Which is actually cheaper, buying or renting a house? Lets crunch the numbers to determine which is actually less expensive, and which factors to consider to determine which is right for you. Enjoy! Add me on Snapchat/Instagram: GPStephan
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I think there’s a common misconception that buying is always the better choice, and that renting is just throwing money out of the window. But you can’t deny that many high-profile people just end up renting their homes…why is this?
Lets first start with owning a home. Many people just look at the cost of rent, then look at the mortgage payment - see it’s maybe a little more, but think “I can own this for just a little bit more, buying is a waste!” However, the actual cost of owning is home is much greater than just your mortgage payment. You also have property taxes, insurance, and repairs to take into consideration - not to mention the opportunity cost of the money that you invest into your home.
Purely for cash flow purposes, renting is usually cheaper. Even though you don’t get the tax benefits of owning, usually renting and investing elsewhere is cheapest month-to-month out of pocket. Not only is it “cheaper” for cash flow purposes, but you have the mobility to pick up and leave when your rent is up. You’re not responsible for maintenance. You don’t need to bother selling it when you’re done. You just pick up and go. You can also invest your money invested elsewhere, potentially making you even more money.
But in terms of NET cost over 7 years, the lease will cost you MORE than owning a home, realizing the tax benefits, seeing some appreciation, and paying down your loan.
So what’s the advantage of renting?
First of all, this assumes the market goes up over 7 years…if the market is about the same price or drops, you’ll actually come out AHEAD by renting. You’ll also come out ahead by renting if you can make more than a 12% return on your down payment elsewhere. You’ll also come out AHEAD by renting if you’re only going to live in the home for 1-3 years and plan to sell it, unless you get lucky with a rapidly appreciating market. So it takes a lot of averages and assumptions to really decide which one is better.
The biggest downside I see with buying is that it ties up capital that COULD be deployed in a business that would generate higher returns. For someone who only wants to buy an live there a few years and sell, it’s dangerous to assume the market will continue going upward in a short period of time. So the “cost” of renting is sometimes much cheaper than just owning the home for a few years.
BUT….for those who plan to live in their home for more than 7 years or so, generally speaking buying is better. You basically lock in your cost of ownership by buying - you won’t have rent increases, you won’t have a landlord telling you what to do, and you have total control over the property. You also get the tax benefits of owning and you can build up equity in an appreciating asset.
However, you’re tying yourself down and if you decide to sell after a year or two, you’ll likely take a loss unless your market appreciates in price enough to make up the closing costs and commissions. But long term, owning will be cheaper if you intend to live there long term.
So like I said, determining which is cheaper really depends on quite a few variables - short term, it’s generally better to rent. Long term, generally better to own. And the longer you stay in a property, the more it usually makes sense just to own it.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
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
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
I think there’s a common misconception that buying is always the better choice, and that renting is just throwing money out of the window. But you can’t deny that many high-profile people just end up renting their homes…why is this?
Lets first start with owning a home. Many people just look at the cost of rent, then look at the mortgage payment - see it’s maybe a little more, but think “I can own this for just a little bit more, buying is a waste!” However, the actual cost of owning is home is much greater than just your mortgage payment. You also have property taxes, insurance, and repairs to take into consideration - not to mention the opportunity cost of the money that you invest into your home.
Purely for cash flow purposes, renting is usually cheaper. Even though you don’t get the tax benefits of owning, usually renting and investing elsewhere is cheapest month-to-month out of pocket. Not only is it “cheaper” for cash flow purposes, but you have the mobility to pick up and leave when your rent is up. You’re not responsible for maintenance. You don’t need to bother selling it when you’re done. You just pick up and go. You can also invest your money invested elsewhere, potentially making you even more money.
But in terms of NET cost over 7 years, the lease will cost you MORE than owning a home, realizing the tax benefits, seeing some appreciation, and paying down your loan.
So what’s the advantage of renting?
First of all, this assumes the market goes up over 7 years…if the market is about the same price or drops, you’ll actually come out AHEAD by renting. You’ll also come out ahead by renting if you can make more than a 12% return on your down payment elsewhere. You’ll also come out AHEAD by renting if you’re only going to live in the home for 1-3 years and plan to sell it, unless you get lucky with a rapidly appreciating market. So it takes a lot of averages and assumptions to really decide which one is better.
The biggest downside I see with buying is that it ties up capital that COULD be deployed in a business that would generate higher returns. For someone who only wants to buy an live there a few years and sell, it’s dangerous to assume the market will continue going upward in a short period of time. So the “cost” of renting is sometimes much cheaper than just owning the home for a few years.
