While I really enjoy Grant Cardone and what he has to say, this is why I don’t “rent where you live and own what you can rent.” Instead, I prefer owning where I live AND owning what I rent, the best of both worlds. Enjoy! Feel free to add me on Snapchat/Instagram: GPStephan
To preface this, Grant Cardone has a video explaining why you you should “rent where you live, but own what you can rent.” His reasoning behind it is fairly logical: the majority of people see the home they buy as an investment and don’t look at the opportunity cost of this money, so they don’t fully understand the expenses that come with owning a home. Grant explains that instead of tying up money in a home you live in, you should use that to invest in multi-family real estate - and then, rent where you live, because that’s less expensive. His reasoning is that he can rent a home for much cheaper than it would cost to own that home, he has more flexibility in moving around, and can leverage his money more by investing it.
But lets break this down a little further…and then I’ll give you my own thoughts on this, because I own where I live and own where I rent, and have purposely designed it this way for a reason, which I’ll discuss shortly.
The biggest point with Grant’s argument is that it’s less expensive to rent a home than it is to own it, and you get a higher return elsewhere. And the answer to this is both a yes and a no at the same time, meaning it’s largely dependent on your market. Here in Los Angeles, MANY areas are more expensive to own than rent…in the higher end markets, home owners make more money in appreciation than they do in monthly cashflow, which often balance out the costs of buying vs renting.
Other markets are the total opposite. Some markets are way cheaper to own. Outside of really high and really low cost of living areas, most markets tend to fall somewhere in the middle. It doesn’t make a huge difference either way, BUT with owning, you generally have a little more control with what you do with the property, and you’re not worried about a landlord kicking you out on a whim out of nowhere. So Grant’s argument can be true depending on the situation, but it’s also false in other markets.
The problem here is that for most people never do any research about which is better for their situation, and automatically assume they should buy because “it’s a good investment long term,” which won’t always be the case.
I like to own where I live and own where I rent. This gives me ultimate control of both words and most people don’t realize the HUGE opportunities of buying where you live. First off, buying where you live gives you this immediate advantage over an investment property…it allows you to put less money down at a lower interest rate. The difference between paying a 4.5% and 4% rate can add up to an enormous amount of money over 30 years. The other advantage here is that you can buy a property that needs a significant amount of work and renovate it. This is what I’ve always done, for every single property I’ve bought.
By renovating a property, you can walk away with a significant amount of equity…So right off the bat, I’m coming out ahead by buying and renovating, than just flat out renting something. Even if I pay more for buying, I’ve just made way more money in equity.
Now, granted, you could also do this for an investment property and rent it out for a higher price, but my approach has been to buy a home as a primary residence, get the lower interest rate, renovate it, and then move in and live in it for awhile. Enjoy owning without having a landlord. When the time comes, buy something else and rent out the house you were living in. Now you have a renovated investment property, financed at a lower interest rate with less money down, that you can one day rent out. Ideally the property SHOULD cash flow though, which is why you need to anticipate the rents ahead of time and what your total cost will be. But when done correctly, you’ll end up with a great cash flowing property.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Get $10 by signing up on Coinbase after your first $100 purchase: https://www.coinbase.com/join/5a20f244e07edf019d1ce550
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
To preface this, Grant Cardone has a video explaining why you you should “rent where you live, but own what you can rent.” His reasoning behind it is fairly logical: the majority of people see the home they buy as an investment and don’t look at the opportunity cost of this money, so they don’t fully understand the expenses that come with owning a home. Grant explains that instead of tying up money in a home you live in, you should use that to invest in multi-family real estate - and then, rent where you live, because that’s less expensive. His reasoning is that he can rent a home for much cheaper than it would cost to own that home, he has more flexibility in moving around, and can leverage his money more by investing it.
But lets break this down a little further…and then I’ll give you my own thoughts on this, because I own where I live and own where I rent, and have purposely designed it this way for a reason, which I’ll discuss shortly.
The biggest point with Grant’s argument is that it’s less expensive to rent a home than it is to own it, and you get a higher return elsewhere. And the answer to this is both a yes and a no at the same time, meaning it’s largely dependent on your market. Here in Los Angeles, MANY areas are more expensive to own than rent…in the higher end markets, home owners make more money in appreciation than they do in monthly cashflow, which often balance out the costs of buying vs renting.
Other markets are the total opposite. Some markets are way cheaper to own. Outside of really high and really low cost of living areas, most markets tend to fall somewhere in the middle. It doesn’t make a huge difference either way, BUT with owning, you generally have a little more control with what you do with the property, and you’re not worried about a landlord kicking you out on a whim out of nowhere. So Grant’s argument can be true depending on the situation, but it’s also false in other markets.
The problem here is that for most people never do any research about which is better for their situation, and automatically assume they should buy because “it’s a good investment long term,” which won’t always be the case.
