Which is Cheaper: BUYING or RENTING a house? (DEBUNKED)
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- Опубликовано: 10 май 2018
- 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.
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So buying is cheaper for the long term and renting is for the short term. Sounds about right
His analysis was a hell of a lot more in depth than that. Give the guy some credit.
Yeah, rent for the max of 3 years.
@@worldbosspf1 no if you invest that money you would have used to buy a home. Depending on the city/market, usually you're coming out ahead.
yes but you still have to take into account the rise in property tax every year.
The problem is no one is renting for the short-term you're always going to be renting some place. If you're going to live in an area for more than five years you're stupid not to buy a house if you can afford it.
Mobility is underrated when it comes to renting.
If you get a promotion or a new job offering more in a different city, you aren't rooted down by owning a house. If your employer knows you have options and aren't afraid to take them, this can help in raise negotiations even if you do stay. It's a win-win situation.
I totally agree!
Michael Jay - Value Investing we're future enturperneers (sp?) We have no employers
Michael Jay - Value Investing
If you have your own real estate license, you end up savings thousands of dollars for the rest of your life by selling your own properties.
There is a bigger cost in NOT getting a real estate license
Why can't you rent out your house?
Yea, you can just rent it out and if it's too much headache you can have a property management company take care of it
HUGE exception to renting being smarter in the short term: You can always buy now and then rent your house out if you move away. Buy and hold, even if you have to hire a property manager to handle the headaches. Buy and hold has historically been a great long term strategy.
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?
@@jamesvigor6409 Due to the significant falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this teacher?
So.... keep living with my parents😅
Haha bingo!
Yeah, but not untill they die
LegoGuy87 well if they die you get their inheritance. If they get sick of you and charge you rent then you might as well move out and get your own place and pay your own rent anyway
Yep stack that money and retire early
Exactly lol
Graham, you are one of the very few youtube 'gurus' that puts actual content out there, not just inspirational talk.
Thanks so much Chantal!
Agreed!
Agreed
The lesson here don’t live in California. That property tax is theft.
😓
@@GrahamStephan right lol where I live property tax is .93% of home value per year. Lol Commiefornia strikes again.
yea just live in Tahiti or Venezuela, is the best
Here in the Dallas area it's roughly 2.2%
@@radagascar1 But no state income tax
Amazing analysis man! The only detail you forgot to mention is about TIME. When you rent, you got so much free time because you got less responsabilities. Keep up the good work.
🙌🏼
I think what people often forget about buying vs renting is that when you rent, you tend to take a cheaper and smaller place to "save on rent", but when people go out and buy houses or apartments, they tend to buy much bigger places
That's a really solid point, haven't thought about that!
Lol i did the same
Baby Song
Yea put people always go and buy homes they can't afford 2-3 years down the road they start to realize I can't afford my payments and now they are stuck trying to sell it. And longer it sits less it starts to go for. And when they do get it sold it was so much less then what they bought it at and they walk away wasting there money in a way. I'd say buy a home that needs some work flip it sell it for more then you bought it at buy a new home outright then your laughing mistake people make is buying what they can't afford so for most people renting the only option those are the smart ones instead of being locked in home payments they can't afford
Good example is people buying a single family home after renting an apartment. Wouldn’t it make more sense to buy an affordable condominium that is equivalent or slightly higher scale than where you rented?
depends on where you live and how mobile you are.
Renting is cheaper if:
1. you live in or near a big city
2. you move constantly
Buying is cheaper if:
1. you live in a rural area
2. you stay at the same place for 15-30 years
Living in your parent's basement and has tax advantages too.
finally becomes an adult: ok world
after this video: maybe I should just crawl back into the womb
I hated school so much
Welp I should go back
I bought a condo and rented it out and live in a rented home where i get the space that i want without the headache of maintaining the wear and tear which is more than maintaining a condo.
My condo is being paid by my tenant and i make a bout 1 grand extra which ibuse to help pay part if the house im renting. dont want to buy another property because i dont want to have any bank loans and i feel happier living a debt-free life.
