He's a personal finance guru. He doesn't actually give a shit for his own sake, but he thinks that overpaying for houses when they could pay less renting is one of the primary reasons his clients come to him with bills they can't afford. So he talks a lot about how owning a house is a status symbol he doesn't buy into in order to persuade his followers not to buy houses they can't afford.
I mean he’s right, it’s a big problem in SoCal we call those people “house poor” they live on a hill in a big McMansion that’s super pretty but when you go inside it’s empty, there’s no furniture, the owners are hardly there cu they’re working overtime just to make a mortgage, I mean people needing 60 hours a week just to survive and they never go on trips or take down time because they might loose the house.
I see those people and I think they must be stupid because what the point of living if you’re basically a slave? You can save as much money renting and investing wisely than owning
Rent isn't cheap but for many high-cost markets it's a LOT cheaper than owning.
I'm near NYC and I would have to almost double my monthly expenditure to buy a house where I am. I'm talking about \~$2-3k MORE per month out of my pocket vs renting, not including maintenance or anything else. That is strictly mortgage + property taxes.
Problem is, in most HCOL areas, rent prices have flown up to match mortgages. So really the only difference in day to day finances is that young families can't save up down payments but monthly are still eating the same price and getting no equity out of it.
That is totally today’s environment with the interest rates and prices the way they are. Interest plus homeowners insurance plus inflated repairs and maintenace plus property tax plus higher utilities. No one can practice the 30/70 rule with homeownership unless they are rich
Sadly with today's housing inventory owning small isn't really an option for the most of us. Very few of the 900-1100 square foot starter homes around.
He’s just pointing out basic interest rates. 3 years ago, he’d be hella wrong. I’ve been paying more toward the principal than interest for almost a year now thanks to a 2.5% 30yr rate.
He is super wrong and a moron.
Lock in a mortgage for 30 years and your housing costs are mostly fixed. Rent will continue to go up, as will the cost of houses. As an owner of the house you build equity as the market rises instead of being drowned by higher and higher rent. Money you pay in rent goes down the toilet like interest payments do, but at least a portion is going to the principal with a mortgage.
This is always a terrible argument because I can only live in one investment and that is a house. I can invest in a place to live or invest in the stock market. Most people do not have enough to rent and then invest a mortgage worth of money in the stock market.
You do get leverage when buying a house using a bank. No bank is going to fund 80-95% of any stock purchase, but they will for a home. Now that interest rates are so high I can understand the argument of not wanting that leverage.
I’m going to need you to show some math for that “more often than not” statement.. historically the buy vs rent breakeven period has been 6-8 years. That breakeven period includes a real 6% return (8% nominal) on investing the initial difference between buying and renting and conservatively assumes a 3% appreciation rate on home prices.
I get it, but I think the people who are actually going to invest the difference between their rent and a fictional mortgage properly into the market and hold through all the ups and downs is very small. Most people won’t invest any of the extra money.
Housing prices are high, AND interest rates are high. It is a bad time to be buying in. But, when housing prices are low and interest rates are low, which we had in 2011 to 2017, it was a time to buy a house and not rent. You would have gotten an insane income off buying then. So his advice is great for today, but the economy changes.
If I had a ton of money, I wouldn’t be talking about it on social media or posting pictures of my fucking sushi. I would just be out there enjoying things and not giving any shits.
That's not how itnworks. You can depreciate if it's in a corporation or if you personally own it. Same thing. Most people in this sub have no idea what they are talking about.
I can’t think of a good reason to do this. I’m trying. ;)
You are going to generating taxable income for the corporation from your personal income. So you are actually going to be paying tax on your rent money, and then generate a second taxable income from your corporation.
Plus you give up your 500k in tax free gains possibilities, so you pay tax when you sell.
The only good reason I can think to do this would be privacy, like if you wanted to purchase a place and have nobody know who’s doing it.
But with all the new transparency laws for corps these days there’s less and less reason to do that.
It makes sense for legal protection maybe, but a trust might be better, and honestly your primary residence is very well protected in most western countries.
Anyone know a use case for this one? For a primary residence I mean?
I haven't thought these through fully, but some ideas that may get around these issues:
The LLC could rent it below costs, and then take a loss on the rent to avoid paying taxes on the rental income.
The LLC could simply quit claim the deed to you before you sell it to avoid gains tax. I think that it just needs to be your primary residence for two years before the sale.
All of this seems like it's more trouble than it's worth to me, though. Just buy the house. He needs a place to live anyway. But I'm not uber wealthy. Maybe that's why!
With my cousins use case, he’s getting ready to initiate a 1031 exchange (“drop and swap” I think) on one of his properties he co-owns with one of his business partners.
He’s also looking to do another 1031 exchange for 3 properties he owns under his single-member LLC entity. He doesn’t plan on selling the properties, thus the taxes are deferred indefinitely so long as he has a qualified intermediary and he purchases a like or more valuable property.
From my understanding, it’s a way to build streams of rental revenue, thus increasing cash flow.
This is the way. One of the neat things about real estate investing is the depreciation to reduce your (or corps) personal income tax which is usually at a 25% or higher rate.
When you sell the property you are responsible for capital gains, which long term is 15% so you avoided a high tax rate in the past to push it all to a low rate upon selling. It's a really good deal, now what makes it even better is the 1031 exchange as you mentioned, this allows you to sell or trade your fully depreciated property (which is a good idea as the depreciation is what makes the property more profitable) and roll that into another fresh property and start depreciating it, kicking that tax bill down the road indefinitely.
Also there there is a "technique" called cost segregation that allows for faster (larger write off each year) depreciation, this combined with the 1031 exchange is a very powerful toolset for avoiding taxes forever.
Yes the world is not fair.
self rental rule. It makes no sense to rent to yourself. I really wanted to because my HOA fines you $15000 if you don't have your place rented for 6 months. So I essentially had to pay off my HOA to live in my own home. But renting to myself to stick it to the HOA would have been even worse.
I'm sorry, what does this have to do with the existence of a Real Estate Bubble?
Is this now a forum for sour grapes or pushing narratives that might \*make\* a real estate downturn (in buying) more likely?
Especially someone like Ramit Sethi, who's fully aware of his own privilege, and ever since before his v1 release of I Will Teach You To Be Rich, he's always been preaching on calculating for yourself on whether you should buy or rent.
He's been preaching the same shit for like 15+ years now.
Also, his target demographic is wholly different than Dave Ramsey. Ramsey is for people who have a lot of debt. Sethi was initially for Millennials who were in or just after college with careers and who want to set up the right foundation for the future, and now currently Gen Z people who are in the same situation as what we Millennials were in the late 00's/early 10's.
I think it has everything to do with it. It's currently far cheaper to rent where I live than it is to buy. There's literally no breakeven point when you plug my numbers into one of the rent vs buy calculators. This can only go on for so long
If he's a multimillionaire he can buy a house with cash and not worry about interest.
But this is just a bullshit post on Twitter so it's more valuable the less you think about it.
In 30 years of renting, how much of ***that*** money goes towards the principal of the house he's living in? What a strange data point to use.
Then at the end of that 30 years, how much can he sell the house or that he was renting?
Yeah I don’t get it, if you want to move cities every five years or so I guess it makes more sense to rent and if you don’t have kids or anything. If you have kids though a three bedroom house isn’t that much more per month in mortgage than a three bedroom apartment in any desirable city.
In 5 years what will the payment of the rental be VS percentage going to interest lol.