I like to own where I live and own where I rent. This gives me ultimate control of both words and most people don’t realize the HUGE opportunities of buying where you live. First off, buying where you live gives you this immediate advantage over an investment property…it allows you to put less money down at a lower interest rate. The difference between paying a 4.5% and 4% rate can add up to an enormous amount of money over 30 years. The other advantage here is that you can buy a property that needs a significant amount of work and renovate it. This is what I’ve always done, for every single property I’ve bought.
By renovating a property, you can walk away with a significant amount of equity…So right off the bat, I’m coming out ahead by buying and renovating, than just flat out renting something. Even if I pay more for buying, I’ve just made way more money in equity.
Now, granted, you could also do this for an investment property and rent it out for a higher price, but my approach has been to buy a home as a primary residence, get the lower interest rate, renovate it, and then move in and live in it for awhile. Enjoy owning without having a landlord. When the time comes, buy something else and rent out the house you were living in. Now you have a renovated investment property, financed at a lower interest rate with less money down, that you can one day rent out. Ideally the property SHOULD cash flow though, which is why you need to anticipate the rents ahead of time and what your total cost will be. But when done correctly, you’ll end up with a great cash flowing property.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Get $10 by signing up on Coinbase after your first $100 purchase: https://www.coinbase.com/join/5a20f244e07edf019d1ce550
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
It really should be a lifestyle choice, and the other problem with buying is that people often buy more house than they need because it's an emotional choice. People often spend more money to get the upgrades, rather than investing the difference. Or getting more bedrooms than they actually use / need. If you rent you can always downsize or upgrade as needed which is a lot more difficult to do if you buy too much house than you need. You are also able to move more easily if you need to at the end of a lease vs. when you buy where you live, you'll have to sell or rent out the house.
There is no right / wrong answer. If you're in a place in life where you're settled, then buy. If you're moving every few years, then you should probably rent. Both rent vs. buy are correct, depending on where YOU personally are at in life.
The downside to househacking is that you have to share your house with random ppl…
My brother did the same thing in Mountain Home, CA. He bought a brand new home for 500,000 and sold it about six years later for 1.1million on an interest only mortgage. Appreciation has always been the winner in real estate.
Why don't you believe in doing 15 year mortgages.
I did and I pay 1200 a month mortgage
Owning what you rent is wasting money!
Fantastic video, Graham
Why does he remove 175$ and 90$ from the net cost of owning the house?
Also, rent out what you rent is illegal in my city. Soo.
Okay I have a question about adding equity: can you use this to quickly build equity in order to avoid paying PMI? I bet there's a situation where you could find a sweet spot where you don't have to put as much down and instead do renovations to gain equity instead of putting more down. Thoughts?
"If you just own everything you cant lose money"
Graham, instead of doing this process every other year, can you do it once a year?? I know it’s aggressive but I’m just worried banks might look at it as mortgage fraud … thoughts?
Great video but where does one buys these rental properties?
What GC is really saying is dont try to get rich by living in a house, fix it up then sell it. Thats a 10+ yr journey, where you cant get back the time.
Most of your teachings is also bullshit
Hey Graham. Your video highlights the strategy I accidentally stumbled on: keep buying single family primary residence every couple of years. I am at 2 now, and will buy the 3rd in 2021!
Awesome video!!
I want to see bank statements, whoever is richer and stable then that's the guy I want to listen to.
Thanks so very much. We are definitely going to buy and live in our first property, save money then move to buy the next one, while renting the previous. Makes much sense to me as someone with a family. Thanks once again 🙏
"Buy, live, renovate, then rent out but must have cash flow for this to work". But if the property increases in value, isn't it good enough just to break even or even have a small monthly negative cash flow? You're getting a house for free more or less if the renter pays the mortgage. The value of the house increases but your mortgage doesn't so in a way it gets cheaper to buy.
The other variable is one who would be content in renting a lower value property (temporarily) than one would purchase adding to the difference between the cost of renting vs. buying. I think most people would buy a nicer house than they would rent if it's only temporary (1-2 years?).
Orrrrrrrr you can buy that $150k house with a cheap mortgage payment with 3% down and still have your money for investments. Everyone assumes 20% down is automatic. I’d much rather keep my $30k and pay an extra $40/month PMI for 4-5 years which I rent or prepare to sell it. The main issue here is individuals getting approved and seeking a home for the maximum they are approved for or more.
Never be overextended and under capitalized
Get the HEEELLLLL out of California!
“ spending years paying down a mortgage, most people aren’t going to have much to show for it, except for a paid off house.”
Uh yeah. That’s the fucking point
Grant cardone had gone broke he shut down his agency and fired all his employees. He is selling his properties at marginal price.
One thing you mentioned but is understated is that when you get a mortgage you are buying that property at present value but are locking that payment in for 30 years of future value dollars. You don't have to worry about your payment or your rent going up with inflation or with the value of the home. You are able to pocket this difference. In 30 years your $1600/mo payment will be much less relatively to today.
Graham, your wisdom is a blessing!
I like moving around periodically and small contracting projects.
Wow you do answer most peoples comments I’m blown away. Your a sharp guy!