Babe that's very clever you just inspired me thank you. You are smart
See that’s what I want to do. Continue to rent a home and buy investment property to make money for me. Like how you make an extra $1,000 though. Did you buy within the city? I saw some guy say he only gets about $200 a month on his properties. I’m like what? He has 10 properties
Does great math, dude says hit like button. Button smashed.
Comment Liked!
I straight crucified that like button.
Binary Number no. I just like large, intimidating numbers. Oh ya. I got it :)
Binary Number I do the same thing when I hit their like button too. Big numbahs! Spookeh!
Actually, there is a decent amount of math errors in this, using common math mistakes. Like, he adds and subtracts the opportunity cost twice in the comparison equation. Which isn't apples to apples. Although, his conclusion agrees with common sense observations, but there is a great deal of speculation that he cherry-picks to support his soft conclusions. I don't disagree, but the math is not correct.
"Which is cheaper: buying a house, or renting a house?"
Just like most things in life, the answer is: "It depends." It depends on what part of the country you're living in, what the state of rental real estate is in that state, etc.
The best choice is BUY & RENT at the same time. I bought a fourplex in the inner city first. So I get the depreciation and other tax benefits. Then I rented out an amazing apartment in my dream neighborhood 1/2 a block from the beach 🏖 where condos start at $1M 🏄 The cash flow from my 4plex pays 💯 % of my lease, utilities and craft beer 🍺 😆. So really I live by the beach for free!!
Agreed!!
Wow you're amazing!! Good for you!
Thats really smart!
Sounds nice if you can 1) find and 2) afford a quadplex in the inner city that cash flows in this market
This
Great video but there are a couple things you did not take into account.
1. As you pay down your mortgage, the amount of interest you can deduct declines. The longer you live in a home the more your tax advantage declines.
2. You used simple interest to calculate the down payment's investment return. The investment return should be compounded, increasing the original investment's return over time and reducing the cost to rent.
If you're going that way then calculate the rent you're gonna pay after a mortgage is paid off. A typical homeowner will end his mortgage before he retires. Now calculate your rental costs say from age 56 all the way to the age until you die say at 82 years old. Now add all that up and that's your extra cost of renting. The only costs the homeowner will incur after the mortgage is paid off are insurance, property taxes and maintenance but these are items that are normally included in the rent.
but you adding 1200 a mouth each mouth to investing, so 30 year later you still might have far more. depond on a lot of things.
now that 1200 a mouth would go down each year, as rent increase BUT your money that invested will go up,
and your tax write off GOES down the more you have it paid off..
Are we just going to completely ignore the third option?
What about squatting?
How about living on Mars
Bought a $660k 4,600 square foot lake home in a mid-sized Michigan city. The entire town went to crap after 3 major employers started laying people off and sending their white collar labor to Chicago. Sold the property 5 years later at a -$175k loss. I'll never buy a house again. Too much risk...especially since we're in another housing bubble.
mikelally97 so why would u buy in during the bubble🤦🏻♂️ thats just lack of financial education on ur part, u shouldve fucked around an boought the house when valued at 175 then sell for 500+
Try California.
Exactly the housing market can change at anytime and your mind or certain circumstances can change where you want to live just like your care buy a house and wanting to move when the housing market sucks which likely it will stay that way for some time your taking a huge loss best to buy a piece of land and build a cheap home you can resell for profit me I plan to buy a piece of land and get a 3D printed home which run about 4K for the average small size one that’s not bad and I’m not taking a huge loss if I wanted to sell it location is key thought to any home you sell
Hats off to you for remembering all those numbers. You should have a whiteboard behind the camera to help you
Graham, I am 22 years old and I watch this type of videos, since I finished high school. I can say, that your channel is literally the best one. Keep going this way and thank you for all of the valuable content, which you provide to us for free!!
I was glued to this video for the full 14 minutes. Great content!
Thanks!!
if you have 100k just sitting around you're blessed
I plan to do so, while renting... Investing my down payment. I rather have liquid cash than a house
@James Alexandros creepingly pragmatic
@James Alexandros we got 3 houses total 1mil. We are sell only 2 for about 500k also split with my brother
jwathas the long term benefit of ownership over renting assuming market is stable is you end up with slightly more asset than renting. But as soon as you start to renovate and upgrade you easily remove any difference between the two, or even tip the scale towards renting.