BUT….for those who plan to live in their home for more than 7 years or so, generally speaking buying is better. You basically lock in your cost of ownership by buying - you won’t have rent increases, you won’t have a landlord telling you what to do, and you have total control over the property. You also get the tax benefits of owning and you can build up equity in an appreciating asset.
However, you’re tying yourself down and if you decide to sell after a year or two, you’ll likely take a loss unless your market appreciates in price enough to make up the closing costs and commissions. But long term, owning will be cheaper if you intend to live there long term.
So like I said, determining which is cheaper really depends on quite a few variables - short term, it’s generally better to rent. Long term, generally better to own. And the longer you stay in a property, the more it usually makes sense just to own it.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
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
He just assumed most of us are stupid and didn't understand basic math lol
Owning makes sense if you stay in one house for 30 years. In fact, that's the best way to profit. Otherwise, the fees will cut into your equity every single sale, refi, etc. The old people that are house-rich today are rich because they bought once and lived in one house their entire lives. That's the entire point of it.
I rent an apartment because I don’t have to pay property taxes, pay for anything to be fixed in my home, nor pay HOA fees. The amount of money I save because of all of this allows me to live my life today and not later in life. I also live in SF so owning out here would be wasted money.
A lot has changed since you dropped this video, you should drop an updated version of this!
I'm trying to buy a house could you help figure everything all up . And the best way to pay it off quick like with that interest tax write off I had no idea..
Owning your own place, it gives you power and it gives you a voice when you decide to rent from someone you give up your voice your rights your ability to do whatever you want and they step all over you making you feel like it and it’s always best to own a place that is power even if you have to pay a little bit more, it’s worth the peace
After selling a couple homes in 2020, I'm anticipating a housing crisis in order to buy inexpensively. As a backup plan, I've been thinking about purchasing stocks. What recommendations do you have for the best time to buy? On the one hand, I keep reading and seeing trader earnings of over $500k each week. On the other side, I keep hearing that the market is out of control and experiencing a dead cat bounce. Why does this happen?
now someone let me know if theres a video on house hacking vs renting
That's mighty generous of you to think that I can actually save $100,000 for a down payment or to invest..
😗
Rent doesn't seem to go down when the value of the property goes way down in my experience. It will definitely go up though.
Yeah, but what if I wanna buy a rental property & rent the home out when I wanna pick up and go?
Good video covering many aspects. So, it depends on the situation.
You can rent a big ass house in Maryland for about 2100 a month I love my state
We need more of these videos but updated to current market conditions
Hi Guys, can anyone explain how at 5.57 mark in the video, he arrived at the total out of pocket expenses at 142k? Not able to figure out this value. Thanks in advance
Morgages are typically much less than a rent payment. What world are you living on lmao
Keep living in moms basement
lol, best case scenario with cooked numbers xD i know u are a real estate guy, but times have changed. let go 😂
Why waste $100,000 on a deposit? When you can use that to rent, invest and start businesses! Let's say $2,000 per month for rent = $24,000 per year and you have $76,000 to invest and start a business. Why would anyone want to buy a house to live in?
Rent to live, buy to rent!
This deserves a like Fs
NICE VIDEO….. PLEASE HAVE INCURRED SO MUCH LOSSES TRADING ON MY OWN…I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED… CAN ANYONE HELP ME OUT OR AT LEAST TELL ME WHAT I'M DOING WRONG?
rent around me is 1100 for a 2 bedroom, a mortgage for the typical home around here is 650, hard to ignore that spread
For some area buying home is a stupid decision but few areas buying home makes sense.
I came to read the comments because this guy's adive is outdated. In 2022 rent way too high.
In the military, if youre not using your BAH to pay for your mortgage, youre losing money
Loved all the numbers. So satisfying.
This is a video I will watch again and again. Thank you. Love the comprehensive overview!!
Pretty good and thoughtful analysis. My only quibble is the mortgage interest deduction in your calculations. I recall (and live with) the "gift" from the last administration that capped deduction for state income, property tax and home mortgage at $10k total so in all likelihood in your example, the tax benefit is realistically zero.
This is so beautiful, I’m keeping this video, I will use this one day, almost guaranteed 💪❤️
Alright… You've convinced me. I'll sub now. You put too much work into these videos for me not to subscribe.
Great presentation, enjoyed your discussion… thanks alot, very helpful. One thing I gleaned was for ease of living, renting is simpler – if you fail to do everything in owning the benefits are no longer there. Or a smaller house isn't as beneficial to renting in proportion… enjoyed that fast paced discussion ( I'm an accountant and have owned a house bet)
Rent prices also raise mortgage does not
I neither rent nor buy. Parents gave me a condo to live, in downtown Toronto.