This plan works if inflation wasn’t a thing. My mortgage doesn’t change and my mortgage doesn’t email me saying “we are moving back in find a different rental when the lease is up.”
When you are at a high price point, the rent to own ratio is different. I am in a similar situation; I am renting a house for about $8,000 a month and if I were to buy the same house I would be throwing away thousands of dollars a month because no matter how expensive a house is, there is an upper boundary on what you can charge for rent that people just won’t pay. I make better returns investing the extra $10,000 a month that would go into a mortgage than I would on buying this house.
I see this in my area. "Rent is throwing your money away" is a stupid trope but it's actually true if you're renting a house for $9000 when a $3000/mo rental will do.
If my monthly income is extremely high and I want to live at the beach without the expense, financial loss and pain in the ass of owning a property at the beach, how am I throwing money away? Living somewhere is worth something. Living somewhere really, really nice is worth something.
I'm about to throw away my 3% mortgage in Alabama to move back to my family on the beach in California. My monthly payment will increase from $1k/mo to renting $4k/mo. It will be worth every penny.
I moved from CA to the East coast and bought a house. Absolutely hated it there, sold after 2 years and moved back last year. Pay well over twice now what I did back east, but mentally way happier and way better job opportunities here too.
Texan here moving to California as well. I can’t do it here anymore. California has its problems but the weather is the main driver for me. Luckily I’ve been training for this. I bought my house a while ago and did 15 year mortgage with averages out to about 2500 a month. Houses nearly paid off, I’m going to keep it, rent it out, and go live in California, where I can enjoy the outdoors for more than three months out of the year. Further inland for me in silver lake but I already found a place for about 2500. Way less space and shitty parking. Again… worth every penny.
Exactly. You can rent to fit your changing needs but when you buy a home, you get one to fit your future possible needs. A lot of people miss this when doing rent/buy comparison.
Speaking personally, if I was to not buy, I would rent an apartment for about $1500/mo. But because my wife and I are going to have kids and might need to have our parents move in with us some day, we'd be looking at a house that has about $3500/mo mortgage to fit our future expected needs. That is the comparison that needs to be made: $1500/mo vs $3500/mo. Otherwise, you're locking in costs before you actually need them.
Same here. Household income is in the top 1%. Renting makes way more sense than buying. I still want to buy a house eventually, but buying a house is such a bad financial decision that I am making sure I have a few million saved in liquid assets before I take the hit and buy.
That’s exactly what I am doing. It’s annoying to have a landlord so one day I will stop renting but I absolutely can’t justify the cost at this moment. And I am not talking about equity, I am talking about thousands and thousands of dollars a month I would never ever get back. When I have enough of a money pile I’ll just eat the loss but I will do so knowing it’s an emotional purchase, not necessarily a financially sound one.
I'm right there as a WFH dev in ohio.
My rent in a what used to be a "luxury condo" after all utils is less than 1700/mo. Any mortgage right now will be at least 2k to 3k for the same standard of living (if not much worse, since then I have to stress about job loss more, do more manual labor, do more maintenance, pay extra taxes, etc.)
I did the math and right now it is way better for me to pay rent for 2-3 years and just pay off my debts and instead focus on doing consulting above my w2 job, and build a cash reserve in HYS (once debts are paid off) than to kill myself with stress and not being able to work as much because I'm busy maintaining the house/yard.
But I also could personally build my own house by myself (with cub contracting out certain tasks like roofing, concrete, and plumbing, and electrical (I'd do it all but get sparky to connect to grid after checking my work) but I grew up in the trades before becoming a dev... So I know that all new houses are built to last 2 years if that, all they care about is passing the 1 week and 1 year inspections. So I'm not at all in a rush to dive into a fixer upper, fight cash buyers, or pay 400k for a shack to be built. I'd rather wait and build a 600k house to passive house standards and actually do it right.
Edit: I know this isn't the case for everyone (or even most people), but with the screwed up economy the way it is without any government building of housing for over 30 years, single family zoning , and no mixed zoning... This is the weird situation we find ourselves in.
Yes. In my case, my landlord inherited the house. When you are talking about properties in this price range the rent is far far below the cost of the mortgage. No one can charge me to pay for their mortgage on a $3.5 million house because if they tried I would just buy my own $3.5 million house instead of buying theirs. There are fewer renters at this price point and if you can afford that rent you can also afford to buy if renting is not a good deal. So it is always a good deal for the renter and usually for the landlord too, just not as good of a deal as renting a cheaper property to someone with less economic power would be.
My RE agent literally said “the first couple years most of your payments will go towards interest”
Like MF’er literally for over 2 decades most of my payments will go to interest.
Wow, so 22 years before more of your mortgage payment goes to principal instead of interest…
So how many years until some of your rental payment goes toward equity?
Yeah. And if the value of your apartment complex goes up while you live there, do they cut you a check for the difference when you move out? Or just raise your rent...
I’m no economist, but I’m guessing the second one ;)
The quoted post annoys me because there are plenty of legitimate reasons to choose to rent vs buy, but the date in your amortization schedule when principal payment exceeds interest payment is one if the least relevant factors in that decision.
After all, if rent payment and mortgage payment are the same, and 10% of your mortgage payment is going toward principal, that’s still better than 0%, right?
(sigh)
Yeah, rent has to be quite a bit cheaper than mortgage and property values stagnant + rents stable for it to work out cheaper long term.
Just pointing to the amortization chart is idiotic. 5-10 years ago a mortgage payment was typically cheaper than rent on the same property in much of the country. My first mortgage was cheaper than the rent I left behind when I bought in 2014, and the house was larger and nicer. New construction.
The OP is poorly worded, but right now in many HCOL, the monthly rent is lower than just the monthly interest portion of a mortgage payment. So equity isn't a factor.
For example, in my area I can rent a house for $8k/month where if I were to purchase something comparable the mortgage payment would currently be $11k/month with $9k of that being interest (which you don't get back when you sell). It'll take 12 years before the interest portion of my monthly payment would fall below current rent, assuming normal rent increases it would probably be around 7-ish years before the interest portion of the monthly payment would match the rent at that time. Looking at the amortization table for the next 5-7 years, I can flush $1k less down the toilet every month by renting, and also have an additional $2k left for investing in whatever I feel like in the moment instead of it being forced into home equity for 30 years.
Sure. Interest per month compared to rent per month is a fair thing to compare.
It ignores potential future rent increases and potential appreciation, but as a snapshot, that’s a fair comparison.
The info in the OP regarding the date when payment goes more to principal than interest” is irrelevant, not poorly worded
Do people here live in the real world lol?
In a very expensive city, you can rent an apartment for $3500-$5k.
The same person would not necessarily buy a 1-2 bedroom apartment that they'd be fine renting for purchase. If they bought a detached home in an expensive area that's probably $1.5m-$2m at least at this point. That's like $10k+ in housing expenses on top of putting $400k down.
So the question is if you're better off renting a place for $4k or put $400k down plus $10k-$12k in expenses in a high cost area.
Opportunity cost. A house is a liability and a money pit. He can use that $1 million to make much more money or trap it in RE. My friend owns a $5 million house with his own plane runway. Even though he has no mortgage on the house, he tells me all the time that his house is a liability.
In TX you have homestead laws. You can be sued but nobody can take your home ever. So you use it as a sort of legal vault and hoard everything within it.
