like lawn care, taking care of the gutters, structural issues and general maintenance. I also don't like the idea of giving 20% of the homes value upfront for the purchase along with realtor fee's. When you rent the upfront cost is first months rent, deposit and application fee. Example would be: you buy a house for $100,000.00 you would have to cough up $20,000.00 with renting its first months rent say $1,000.00 plus a $250.00 deposit wow what a difference. A home is not always an investment, your money is going into property. If anything happens with your job or your finances change, you owe a lot of money to the lender of your loan. With renting you just have the lease you signed. At the end of the day, I feel you are saving money renting and the stress of homeownership is void. I can use the money instead to take a vacation, invest in the stock market or have a nest egg if anything should happen.
you know what, I never really thought about it like that. That makes a lot of sense
Can you really move at any time without cost in Australia? Here in New Zealand most people I know have fixed term contracts of one year. If you decide to move earlier, you still have to pay out the rent to the end of your contract. Unless you can prove extreme hardship to the courts, which is rare. I've heard its also common in the US.
You're right, you need to wait until the end of your tenancy agreement which is usually 6 months or 1 year. I meant (sorry if I was unclear), that the costs to move when you are renting are just moving costs (when your contract is up), as opposed to the cost of selling a home and buying another which can be expensive. Hope that makes sense. :)
Definitely agree not to buy a house when you are not financially ready. If u will buy, put at least 20% down not the 5% the gov't is trying to encourage. Also the monthly mortgage should not be more than 30% of your monthly income and continue saving. What i like about buying is the stability of not having to move when the owner decided to sell or increase rent. Also some rents in Sydney is ridiculously high that it's almost the same as the amount of mortgage. And i think it's better to diversify. But as u said, it all comes down to personal situation and your priorities in life.
Depends, in Victoria the LVR is 30% at least, in QLD it’s different
You are so right same with me I live out to my room a small room and I rent and I leave out to my van and I have no debt I'm debt-free and I have money in my pocket every day if I want to take a day off I'm on vacation I can you come do that when you own a house a lot of people think cuz I don't have to have money that was off so renting is not a bad that money it is great to rent as well depending on the person but me I love renting I'll never ever ever buy a house again myself...
And I too am debt-free
Tracy just of subject the amount of money Aussies spend on cars especially new cars on finance lose money when leave the dealership lose money on finance then lose money to upgrade in 4 years do that 3 times and say goodbye to 100k
I have been a renter for many years, and I am done being at the mercy of a landlord that increases rent every year. While their rental property grows in value, your wallet thins out every lease renewal! I rather have a 30 year fixed mortgage. I live below my means, which many do not. Either way, you have to save$$$. There are pros and cons on each side. You have to decide which one is more beneficial.
Warren Buffett recently said he'd be a lot richer if he rented instead of owning his house and invested the saved money in stocks over 50 years, which makes sense and supports what's being said in the video.
Love your mentality... honestly I want to be debt free.. if I have to buy a house, I would like to pay it by cash. Period.
“If I need money, I can sell some shares at anytime, which, someone who owns a house can’t quickly get cash if they need to.”
Have you heard of a home equity line of credit, Tracey?
The owner of the house has calculated the morgage, rates, insurance and you are paying it all. It's all being paid from your rent. Yes you paying interest but at least if you paying for 30 years you will have a house that's yours at the end of it. Renting just means you paying interest for someone else. You will always need shelter. A place to live. Unless you choose to be homeless. If you decide to only keep the house for 7 years you make so much more profit due to capital growth . When you renting its like a surrogate pregnancy. You carry the baby for years but at the end it's not yours. Renting just means you paying someone else's bank loan interest for them
My home value has doubled in about 20 years. That’s 5% earning against an average mortgage rate of 4ish. Up there. That doesn’t however include all I’ve spent on maintenance, repairs, improvements, fees, increasing property taxes, etc. I’m dead tired of having to take time and fit maintenance into my schedule. Equity means nothing until you cash out. And I can’t wait to.
I must say that there is one aspect of renting that many see as a huge burden but if you adapt accordingly eliminates it entirely, and that is not being a consumerist hoarder of useless or excess possessions.
If you live minimalist you can move out in an hour and a single car load....
Can you show your stock portfolio ? Hard to listen to the great advice and content, but don’t have any data or examples of your stock portfolio