James Alexandros Thats nice kinda got dark when you where talking about your parents dying. My mom and dad got 5 houses each whort 500k. I have 4 siblings. So I will have 500k just sitting when my parents die. Also my parents don’t own 5 houses that’s insane we not rich. I just wanted to say that. We don’t own a house we just rent so yea good night.
Great video, glad to see someone take the time to break it down. It's an incredibly complex calculation since there are many unknowns over the years of home ownership. After owning a "fixer upper" for 12 years I can tell you there are more hidden costs than mentioned, so plan conservatively. Also, this example doesn't take into account both inflation and tax increases or paying ahead on the mortgage. The former will erode potential profits at the latter increase them at close out. I still agree with his overall summary: rent short term / buy long term, but realistically "breaking even" on your total costs with a home purchase of around 20 years is doing well. To really make money on a property that doesn't spike in value you will need to live in it for some years after the mortgage is settled and that cost is removed from your bottom line.
Thank you!Would love to see an updated version of this video for todays market since there seems to be some dramatic changes with rising rents, etc.
I feel like renting would be better than buying in a lot of high cost areas (ie, NYC, LA DC). But some areas are cheaper for buying than renting (ie Texas, the Midwest, Atlanta/Miami). Really depends on the area.
Generally that's true. In high cost of living areas, renting is almost always better for cash flow purposes unless you intend to own your home for a long time.
I generally agree with this statement, but I don't know where you're getting your data, because Miami is on fire and doesn't compare to Atlanta. At.All.
ArsenalFan13 I guess don't know how much an apartment goes for in NYC.
@@dr.manhattan6278 If you pay $2,500 every month for an apartment in New York then you're extremely lucky.....For the most part it's almost impossible the prices are around $4,000 per month
@@mindhunter8772 that's bullshit. there's plenty of options at 2500 per month. Upper East Side for one.
I love your videos! I’ve probably watched around 30 of them now😂 You honestly have some of the best content on RUclips! I went out and got my first credit card last week (I’m only 19) because of your video about credit and how it’s super important! So I just wanna say thank you for making these videos because I learn a ton from them!
Thanks so much, congrats on your first credit card!!
I am so impressed with effort and research that went into this video. Wow. Thank you!
This is a video I will watch again and again. Thank you. Love the comprehensive overview!!
Great video. Keep up the good work. I did notice one piece you might have missed:
If you can afford to write a $2,500 ($2870 minus tax savings) check per month to buy but instead you rent for $2,334 out-of-pocket you now have $166 of cash available for investing elsewhere. If you invest $150 of that monthly at an 8% annual return (8.3% Effective Annual Rate) after 7 years you’d expect to have almost $16,816. About $200/month more in favor of renting (assuming you’d have the discipline to invest 90+% of your cash savings).
The big kicker is leverage. Sure the house might appreciate 3% but you only put up $1 to have $5 appreciate. So your 3% expected return is more like 15% BUT you also owe someone $400k. It’s like margin trading but with a USUALLY less volatile security. Leverage increases the magnitude of returns (and losses). So if your home appreciates 3% you did great but if the price goes down 3% you lose your shirt. Get a 2-3x leverage brokerage account and your expected returns not owning will be higher...but then we have to open a whole new can of worms with risk/reward/sharpe ratios/risk tolerance etc.
I dont regret the piece of property my grandfather bought. My mom never had to pay off anything because of his selflessness💕 we need to stop doing this for ourselves and think of our future generations.
🙌🏼
I am in the middle of a crossroads in life with this whole coronavirus situation and this video has really helped me break it down into pieces. I am going to play around with Excel but it would be interesting to see some of what your spreadsheets look like Graham!
Loved all the numbers. So satisfying.
I'm catching up on all your content. OMG this video must have taken you forever. Kudos! Great breakdown!
you got it!
It’s Friday I knew you was coming man!! Watching now
Awesome! Hope you enjoy!
Graham Stephan I really did buddy!!
Seriously, all of your content is very helpful and informative to me. So thanks a ton! You just earned a new sub.
Graham's channel is my favorite :) I just started my RUclips channel about real estate and I inspire to grow up to be like Graham one day lol
Best video I've seen on the topic, and many very useful comments that add to it from posters.