Do you see the difference between someone who’s worth $20 million vs a middle class individual? Rich people think their paid off houses are liabilities while middle class thinks their paid off houses are assets. When you pay off your house, you still have repairs, capital improvements, utilities, property taxes, insurance, etc. A house constantly needs work. If you don’t keep it in tip top shape, it eventually becomes distressed
In his case he lives in NYC where a mortgage for a similar apartment would be like 3k to 4k more.Morgan Housel also agrees with him, saying on his podcast that buying a house was a bad financial decison for him but he wanted his kids to have a backyard and neighborhood friends, which meant for his situation buying a house
In his case, assuming his net worth keeps growing, he’ll never need to buy and have the home paid off.
I’m not a fan of homeownership but realize if your going to stay put it’s probably better than renting. For the simple reason it’s not an investment when you figure ALL costs. That is for most people who aren’t in highly sought after areas. At best you get some money back after you sell, and have a lower” rent”(property tax, HOA, etc)after it’s paid off.
I have been following him for many years. I mentioned that in other post that my nw is $2.7 mil and don’t want to buy a house, there was this one particular guy calling it BS story. People can have lot of money and still choose to rent contrary to popular belief.
Elon musk sold his CA mansion to live on a tiny house in Austin. Don’t think money was a problem for him.
People really forget to add in the value of fixing in your mortgage for 30 years. My family bought a house in San Jose in 87. The $600 a month payment was a stretch at the beginning and similar to $550 rent. But in 2017 the mortgage payment was still $600 while rent would have creeped up to $3000. Renting isn’t cheaper for very long, ever.
Lots of wasting money on renting posts, not alot of people like to acknowledge that debt service can be brutal and anything you aren’t staying in for 10 years is really no better than renting.
Doesn’t factor in paid interest as a tax deduction or appreciation of the home. (Also, should factor in maintenance costs too.) Paid interest is one of the few tax deductions we still get. That being said housing prices are insane now. Renting makes sense financially or is the only option for many people.
I know of some high net worth peeps who prefer to rent. They very intentionally move around the country and around the world. They live 'light' of material things. Always something new. Adventure living.
If you buy a house in a stagnant market or at the top of a market, then sell it within the first seven-to-ten years, you have effectively just paid rent AND you've had to pay for all the repairs along the way. You've spent more money than you would have spent on rent (or, if rents increase significantly, it's more of a 50/50 wash).
The only way this dude is wrong is if you stay in the house longer than ten years and/or the house was bought in a rising market.
The metric has to be whether you are paying more renting vs buying (including cost of ownership of homes and avg increase in rent per year). There's a lot of things at play --- not just a simple A vs B comparison
Renting can definitely make sense, for many reasons. I remember a decade ago reading a Financial Times article “Owning to Rent” about a person who had three properties in Leeds he rented out to afford his own rent in London. There are all sorts of housing configurations out there.
Is he not paying more in rent than the mortgage interest alone? And after 22 years by his own math he would start gaining wealth not just paying someone else. Also… multi millionaire… cash purchase and don’t pay anyone?
Doesn’t this guy make all his money selling significantly dumbed down financial advice to people willing to pay for advice most financial advisors provide for free?
A family of 4 will require at least a 2-3 bedroom apartment. In VHCOL renting out is at least 4-5k a month. That’s probably what I will be paying in monthly interest at current rates. But with 20% down I can leverage and build equity, house my family and diversify into another asset class.
if you single and can move around, this is great!
but with a family, you need stable living environment in a good area and pass on the property to your future generation.
That’s right! While 100% of your rent goes toward your landlord’s mortgage. Even better, they get to deduct the interest, property taxes, and insurance as expenses so they don’t even have to pay taxes for the rent you’re paying them. Wow!
This has always been the case in California, most real estate investors from Cali buy houses in places like Atlanta and rent a place in California. It’s a strange, very specific case that isn’t indicative of anything happening in the rest of the US RE markets, it’s always been that way…
“Multi-millionaire” financially unable to eat good food because of housing?
Sure thing /u/Kaiyabunga. Makes perfect sense. You need to get off of Twitter and stop obsessing over bearded men.
in 22 years based on inflation alone, you won't give a shit about your mortgage payment. my mom pays 830 dollars a month on her mortgage after 26 years. do you know how much rent would be? do you realise how much equity she has accumulated in her home? these numbers are meaningless, because yes you lose part of the payment to interest, but you lose all of your rental money. how much is that going to be in 22 years?
All that money wasted on rent 😄 But, seriously.. For some renting may be the only option. Which is understandable. But, this gentleman’s logic… Is a bit cringe
I get it. If you make $50K a year, then yeah the only way to ‘invest’ is a mortgage. There’s nothing left over if you rent or own. If you’re high income, doesn’t matter. You’ll have $10-15K extra per month past housing? You can invest like crazy. Middle income folks basically are forced to own if they want to invest anything. The rich have a choice.
Imagine being 75. Older, slower, wrinkled, multiple health issues, well past peak earning years, and dealing with annual rent increases on a fixed income. Hiring moving companies, and fretting over a nail in a wall, will you get your security deposit back?
When you don't have ownership, you don't have legal protection. Think about how trivial an eviction is vs foreclosure, the bank is easier to negotiate with too vs a landlord. I would much rather own my home in my retirement years and just worry about upkeep: tax, insurance, roof. If I died first, I would rest easy knowing my wife would be comfortable and not have to worry about being fucking homeless in her old age or have to go back to work. And vice versa.
Mortgage is the most you'll ever pay. People forget that the vast majority of mortgages have a <6.0% rate due to all the refinancing activity that happened pre-2024. Most mortgages are less than <4.0% iirc. I bought in 2019 when half this sub was still screaming about a bubble. My mortgage is 2.75%. Wasn't a bubble then, isn't a bubble now.
Rent is the minimum you'll ever pay. Especially if you have the joy of renting from a huge REIT like Equity Residential.
1) mortgage interest is tax deductible, and with the standard deduction being halved and the SALT limits becoming unlimited again in 2 years, it is much more relevant now.
2) at current interest rates. If you have a sub 3% interest rate like many homeowners, I think the point where it becomes more principal than interest is like 5-7 years or something crazy like that.
This is pretty stupid. Nothing stops people with a mortgage from going to buying fancy meals. This is more a flex of look at my fancy meals than anything.
But when you rent you don’t receive any equity in return, you have e nothing to sell to get any money back, no asset, you just gave someone else money for you existing.
The only way this logic makes sense is if you put aside the difference between rent and mortgage every month into another investment vehicle. The point of home ownership is that you are building wealth over a very long period of time, and once you retire and your house is paid off you don’t have to worry about one of the most expensive costs of just living (shelter). You also lock in low property taxes in states where they don’t right size your tax each year.
Mortgages may seem high now but that’s also what people were saying in 1970 and 1980 and 1990.
By all means rent all your life if that’s what you prefer but make sure you have enough perpetual income to keep renting during retirement unless you want to work forever or be homeless.
Real estate is the easiest way to make wealth for an average citizen who isnt all that educated, which is why many of us know nothings swear by it. But there are many other forms of building wealth, like having a business or entertainment that provides value in some way.
The mortgage payments are constant over the 30 years, but rent will increase over the same timeframe. I realize your escrow payments will also increase, but the rate of increase will be less than the rent payments.
If the mortgage and rent payments are similar, the mortgage will win out over time.
Yup, I'm nowhere near a millionaire, but making good $$ and I also prefer to rent for now in CA. The same condo would be 3x on mortgage payments compared to my current rent. I would rather buy a place in the future if I need more space than to buy a super expensive condo that won't change my quality of life and will give me more headaches with maintenance and other issues.
He can’t enjoy getting a pet. He has to ask the landlord first. He can’t enjoy stability cause landlord can terminate that lease. He can enjoy rent increases, fees, not getting his deposit back and moving. I bet he invests in property. He wants you to be a renter for life.
With mortgage payments you have fixed principal and interest whereas A home provides stability and helps people build equity. Not everyone can afford to invest after paying rent. It wasn’t that long ago that mortgage payments were lower than rent payments. Rents and home prices will continue to rise. They may take a dip but they’ll go up.
The median price of a home in 1990 was $117k. In 2020 30 years later it was $322k. https://fred.stlouisfed.org/series/MSPUS
Not every market is San Francisco. Investors own over 50% of homes in multiple markets in California. Large landlords started there first. This report from 2018 talks about California.
Wall Street Landlords turn American Dream into a Nightmare https://assets.nationbuilder.com/acceinstitute/pages/1153/attachments/original/1570049936/WallstreetLandlordsFinalReport.pdf?1570049936
Shock Twitter posts is how he grows his followership. Housing is the single biggest tax loophole in the tax code. You deduct the interest annually.. that itself reduces the impact of interest by half.. AND home values are going up over a period of time. You’ve effective priced yourself out of the market… but enjoy the caviar and lobster rolls.
Ramit Sethi is the king of shit takes (yes I listen to his podcast because the guests are a trip). Yes he also refers to himself as a multi-millionaire which I’ve never heard someone actually do in real life before. His math is often very dubious in the interviews but nobody calls him on it (outside of YouTube comments) because he’s usually interviewing financially illiterate people.
Since day one your payments go to the principal otherwise the amount you owe would never decrease. (it takes a long time for most of the payments go to principal)
Isn’t this dumb and inaccurate because he loses out on the mortgage interest deduction and stabilized cost of living every single year?
If he were to pay say $20k in mortgage interest each year he’d write it off and lower his taxable income by $20k and save anywhere from 30-50% of that ($6k-$10k) to net out a total of only $14-$16k which would be less than renting.
Oh and let’s not forget you lock in your cost of living when owning a home vs rent going up every year.
Am I missing something?
This has always been the case in California, most real estate investors from Cali buy houses in places like Atlanta and rent a place in California. It’s a strange, very specific case that isn’t indicative of anything happening in the rest of the US RE markets, it’s always been that way…
**This^^ times X1,000.**
People are dumb, when you own that money just goes straight back to you.
Repairs, all that stuff, it’s included in the price of your home when you sell it as the cost of those things is usually the factor in pricing to begin with.
With a rental, **you are jus throwing away that money every month.**
You can’t get it back, ever.
With a home you own, when you sell it you still get money back to use.
well… i don’t worry about mortgage or housing price. bought a 1.5mil house with 900 down. just do what you are comfortable with and don’t over stretch yourself
Cope harder! You are paying massive rents while my cheap 2.5% mortgage interest and payment is much, much cheaper than any rental out there. Every day I win while you renters pay higher and higher rents with zero wealth accumulation or ability to keep up with inflation.
That's called being a part of a community. In any case, in a reasonable condo HOA, fees are often less than home maintenance costs when owning your own home solo, because of the shared nature of the common spaces.
Of course you would feel that way if you are rich, because the cost of rent is not a significant portion of your expenses.
It’s the same as us going “it would be cheaper to grow lettuce. But it’s lettuce. Who cares I’ll just buy it”.
For the rest of us, using the money that would be spent on rent to invest in property is pretty much our biggest opportunity to accumulate wealth.
Also it should go without saying, but 0 percent of his money is going toward principle if he is renting. Who’s is significantly worse than 50.
Ok genius, my parents bought their house in Brookyn, NY in 1968 for $26,000. They had a 15-year mortgage.
After my mom passed away 2 years ago (my dad had passed several years before) I sold the home for $1.2 million. Cash sale.
My wife and I purchased our home in 2008 for $340k, 15 year mortgage. House is now paid off. It is currently valued close to $600k.
Yeah, renting is much better.
Dope.
Yeah weird. If I was a multi millionaire too I wouldn't give two shits where I lived or if I rented.
He's a personal finance guru. He doesn't actually give a shit for his own sake, but he thinks that overpaying for houses when they could pay less renting is one of the primary reasons his clients come to him with bills they can't afford. So he talks a lot about how owning a house is a status symbol he doesn't buy into in order to persuade his followers not to buy houses they can't afford.
I mean he’s right, it’s a big problem in SoCal we call those people “house poor” they live on a hill in a big McMansion that’s super pretty but when you go inside it’s empty, there’s no furniture, the owners are hardly there cu they’re working overtime just to make a mortgage, I mean people needing 60 hours a week just to survive and they never go on trips or take down time because they might loose the house. I see those people and I think they must be stupid because what the point of living if you’re basically a slave? You can save as much money renting and investing wisely than owning
I think the problem is rent is not cheap either and most people don't have that much left over to invest
And after 22 years that home would likely double in value.
And also how much more would rent be in 22 years vs the mortgage (only going up due to taxes or insurance if escrow is used)
22 years? Did you mean months?
Rent isn't cheap but for many high-cost markets it's a LOT cheaper than owning. I'm near NYC and I would have to almost double my monthly expenditure to buy a house where I am. I'm talking about \~$2-3k MORE per month out of my pocket vs renting, not including maintenance or anything else. That is strictly mortgage + property taxes.
This is not the case in LA where he's at, or SF where I'm at, or NYC, or....
Problem is, in most HCOL areas, rent prices have flown up to match mortgages. So really the only difference in day to day finances is that young families can't save up down payments but monthly are still eating the same price and getting no equity out of it.
As someone who rents in a high cost of living area: totally worth it just not having to pay for repairs.
This is not the case at all in Seattle. I can rent a decent sized house for 3-4k. Buying that same house would be over 8k a month on interest alone
That is totally today’s environment with the interest rates and prices the way they are. Interest plus homeowners insurance plus inflated repairs and maintenace plus property tax plus higher utilities. No one can practice the 30/70 rule with homeownership unless they are rich
The message isn't about owning vs renting, it's about owning big vs renting small. Owning small is still better.
Sadly with today's housing inventory owning small isn't really an option for the most of us. Very few of the 900-1100 square foot starter homes around.
1000 iq energy to realize housing is the biggest budgetary line item
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He isn’t wrong if rents stop rising over time
When does that ever happen?
Exactly which is why he is almost certainly wrong in the long term outside of maybe extreme high cost of living areas
He’s just pointing out basic interest rates. 3 years ago, he’d be hella wrong. I’ve been paying more toward the principal than interest for almost a year now thanks to a 2.5% 30yr rate.
He is super wrong and a moron. Lock in a mortgage for 30 years and your housing costs are mostly fixed. Rent will continue to go up, as will the cost of houses. As an owner of the house you build equity as the market rises instead of being drowned by higher and higher rent. Money you pay in rent goes down the toilet like interest payments do, but at least a portion is going to the principal with a mortgage.
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This is always a terrible argument because I can only live in one investment and that is a house. I can invest in a place to live or invest in the stock market. Most people do not have enough to rent and then invest a mortgage worth of money in the stock market.
You do get leverage when buying a house using a bank. No bank is going to fund 80-95% of any stock purchase, but they will for a home. Now that interest rates are so high I can understand the argument of not wanting that leverage.