Can you do a video like this but for cheaper areas? I know youre in California where everything is outrageously priced but where I'm at in Pennsylvania, there's really adorable homes for around $50,000. Not $500,000. I'm trying to follow the math but with my areas figures instead but its just not making sense to me haha. I'm starting my rental property journey very soon (hopefully by January 2020) and I will be starting very small.
Woah, did you get a house? :)
Did you buy a home? I’m in PA as well looking at buying my first rental property
I'm also in PA, Lehigh Valley. Big up and coming area!!!
Just divide everything by 10…
Also have to factor in the value of having the title for your property. Imagine having to contact your leasing agent to contact the owner to ask if you can repaint a wall.
Thanks for your videos! They are very well done and very insightful
This is such a high quality analysis, thank you!
There are obviously so many factors and you did an amazing job trying to hit them all, especially in 1 take haha. I guess it really depends sometimes on the person and location. Opportunity cost is huge, it sounds so simple but could be our biggest enemy haha. Nice job describing everything tho man!
Thank you so much!
Pro tip=live in a van.
Down by the river
Off the grid! 🤙🏾
Good god no. A van is a car. It's depreciating in value. Even an empty lot goes up over time
That's where things are going .
Thug Life Bear soooo buy an empty lot and charge for parking 🧐🧐
I have been looking for an explanation like this and nothing’s has been this clear!! Thank you!!
youg ot it!
that's why I subscribed to your channel Graham, you always give us great information. Thanks man.. I always hit the like button before I start watching the video because I know I will get great information. 👍🏻
thanks so much!
Graham, huge fan here! I want to correct you on something. With the new tax law the standard deductions are now up to $24,000 per year. I was only able to make the itemized deductions up to $17K, so my CPA switched me to standard. That means the second point with saving on taxes may not really be real. Please correct me if I am wrong. I have learnt so much from you.
This is so interesting! Thank you! I was having a hard time following, but I think the mortgage tax deduction and the opportunity cost of money are factors that often get overlooked when calculating this, so I’m glad you considered both in the equation.
Mortgage tax reduction only applies if you do itemized reduction. So there is also opportunity cost there. People make big deal out of tax reduction but most office working people use standardized reduction.
Wow this is a gold mine if information & very clear to understand. You are amazing Graham 🙏
Thanks!!
Excellent video, thanks for sharing.
Ur videos are so useful and exactly what i need 👍👍👍
Thanks so much for watching!
one of the most important decision in one's life.
Love the in-depth analysis. Thank you!
thanks!
Thanks!!! Awesome video. Duper helpful
In simple terms
Renting: temporary living in a small studio maybe with a roomate or significant other.
Buying home: long term, larger living space to accommodate more people like kids, the family dog, and maybe your nagging in-laws that over stay their welcome.
We should stop using the term "own" when talking about buying a house. If you have to keep paying someone to keep something you don't own it.
You hold title to it, but the bank has a lien against it. That’s home ownership. You get total control over the house and what you do with it.
Taxation is theft. You never truly own anything
@@GrahamStephan they can take your home just because your wife died and you can no longer afford payments. You don't own shit. Paying property taxes means i don't fully own it. A piece of paper may say i own something, but stipulations on something you own is called exploitation.
agree with you. when in debt you own nothing, but they own your arse. being their slave for decades, make them money until the debt paid off, which i doubt anybody can get over it with their low paid salary and hard earn income.
@@jermainemyrn19 You do own your home the bank just gives you a loan if they didnt have consequences for not paying your bills people could just get away with it, they are a business after all they are there to make money plus the do not like to take your home away from you because they would lose money it it most of the time. Personally I see it as its just a loan separate from the house as you can do whatever you want to the house without the bank stopping you. You could also see it as the bank owning part of the house. It all depends on your definition of the word "own"
The best explanation I have seen so far on renting vs. buying.
Love this. Exactly what i'm trying to follow - renting :) thanks Graham!
Just letting you know... I smashed that like button!!
Very good analysis! Lots of people can only rent since they don't have 100k to put down on a house, so it's there only option. Getting 100k is the hard part for most people.
That’s another solid point. The down payment is a big barrier for many people to cover one.