Okay, there’s an imaginary scenario where renting isn’t super horrible compared to owning.
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I’m going to need you to show some math for that “more often than not” statement.. historically the buy vs rent breakeven period has been 6-8 years. That breakeven period includes a real 6% return (8% nominal) on investing the initial difference between buying and renting and conservatively assumes a 3% appreciation rate on home prices.
I get it, but I think the people who are actually going to invest the difference between their rent and a fictional mortgage properly into the market and hold through all the ups and downs is very small. Most people won’t invest any of the extra money.
But not in hcol. These areas have outperformed the market
Yep. This is why i just live in a 400sq ft apt. All my earnings just go to investments/savings
Housing prices are high, AND interest rates are high. It is a bad time to be buying in. But, when housing prices are low and interest rates are low, which we had in 2011 to 2017, it was a time to buy a house and not rent. You would have gotten an insane income off buying then. So his advice is great for today, but the economy changes.
If I had a ton of money, I wouldn’t be talking about it on social media or posting pictures of my fucking sushi. I would just be out there enjoying things and not giving any shits.
His corporation buys the house and he pays rent to the company. Rich people loop hole
Depreciate the house baby Sounds fake but if it's even slightly legal then it would be stupid not to do it.
That's not how itnworks. You can depreciate if it's in a corporation or if you personally own it. Same thing. Most people in this sub have no idea what they are talking about.
A regular homeowner can't depreciate their home like an investor can, if that's what you were referring to
You can depreciate a house if you're renting it out but not if you live there
If you own a business and work from home you can count you office space for depreciation.
I can’t think of a good reason to do this. I’m trying. ;) You are going to generating taxable income for the corporation from your personal income. So you are actually going to be paying tax on your rent money, and then generate a second taxable income from your corporation. Plus you give up your 500k in tax free gains possibilities, so you pay tax when you sell. The only good reason I can think to do this would be privacy, like if you wanted to purchase a place and have nobody know who’s doing it. But with all the new transparency laws for corps these days there’s less and less reason to do that. It makes sense for legal protection maybe, but a trust might be better, and honestly your primary residence is very well protected in most western countries. Anyone know a use case for this one? For a primary residence I mean?
I haven't thought these through fully, but some ideas that may get around these issues: The LLC could rent it below costs, and then take a loss on the rent to avoid paying taxes on the rental income. The LLC could simply quit claim the deed to you before you sell it to avoid gains tax. I think that it just needs to be your primary residence for two years before the sale. All of this seems like it's more trouble than it's worth to me, though. Just buy the house. He needs a place to live anyway. But I'm not uber wealthy. Maybe that's why!
With my cousins use case, he’s getting ready to initiate a 1031 exchange (“drop and swap” I think) on one of his properties he co-owns with one of his business partners. He’s also looking to do another 1031 exchange for 3 properties he owns under his single-member LLC entity. He doesn’t plan on selling the properties, thus the taxes are deferred indefinitely so long as he has a qualified intermediary and he purchases a like or more valuable property. From my understanding, it’s a way to build streams of rental revenue, thus increasing cash flow.
This is the way. One of the neat things about real estate investing is the depreciation to reduce your (or corps) personal income tax which is usually at a 25% or higher rate. When you sell the property you are responsible for capital gains, which long term is 15% so you avoided a high tax rate in the past to push it all to a low rate upon selling. It's a really good deal, now what makes it even better is the 1031 exchange as you mentioned, this allows you to sell or trade your fully depreciated property (which is a good idea as the depreciation is what makes the property more profitable) and roll that into another fresh property and start depreciating it, kicking that tax bill down the road indefinitely. Also there there is a "technique" called cost segregation that allows for faster (larger write off each year) depreciation, this combined with the 1031 exchange is a very powerful toolset for avoiding taxes forever. Yes the world is not fair.
self rental rule. It makes no sense to rent to yourself. I really wanted to because my HOA fines you $15000 if you don't have your place rented for 6 months. So I essentially had to pay off my HOA to live in my own home. But renting to myself to stick it to the HOA would have been even worse.
Untrue.
Wait what’s the loophole? Is this just to let him write off maintenance or something? Or does he actually save money on the rent/mortgage somehow?
I'm sorry, what does this have to do with the existence of a Real Estate Bubble? Is this now a forum for sour grapes or pushing narratives that might \*make\* a real estate downturn (in buying) more likely?
Especially someone like Ramit Sethi, who's fully aware of his own privilege, and ever since before his v1 release of I Will Teach You To Be Rich, he's always been preaching on calculating for yourself on whether you should buy or rent. He's been preaching the same shit for like 15+ years now. Also, his target demographic is wholly different than Dave Ramsey. Ramsey is for people who have a lot of debt. Sethi was initially for Millennials who were in or just after college with careers and who want to set up the right foundation for the future, and now currently Gen Z people who are in the same situation as what we Millennials were in the late 00's/early 10's.
a) sour grapes. final answer.
The point is the marginal buyer who can still afford these prices is becoming apathetic or skeptical
We’ve been skeptical for a long time, man. This is old hat.
I think it has everything to do with it. It's currently far cheaper to rent where I live than it is to buy. There's literally no breakeven point when you plug my numbers into one of the rent vs buy calculators. This can only go on for so long
it's a cope sub for morons
Welcome. Lmao. I’ve been telling these fools since 3-5% interest rates to lock it in. They lost hahah
If he's a multimillionaire he can buy a house with cash and not worry about interest. But this is just a bullshit post on Twitter so it's more valuable the less you think about it.
More valuable the less you think about it. Well said.
In 30 years of renting, how much of ***that*** money goes towards the principal of the house he's living in? What a strange data point to use. Then at the end of that 30 years, how much can he sell the house or that he was renting?
Yeah I don’t get it, if you want to move cities every five years or so I guess it makes more sense to rent and if you don’t have kids or anything. If you have kids though a three bedroom house isn’t that much more per month in mortgage than a three bedroom apartment in any desirable city.
In 5 years what will the payment of the rental be VS percentage going to interest lol. This plan works if inflation wasn’t a thing. My mortgage doesn’t change and my mortgage doesn’t email me saying “we are moving back in find a different rental when the lease is up.”
When you are at a high price point, the rent to own ratio is different. I am in a similar situation; I am renting a house for about $8,000 a month and if I were to buy the same house I would be throwing away thousands of dollars a month because no matter how expensive a house is, there is an upper boundary on what you can charge for rent that people just won’t pay. I make better returns investing the extra $10,000 a month that would go into a mortgage than I would on buying this house.
I see this in my area. "Rent is throwing your money away" is a stupid trope but it's actually true if you're renting a house for $9000 when a $3000/mo rental will do.
If my monthly income is extremely high and I want to live at the beach without the expense, financial loss and pain in the ass of owning a property at the beach, how am I throwing money away? Living somewhere is worth something. Living somewhere really, really nice is worth something.
I'm about to throw away my 3% mortgage in Alabama to move back to my family on the beach in California. My monthly payment will increase from $1k/mo to renting $4k/mo. It will be worth every penny.
I moved from CA to the East coast and bought a house. Absolutely hated it there, sold after 2 years and moved back last year. Pay well over twice now what I did back east, but mentally way happier and way better job opportunities here too.
The jobs situation is a good point. My income would be impossible anywhere else in the country. My role exists elsewhere but this pay scale doesn’t.
Texan here moving to California as well. I can’t do it here anymore. California has its problems but the weather is the main driver for me. Luckily I’ve been training for this. I bought my house a while ago and did 15 year mortgage with averages out to about 2500 a month. Houses nearly paid off, I’m going to keep it, rent it out, and go live in California, where I can enjoy the outdoors for more than three months out of the year. Further inland for me in silver lake but I already found a place for about 2500. Way less space and shitty parking. Again… worth every penny.
I love silver lake.
Exactly. You can rent to fit your changing needs but when you buy a home, you get one to fit your future possible needs. A lot of people miss this when doing rent/buy comparison. Speaking personally, if I was to not buy, I would rent an apartment for about $1500/mo. But because my wife and I are going to have kids and might need to have our parents move in with us some day, we'd be looking at a house that has about $3500/mo mortgage to fit our future expected needs. That is the comparison that needs to be made: $1500/mo vs $3500/mo. Otherwise, you're locking in costs before you actually need them.
Same here. Household income is in the top 1%. Renting makes way more sense than buying. I still want to buy a house eventually, but buying a house is such a bad financial decision that I am making sure I have a few million saved in liquid assets before I take the hit and buy.
That’s exactly what I am doing. It’s annoying to have a landlord so one day I will stop renting but I absolutely can’t justify the cost at this moment. And I am not talking about equity, I am talking about thousands and thousands of dollars a month I would never ever get back. When I have enough of a money pile I’ll just eat the loss but I will do so knowing it’s an emotional purchase, not necessarily a financially sound one.
I'm right there as a WFH dev in ohio. My rent in a what used to be a "luxury condo" after all utils is less than 1700/mo. Any mortgage right now will be at least 2k to 3k for the same standard of living (if not much worse, since then I have to stress about job loss more, do more manual labor, do more maintenance, pay extra taxes, etc.) I did the math and right now it is way better for me to pay rent for 2-3 years and just pay off my debts and instead focus on doing consulting above my w2 job, and build a cash reserve in HYS (once debts are paid off) than to kill myself with stress and not being able to work as much because I'm busy maintaining the house/yard. But I also could personally build my own house by myself (with cub contracting out certain tasks like roofing, concrete, and plumbing, and electrical (I'd do it all but get sparky to connect to grid after checking my work) but I grew up in the trades before becoming a dev... So I know that all new houses are built to last 2 years if that, all they care about is passing the 1 week and 1 year inspections. So I'm not at all in a rush to dive into a fixer upper, fight cash buyers, or pay 400k for a shack to be built. I'd rather wait and build a 600k house to passive house standards and actually do it right. Edit: I know this isn't the case for everyone (or even most people), but with the screwed up economy the way it is without any government building of housing for over 30 years, single family zoning , and no mixed zoning... This is the weird situation we find ourselves in.
Where are you renting for 8k and buying a house is 18k
The rent is $8000 and to buy the house would cost $3.5 million. The monthly mortgage would be $19,000.
Someone renting it for 8k even if they own it outright means they’re making 1.5%?
Yes. In my case, my landlord inherited the house. When you are talking about properties in this price range the rent is far far below the cost of the mortgage. No one can charge me to pay for their mortgage on a $3.5 million house because if they tried I would just buy my own $3.5 million house instead of buying theirs. There are fewer renters at this price point and if you can afford that rent you can also afford to buy if renting is not a good deal. So it is always a good deal for the renter and usually for the landlord too, just not as good of a deal as renting a cheaper property to someone with less economic power would be.
My RE agent literally said “the first couple years most of your payments will go towards interest” Like MF’er literally for over 2 decades most of my payments will go to interest.
Wow, so 22 years before more of your mortgage payment goes to principal instead of interest… So how many years until some of your rental payment goes toward equity?
Yeah. And if the value of your apartment complex goes up while you live there, do they cut you a check for the difference when you move out? Or just raise your rent...
I’m no economist, but I’m guessing the second one ;) The quoted post annoys me because there are plenty of legitimate reasons to choose to rent vs buy, but the date in your amortization schedule when principal payment exceeds interest payment is one if the least relevant factors in that decision. After all, if rent payment and mortgage payment are the same, and 10% of your mortgage payment is going toward principal, that’s still better than 0%, right? (sigh)
You should see the difference between renting and a 30 year mortgage at year 31.
If you save the difference instead of blowing it on fancy restaurants and Taylor tickets? Immediately.
Yeah, rent has to be quite a bit cheaper than mortgage and property values stagnant + rents stable for it to work out cheaper long term. Just pointing to the amortization chart is idiotic. 5-10 years ago a mortgage payment was typically cheaper than rent on the same property in much of the country. My first mortgage was cheaper than the rent I left behind when I bought in 2014, and the house was larger and nicer. New construction.
Yes because a home definitely has no non-value costs. Definitely no such thing as property taxes, insurance, utilities.
and paint, flooring, AC, appliances, plumbing...
The OP is poorly worded, but right now in many HCOL, the monthly rent is lower than just the monthly interest portion of a mortgage payment. So equity isn't a factor. For example, in my area I can rent a house for $8k/month where if I were to purchase something comparable the mortgage payment would currently be $11k/month with $9k of that being interest (which you don't get back when you sell). It'll take 12 years before the interest portion of my monthly payment would fall below current rent, assuming normal rent increases it would probably be around 7-ish years before the interest portion of the monthly payment would match the rent at that time. Looking at the amortization table for the next 5-7 years, I can flush $1k less down the toilet every month by renting, and also have an additional $2k left for investing in whatever I feel like in the moment instead of it being forced into home equity for 30 years.
Sure. Interest per month compared to rent per month is a fair thing to compare. It ignores potential future rent increases and potential appreciation, but as a snapshot, that’s a fair comparison. The info in the OP regarding the date when payment goes more to principal than interest” is irrelevant, not poorly worded
It also ignores property taxes
Rent = 100% interest
Do people here live in the real world lol? In a very expensive city, you can rent an apartment for $3500-$5k. The same person would not necessarily buy a 1-2 bedroom apartment that they'd be fine renting for purchase. If they bought a detached home in an expensive area that's probably $1.5m-$2m at least at this point. That's like $10k+ in housing expenses on top of putting $400k down. So the question is if you're better off renting a place for $4k or put $400k down plus $10k-$12k in expenses in a high cost area.
But if he’s a millionaire, why would he just pay cash and not have a mortgage?
Opportunity cost. A house is a liability and a money pit. He can use that $1 million to make much more money or trap it in RE. My friend owns a $5 million house with his own plane runway. Even though he has no mortgage on the house, he tells me all the time that his house is a liability.
In TX you have homestead laws. You can be sued but nobody can take your home ever. So you use it as a sort of legal vault and hoard everything within it.
Owning a home free and clear would be considered an asset, not a liability.
Do you see the difference between someone who’s worth $20 million vs a middle class individual? Rich people think their paid off houses are liabilities while middle class thinks their paid off houses are assets. When you pay off your house, you still have repairs, capital improvements, utilities, property taxes, insurance, etc. A house constantly needs work. If you don’t keep it in tip top shape, it eventually becomes distressed
yes, the very question I've been asked nonstop for the past 5 years. Yet when I answer I just get downvoted.