Overcome*
My suggestion is buy income property first. You don’t need $100k. There are regions where $20k down will get you a nice multiplex to rent out. You can start making $1000 cash flow right now.
Great videos dude 👌 You have to remember those who mortgage when they pass away their house can be sold and their close family members can benefit from that. But when you rent you leave minimum for your loved ones so it depends on your family as well as monthly or yearly savings when renting
The math is generally good for the level of complexity it is, but one thing that does change over time is taxes paid on the home and all the rent, but this is way better for home ownership then renting. Rent generally increase with home value, which we will call 3%. If you start paying rent at $3K, ten years, your rent will be $4K. Your property tax will also increase, but it is a much smaller number, $520 will go up to $693.
Also, in CA, you can also deduct mortgage interest from your state taxes, which is generally another 9.3%, which will save another ~$1800 per year on the first year for a $400K mortgage.
A lot of people died and never finish buying their home
A lot of people died renting and paying off their landlords home 😏
@@b1hawaiian I've been paying rent for 51 years.My landlord just bought Netanyahu a mansion.
@@b1hawaiian landlords die too
@@m3ndoza118 yeah, after their house is paid off by renters lol
Mortgage is 2 words smashed together
1. Mortuus(Latin) meaning Dead
2. Gage(Old French) meaning Pledge
Thus a Mortgage is a Death Pledge to whom ever you get the money from since it will take the majority of ones life to pay off.
My mortgage is $955 a month I'm renting 9 bedrooms for about 450 each = 4050 + utilities property taxes I take home a little over 1300 every month as long as all rooms are filled. VS my rent which costs me 1100 a month. So for me owning a house is cheaper and actually more profitable 🤔
What area are you renting in? Those are some good numbers!
I'm renting in etobicoke, small city outside of toronto. I own my house in saskatchewan regina.
Michigan I own my home pay 1050 a month it would rent for 1400
In victoria $1100 will get you a bachelor if you can find one and get past the credit checks etc. oh and if you have a cat like me good luck finding anything and thats why i rent a room in a rooming house,it was the only place i could find that let me keep my cat.
Try that in Los Angeles. Some of us live in actual cities. I bought it when it was reasonable 20 years ago for $140,000. Now it's worth 1.2 million. If I was young and I was to buy a house now, I wouldn't do it. Can't afford it. In undesirable towns, like humid Texas, it is cheaper to buy than rent. It all depends where you live. A 9 bedroom house with a mortgage of 955 means you bought it long ago, or if you bought it recently, it most be in a undesirable location where they burn cars outside everyday.
Graham you already know this.. but I just wanted to tell you, you're the man, and you have essentially become my financial advisor.
This is a good analysis and I generally agree with it. The thing that is left out is security in your living situation. I was happy as a clam in my apartment, had just had a litter of puppies and was planning a marriage when my landlord decided to sell. We had to scramble (as our lease was up at the end of the next month). We had to manage the animals, moving, rescheduling the marriage, plus try and find a new place in the area we worked in inside of three weeks. Or move all of our stuff into our folks basement...
As Graham says, owning property to then rent that property builds you equity. THe only way to realize that equity (other than loans against it) is to sell it. Regardless of who is living there at the time.
We see property prices increase of 10% in the Western Cape (South Africa), and we have 0% deposits on home loans. So... no opportunity cost involved.
But don't you pay a higher interest rate and extra insurance for a 0% downpayment?
Then there’s a Veteran like me, that has no down payment, no PMI and no Property tax.
It’s cheaper for me in all areas to buy.
Same here except I don't have the 100% disability rating lol. I never realized how great the VA Home Loans are
Michael Hartman don’t need 100% in Illinois.
I get a discount on my property taxes, but in Texas you are only exempt if you are 100% service connected
Michael Hartman yeah. I’m aware. Illinois you only need 70%
Terrific video and excellent work. This makes complete sense. Everyone told me I should buy, instead I found a place I liked and rented. However, instead of Vanguard I invested in Apple... 20 to 25% per year over the past decade. Years ago I'd read an article in the New York Times that said sometimes renting made more sense than owning. That article wasn't nearly as comprehensive as your video (or as specific. I also live in Southern California.) It did mention property tax, but the rest I don't remember. So all my friends were right, but I think they took the less involved short cut thinking. Rent disappears, mortgage payments build equity. And not one of them invested as aggressively as I did.