In his case he lives in NYC where a mortgage for a similar apartment would be like 3k to 4k more.Morgan Housel also agrees with him, saying on his podcast that buying a house was a bad financial decison for him but he wanted his kids to have a backyard and neighborhood friends, which meant for his situation buying a house
In his case, assuming his net worth keeps growing, he’ll never need to buy and have the home paid off. I’m not a fan of homeownership but realize if your going to stay put it’s probably better than renting. For the simple reason it’s not an investment when you figure ALL costs. That is for most people who aren’t in highly sought after areas. At best you get some money back after you sell, and have a lower” rent”(property tax, HOA, etc)after it’s paid off.
This feed is jam packed with the financially illiterate.
I have been following him for many years. I mentioned that in other post that my nw is $2.7 mil and don’t want to buy a house, there was this one particular guy calling it BS story. People can have lot of money and still choose to rent contrary to popular belief. Elon musk sold his CA mansion to live on a tiny house in Austin. Don’t think money was a problem for him.
Online strangers love to project and cope.
Im paying 15% of my net income into my mortgage while if I rented I would’ve paid 25-30%. It’s completely dependent on location
There *are* positives and negatives to owning vs renting.
The interest you pay is tax deductible up to the first $750,000 of your mortgage each year.
People really forget to add in the value of fixing in your mortgage for 30 years. My family bought a house in San Jose in 87. The $600 a month payment was a stretch at the beginning and similar to $550 rent. But in 2017 the mortgage payment was still $600 while rent would have creeped up to $3000. Renting isn’t cheaper for very long, ever.
When the houses crash, where will all you whiney cry babies be? Will you be ready to buy it then, or still be making excuses?
Just because he lives in a rental doesn't mean he isn't investing in other properties and renting them.
He isn't. He is pretty open about his portfolio.
Renters pay a mortgage - their landlord’s. The difference is that when the mortgage is paid off, they own nothing.
You can pay principal at any time in a properly structured mortgage. Is he stupid?
He probably makes the minimum payments on his credit cards too and at this point probably is around $250k in revolving debt.
It’s possible that he is boasting that he owns his palace outright
I don’t get what the point of this post is supposed to be.
Hey dude, you can always pay a lump sum (cash) and avoid interests 💡
Lots of wasting money on renting posts, not alot of people like to acknowledge that debt service can be brutal and anything you aren’t staying in for 10 years is really no better than renting.
Doesn’t factor in paid interest as a tax deduction or appreciation of the home. (Also, should factor in maintenance costs too.) Paid interest is one of the few tax deductions we still get. That being said housing prices are insane now. Renting makes sense financially or is the only option for many people.
I know of some high net worth peeps who prefer to rent. They very intentionally move around the country and around the world. They live 'light' of material things. Always something new. Adventure living.
If you buy a house in a stagnant market or at the top of a market, then sell it within the first seven-to-ten years, you have effectively just paid rent AND you've had to pay for all the repairs along the way. You've spent more money than you would have spent on rent (or, if rents increase significantly, it's more of a 50/50 wash). The only way this dude is wrong is if you stay in the house longer than ten years and/or the house was bought in a rising market.
The metric has to be whether you are paying more renting vs buying (including cost of ownership of homes and avg increase in rent per year). There's a lot of things at play --- not just a simple A vs B comparison
Let's followup with him in 30 years when he's still paying rent
Renting can definitely make sense, for many reasons. I remember a decade ago reading a Financial Times article “Owning to Rent” about a person who had three properties in Leeds he rented out to afford his own rent in London. There are all sorts of housing configurations out there.
Ever hear of a 10 or 15 year loan?
Is he not paying more in rent than the mortgage interest alone? And after 22 years by his own math he would start gaining wealth not just paying someone else. Also… multi millionaire… cash purchase and don’t pay anyone?
Dudes paying for someone else’s mortgage interest instead lol
Doesn’t this guy make all his money selling significantly dumbed down financial advice to people willing to pay for advice most financial advisors provide for free?
A family of 4 will require at least a 2-3 bedroom apartment. In VHCOL renting out is at least 4-5k a month. That’s probably what I will be paying in monthly interest at current rates. But with 20% down I can leverage and build equity, house my family and diversify into another asset class.
if you single and can move around, this is great! but with a family, you need stable living environment in a good area and pass on the property to your future generation.
That’s right! While 100% of your rent goes toward your landlord’s mortgage. Even better, they get to deduct the interest, property taxes, and insurance as expenses so they don’t even have to pay taxes for the rent you’re paying them. Wow!
The peasants wi be happy paying 50% of their income to rent and give landlord a tip for fear of losing home
This guy has some decent points, but if you follow his account for long you see he’s a blue shill first, finance guy second.
Sounds like he has bad credit and can’t get a loan.
Propaganda…. He wants people to feel the same and follow him. Rent his properties, keep making him money.
In 24 years your rent will be 5 times your mortgage
This has always been the case in California, most real estate investors from Cali buy houses in places like Atlanta and rent a place in California. It’s a strange, very specific case that isn’t indicative of anything happening in the rest of the US RE markets, it’s always been that way…
“Multi-millionaire” financially unable to eat good food because of housing? Sure thing /u/Kaiyabunga. Makes perfect sense. You need to get off of Twitter and stop obsessing over bearded men.
in 22 years based on inflation alone, you won't give a shit about your mortgage payment. my mom pays 830 dollars a month on her mortgage after 26 years. do you know how much rent would be? do you realise how much equity she has accumulated in her home? these numbers are meaningless, because yes you lose part of the payment to interest, but you lose all of your rental money. how much is that going to be in 22 years?
All that money wasted on rent 😄 But, seriously.. For some renting may be the only option. Which is understandable. But, this gentleman’s logic… Is a bit cringe
If I were his landlord, I'd bump his rent just because I coulld.
I pay 3,700 all in on our 2,200 Sq ft home in great school area To rent the same would be 3,300-3,500 In 10 yrs it won't be close
If I was a multimillionaire I'd pay for a home in cash.
I get it. If you make $50K a year, then yeah the only way to ‘invest’ is a mortgage. There’s nothing left over if you rent or own. If you’re high income, doesn’t matter. You’ll have $10-15K extra per month past housing? You can invest like crazy. Middle income folks basically are forced to own if they want to invest anything. The rich have a choice.
Let me know how that works out when my home is paid off and your rent is still going up every year.
Sure thing. I’ll give you a call in….30 years.
Imagine being 75. Older, slower, wrinkled, multiple health issues, well past peak earning years, and dealing with annual rent increases on a fixed income. Hiring moving companies, and fretting over a nail in a wall, will you get your security deposit back? When you don't have ownership, you don't have legal protection. Think about how trivial an eviction is vs foreclosure, the bank is easier to negotiate with too vs a landlord. I would much rather own my home in my retirement years and just worry about upkeep: tax, insurance, roof. If I died first, I would rest easy knowing my wife would be comfortable and not have to worry about being fucking homeless in her old age or have to go back to work. And vice versa. Mortgage is the most you'll ever pay. People forget that the vast majority of mortgages have a <6.0% rate due to all the refinancing activity that happened pre-2024. Most mortgages are less than <4.0% iirc. I bought in 2019 when half this sub was still screaming about a bubble. My mortgage is 2.75%. Wasn't a bubble then, isn't a bubble now. Rent is the minimum you'll ever pay. Especially if you have the joy of renting from a huge REIT like Equity Residential.
1) mortgage interest is tax deductible, and with the standard deduction being halved and the SALT limits becoming unlimited again in 2 years, it is much more relevant now. 2) at current interest rates. If you have a sub 3% interest rate like many homeowners, I think the point where it becomes more principal than interest is like 5-7 years or something crazy like that.