I'd seen another video from Canada on this subject; he broke it down as you do but it made owning look like a bad deal. (Maybe in Toronto it is.) I don't think you and all those other people I know who've gotten rich buying and renting houses are making a mistake.
By about 8:45 in the video the advantage of owning becomes clear, but the spread is only $643 a month. This now makes complete sense economically. If the spread was 6400/month, people would be living in bunk beds until they could get a down payment. Another way of looking at what you've been doing might be to say it's not so much velocity ($$) as it is mass (equity) (that analogy might be a bit obscure. Cash flow/growth in equity? Your investing, renting units,then using the equity is less like a fast car and more like a truck. This also fits with your desire to get long term good tenants paying slightly below market rate. Maybe this is why I haven't watched any of the How I live on 160000 a month videos. This is simply a result of the more interesting and instructive things you've done. )
One number you use: 3% equity increase over time. I'm sure you know the national average is 1.5% over the past century- a number that surprised me. But then I took a look on Zillow of the houses I'd grown up in in the Midwest. 1.2% For Southern California 3% is probably either spot on or conservative. All those people saying, "But you could own a five bedroom house in Kansas City!" ??? [Never forget Warren Buffett is really smart, but then he still lives in Omaha, Nebraska.]
The next video on this topic is to run the numbers on leveraging: what's the return on improvements to a property, how leveraging equity to buy another property. You've covered this but perhaps not in line with this video. That could be interesting. Clearly over the past decade I might have done well in the market, you've done significantly better in real estate. Another subject might be: is it profitable to be a horrible landlord? I don't think people invest in real estate to become moral human beings, they do it to make money. A lot of immoral people I've met will always look for the chance to go negative. If you took any of your videos on fixing up places, replacing every time you said 'I want to make it nicer' with 'I want to be a greedy creep,' the difference would be clear. In between is amoral greed. I've known those people too. You can work with them, but they could be having a lot more fun. You're clearly having a lot more fun. I think had I been able to get this information when I was in my 20s, or even earlier, I'd have tried to do what you did. I knew about this, but none of the practical specifics - that's where the magic is. Good videos.
Very helpful...keep up the great videos 👍
Rent has doubled in my city since gentrification. It's pretty tough
Great job on the 1 take, you got the like ;)
WOOHOO! Thank you!
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)
Easily the best video I've seen on buying vs renting! For my fellow Canadians, I recommend the book "the wealthy renter"!
Thanks!!
Hey Graham, do you think that you can maybe one day make a video about Houses vs. Condos vs. Co-ops, and likely scenarios on which may be better for rent/living purposes and what not? Would love to see your insights about that. I live in NYC so you can imagine why owning a house is far fetched for anyone looking to buy in.
I don't usually like Condos but New York would be an exception because of limited space. I don't generally see many co-ops and financing on those is usually an issue. Might make a video on it in the future!
Thanks for the thought and the quick reply :^)
When I buy a home, I'll most likely be there my whole life lol
Home ownership isn't for everyone. But after living here for 36 years in the same paid off house, life is great. It helps to be handy and fix things yourself. Saves a ton of money.
@@myrontedrow3242 Maybe Rampart is like me...one who doesn't give a jack about statistics and does what he wants instead of following the sheep.
Myron Tedrow my dad been living in his house since it was build 45 years ago. The same go for he neighbor however the other house next to him has already been sold over 5 times
very wise words
Great video, the whole time I was asking myself what you answered at the end.
This was really really awesome, thanks for this!
I'm not sure if you included this or not but when you sell your property, the appreciation you receive (3%/year) is $114,936.93 at year 7. But discounting it by 8% and receiving it at the end of year 7 gives you a total appreciation value of $67,064.60. Because its not a cash inflow every month, you can't write it off the annual costs without discounting it. In doing so it comes to an appreciation of $798.39/mo instead of $1,250/mo. I think the costs might have to be discounted to but anyhow, great video!!
Yep, you really have to do a Discounted Cash Flow Analysis if you want to nail it down perfectly.
The numbers might not be absolutely perfect, did my best to analyze it without going into a 20-minute video and driving myself crazy trying to analyze every angle, but it should be relatively accurate (I hope lol)
True haha, cheers Graham
Same goes for the s&p500 tho...
@@tylerbowen88 please why did you discount 8%
What the US gives a tax deduction for home mortgage interest payments? Thats so good you could literally overpay your mortgage do get a bigger deduction...
Germany does too, but only for rented out properties. So people buy apartments to rent out and rent them self too.
I believe you have to itemize deductions otherwise it doesnt apply
Already knew the answer. Saw what you had to put down. Good math, good job. New subscriber! Congrats!
Thank you for this video. I can tell a lot of people ignored all of the factors you listed and went on to "correct" you in the comments when you fairly argued both sides and gave pros and cons to both. I also see that you responded kindly to a lot of those people. 🙌🙌🙌
Thanks for watching! I do my best to reply as much as I can!
An agent will always say it's a good time to buy a house LOL.
I think ultimately it will depend on your market and when you choose to buy. If you're in my market and we've had an apartment boom, but constrained inventory on single family homes/home construction at the peak of a federal reserve induced real estate bubble due to cheap money (criminally low interest rates), then I'd rather rent, then buy once the market dips and lock in those lower payments for 30 years on a residence. Or just always buy whenever the cashflow will dictate. I like that plan too.
🙌🏼
Bought Los Angeles house 25 years ago and value appreciated more than 7 times. Now my cost of housing is almost negligible. Who gets 12% return or more consistently in any investment..
Hands down, a really good video. Good work!
This was an amazing video. Got wild with the numbers, but very knowledgeable
Renting is so much better in so many ways.
It can be!
buy your investment properties. Rent your personal residence. 10X style. 😎
House Hacking
ruclips.net/video/m6tSUsB12QM/видео.html
so you make no profit
Terrible idea. Also, good luck getting a mortgage on an investment property in the U.K. if you’re not already a homeowner
@@themomentalist sorry you live in the UK
O D Don’t be. It’s a great country.
Great info!! thx Graham
Thanks for the insight!
Its ok to rent when youre young but when you get older its much harder to move and its tiresome, especially when you become a retiree. Its much nicer to have your own place and never have to worry about being kicked out, especially when youre elderly.
Zooks exactly, you should buy when you are young.
Totally agree Graham.
Not to insult your business, but I think people really need to not get so infatuated with the "American dream" of owning a home. Like you showed, they really should be focused more on the hard finance. IMO mobility is truly the one factor you can't put a number on that should be a key determining factor for making the decision between the two options. I also predict mobility will become increasingly value as the landscape changes with AI looming in the near-future.
To a certain degree I agree. However for most Americans, owning a home is their best and only investment. It’s a forced savings account and for many people it’s a saving grace. As for your mobility comment, true but if rents go up, so do prices to compensate investors for more money. So owning still works out better long term. But renting short term.
Well said Graham! Glad I found your channel :)
Do not buy property until you understand all concepts and details in this video. Well done.
Explained the pros and cons of each very clearly, I learned a lot. Thanks!
Thanks!!
I lasted upto 7:47 min before finally admitting that I just can't follow this lol
Your “down payment” example is way more than my entire house cost.
u living in a cardboard box or?
Extremely Helpful!! Mind Blowing!
thanks!
Damn! This was super informative and it was super clear and very easy to follow. Thanks!
One question: I see that you included opportunity cost for the 100k for the down payment to buy the house AND you included the 100k again when you rent and make 8% if you invest it. So didn't you just include the 100k twice in your calculation of buying vs renting?
Graham awesome video, I wanted to get your opinion on my current situation. I'm planning on buying my first home in my junior year of college. Im looking in Reno Nevada which is said grow a lot in the next few years. Anyways I was planning on buying a three bedroom home, renting out the room to my friends and then continue to rent it out and move out after college. Do you think renting is still a better option than buying in this scenario? I also plan on doing some home improvement projects over the next few years as well! Any advice would be appreciated!
-Brandon
If you rent out the rooms it’s usually way better!
Awesome thanks!
you're the man grant. thanks!
I love this video! Everyone around me is telling me about ownership but financially it doesn't seem worth it.