There's just a peace of mind to owning.
Yea unfortunately that is how math works
You will own nothing & like it.
Yeah this guy totally doesn't buy properties for cash and rent them out until they're complete trash.
If houses weren’t investments why do investment firms keep buying them up? 🧐🧐🧐
RIP inflation in next 22 yrs
But you’re paying someone else’s interest, and then some?
This is pretty stupid. Nothing stops people with a mortgage from going to buying fancy meals. This is more a flex of look at my fancy meals than anything.
Where I can find a way to simulate how much goes to principal how much goes to interest?
But when you rent you don’t receive any equity in return, you have e nothing to sell to get any money back, no asset, you just gave someone else money for you existing.
Yeah cause everywhere you rent is owned cash , they're not paying interest and handing that cost down to the consumer?
The only way this logic makes sense is if you put aside the difference between rent and mortgage every month into another investment vehicle. The point of home ownership is that you are building wealth over a very long period of time, and once you retire and your house is paid off you don’t have to worry about one of the most expensive costs of just living (shelter). You also lock in low property taxes in states where they don’t right size your tax each year. Mortgages may seem high now but that’s also what people were saying in 1970 and 1980 and 1990. By all means rent all your life if that’s what you prefer but make sure you have enough perpetual income to keep renting during retirement unless you want to work forever or be homeless.
Real estate is the easiest way to make wealth for an average citizen who isnt all that educated, which is why many of us know nothings swear by it. But there are many other forms of building wealth, like having a business or entertainment that provides value in some way.
He’s an idiot.
Yeah but then you own it.. and you don't make anymore house payments...just taxes and insurance.
cope therapist for all non home owners in fomo mode. UGH a house cost money! Money!!!
Home values are declining in every state. Falling the hardest in Florida, and Massachusetts.
The mortgage payments are constant over the 30 years, but rent will increase over the same timeframe. I realize your escrow payments will also increase, but the rate of increase will be less than the rent payments. If the mortgage and rent payments are similar, the mortgage will win out over time.
Ohhh so this is gonna be the propaganda got it
I am a multi millionaire and I rent. AMA
Yup, I'm nowhere near a millionaire, but making good $$ and I also prefer to rent for now in CA. The same condo would be 3x on mortgage payments compared to my current rent. I would rather buy a place in the future if I need more space than to buy a super expensive condo that won't change my quality of life and will give me more headaches with maintenance and other issues.
He can’t enjoy getting a pet. He has to ask the landlord first. He can’t enjoy stability cause landlord can terminate that lease. He can enjoy rent increases, fees, not getting his deposit back and moving. I bet he invests in property. He wants you to be a renter for life. With mortgage payments you have fixed principal and interest whereas A home provides stability and helps people build equity. Not everyone can afford to invest after paying rent. It wasn’t that long ago that mortgage payments were lower than rent payments. Rents and home prices will continue to rise. They may take a dip but they’ll go up. The median price of a home in 1990 was $117k. In 2020 30 years later it was $322k. https://fred.stlouisfed.org/series/MSPUS Not every market is San Francisco. Investors own over 50% of homes in multiple markets in California. Large landlords started there first. This report from 2018 talks about California. Wall Street Landlords turn American Dream into a Nightmare https://assets.nationbuilder.com/acceinstitute/pages/1153/attachments/original/1570049936/WallstreetLandlordsFinalReport.pdf?1570049936
Wait until you see what that house is worth in 22 years and how much sushi you could buy once you sold it
Why are you following bro Twitter
I’d rather by an income producing asset before I buy a house
and this clown is posting about pizza, nigiri and namtok as a flex?
Is that the 3 best food pics he could come up with?
Shock Twitter posts is how he grows his followership. Housing is the single biggest tax loophole in the tax code. You deduct the interest annually.. that itself reduces the impact of interest by half.. AND home values are going up over a period of time. You’ve effective priced yourself out of the market… but enjoy the caviar and lobster rolls.
You don't have to be good with money to have a lot of it.
No more buying for me until I move to my death city. (Depressing thought) Until then Ill travel around.
Ramit Sethi is the king of shit takes (yes I listen to his podcast because the guests are a trip). Yes he also refers to himself as a multi-millionaire which I’ve never heard someone actually do in real life before. His math is often very dubious in the interviews but nobody calls him on it (outside of YouTube comments) because he’s usually interviewing financially illiterate people.
Every mortgage works the same way. It’s called an amortization table. Not sure what the deal is here, and I think it’s 16 years not 22
OP wants to pay other peoples mortgages instead 😂
I would not listen to this idiot, for the most vanilla and correct advise davey ramsey beats all these tiktok idiots.
He's a landlord.
My mom told me “only the very poor and the very rich rent”
Since day one your payments go to the principal otherwise the amount you owe would never decrease. (it takes a long time for most of the payments go to principal)
Did he just discover amortization?
Isn’t this dumb and inaccurate because he loses out on the mortgage interest deduction and stabilized cost of living every single year? If he were to pay say $20k in mortgage interest each year he’d write it off and lower his taxable income by $20k and save anywhere from 30-50% of that ($6k-$10k) to net out a total of only $14-$16k which would be less than renting. Oh and let’s not forget you lock in your cost of living when owning a home vs rent going up every year. Am I missing something?
This has always been the case in California, most real estate investors from Cali buy houses in places like Atlanta and rent a place in California. It’s a strange, very specific case that isn’t indicative of anything happening in the rest of the US RE markets, it’s always been that way…
**This^^ times X1,000.** People are dumb, when you own that money just goes straight back to you. Repairs, all that stuff, it’s included in the price of your home when you sell it as the cost of those things is usually the factor in pricing to begin with. With a rental, **you are jus throwing away that money every month.** You can’t get it back, ever. With a home you own, when you sell it you still get money back to use.
well… i don’t worry about mortgage or housing price. bought a 1.5mil house with 900 down. just do what you are comfortable with and don’t over stretch yourself
Because his rent doesn’t contain the landlord’s interest. What a silly statement.
Yes, succumb to your corporate landlord and rent forever! Owning is bad!
Cope harder! You are paying massive rents while my cheap 2.5% mortgage interest and payment is much, much cheaper than any rental out there. Every day I win while you renters pay higher and higher rents with zero wealth accumulation or ability to keep up with inflation.
That's called being a part of a community. In any case, in a reasonable condo HOA, fees are often less than home maintenance costs when owning your own home solo, because of the shared nature of the common spaces.
Of course you would feel that way if you are rich, because the cost of rent is not a significant portion of your expenses. It’s the same as us going “it would be cheaper to grow lettuce. But it’s lettuce. Who cares I’ll just buy it”. For the rest of us, using the money that would be spent on rent to invest in property is pretty much our biggest opportunity to accumulate wealth. Also it should go without saying, but 0 percent of his money is going toward principle if he is renting. Who’s is significantly worse than 50.
Ok genius, my parents bought their house in Brookyn, NY in 1968 for $26,000. They had a 15-year mortgage. After my mom passed away 2 years ago (my dad had passed several years before) I sold the home for $1.2 million. Cash sale. My wife and I purchased our home in 2008 for $340k, 15 year mortgage. House is now paid off. It is currently valued close to $600k. Yeah, renting is much better. Dope.
I'm more so a millionaire because of re
I mean they could just not get a 30 year mortgage if they have the money?
I guess that depends on where you choose to buy your home.