My husband and i wish we had bought sooner, because even with the unforseen/unplanned costs of owning a home, we would have had our home paid off by now (15 yr fixed home mortgage). We have been living in our community for 15 yrs now, but married/living together for 20 yrs.
Matt, just one point, I think you had a bit incorrect. While the value of your home may rise in the future due to market conditions, all homes will eventually depreciate. To understand depreciation, consider whether you could buy a brand new house in the same location with the same features for less money than the price you will receive for your current house after ten years. Typically, the answer is no, because houses always lose value regardless of market appreciation.
Hi Matt, congrats on your house! Your experience is very similar to our purchase of a 100 yo Queenslander in Brisbane 5 years ago. We ripped up the floor, and did a not-so-proper fix so it can be at least functional. Now we rented it out, and starting to make positive return after 5 years. It was a lot of work, but definitely worth it. Wish u luck! And good luck with your baby too!
@WhY So SeRioUs? I’m sure they did, so did we (in Ireland you have to in order to get a mortgage) but generally they won’t rip out your floor to check underneath.
I've been watching the housing market closely, Prices have been skyrocketing for years. It's going to be tough for first-time buyers to enter the market." how can one diversify $280k reserve .
I agree, It's not just the prices, but also the increasing interest rates that are making it more difficult for people to afford homes. With a good FA you can make up your portfolio.
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in times like these, it's crucial to be cautious and not rush into the market , Who is this your FA , my portfolio needs urgent attention , been a lot of loss.
“Tenley Megan Amerson” is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
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Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
I'm sure the idea of an investment-Adviser might sound controversial to a few, but a new study by Motley-fool found out that demand for Financial-Advisers sky-rocketed by over 42% since the pandemic and based on firsthand encounter I can say for certain their skillsets are topnotch. I've accrued north of 580k within 16-months from an initially stagnant Portfolio.
@@joshbarney114 I've been thinking of going that route been holding on to a bunch of stocks that keeps tanking and I don't know if to keep holding or just dump them, do think your Inv-adviser could guide me with portfolio-restructuring as i wouldn’t mind a recommendation
@@FabioOdelega876 Actually, I've shuffled through a few advisors in the past, and "Colleen Janie Towe” remains the most resourceful thus far. Her strategy proves profitable, and sustainable both in a bull & bear market. Most likely, her credentials can be found on the net, so you can confirm yourself.
Design shows have really romanticized fixer uppers, but if you're going to buy a house that old, it is impossible to do so financially (for most people) without having the skills to be able to fix those issues yourself. For example, we also bought an 1890s row house. However, we only chose to do so because my father-in-law is a carpenter/contractor. Without him (considering the electrical, plumbing and structural issues we discovered) this house would have ruined us financially if we had needed to hire outside help. Old houses will always, always cost more than you think to renovate.
they also have the most room to go up in value, compared to newer houses that loose values initially similar to cars. Most cases its best to buy a house 10-20 years old, not old enough to have a bunch of problems, not new enough to continue going down in value. Value moving also trends with how ever the market is and the last few years has been a bad example of what it normally is.
doing it yourself you lose your wages from working though so unless your income is less than what youre paying a labourer to do then you're leaving money on the table
I sold my house a year ago at the peak of the market, and went back to renting. I was tired of paying for and worrying about repairs. In 2021 I spent $25k on repairs and maintenance. Not everyone has that kind of cash laying around, but you need it when you own a house. You can't just look at the mortgage payment. Houses are expensive to maintain!
Yeah. They want me to buy something in the suburbs. Never! The #1 regret when buying is location. I will not leave the city life, however, it’s insane to buy a 1b1b for $900k + 1.2k/mo in HOA, + $500/mo in taxes + any addt’l repair costs while rents for the same apartment are at $3,500. You can put the “buying” monthly payment difference towards your retirement, and you can leave that property any year if you see the building falling apart.
I found the same place to rent or buy. I would have had to live there for 45 years, have zero maintenance costs, have no inflation, no renovations, to just break even. fortunately my family owns a home, and I can see how often things break, need updating, and loose value if not maintained... I do not think I would be alive to see the day I break even. And that debt would loom menacingly over me for the rest of my possibly shorter and with fewer days off life. Now the upside is that you can make the place your own, and if you are not a minimalist, you need space to keep your stuff somewhere. Living simple, makes renting easier, living with children, lots of toys and miscellaneous, it makes renting more complicated. Having a bad neighbour can ruin your owning experience, getting away from that is easier by moving. Selling an expensive place, is also hard. I see properties decaying waiting oi be sold for over ten years now. Don't forget about recessions... yes, life, adult life is fun. buy a cheap place, at least one car, and commute, or rent in the city and bike... don't forget to factor in the price of vehicles, insurance, maintenance, in the cost of living further away...
I appreciate the original post. Just in reading it I had the thoughts of how rent will greatly increase over the next 45 years and the renter has no choice but to pay it. The money you save by biking in the city will get eaten up by the higher costs of city life. Bad neighbors are everywhere, but owning a home on property gets you physically away from them. Most renters don't have that luxury. Buying is not for everyone, but renting is NOT for me.
You buy the house at a fixed price but as time goes on, you're paying less and less of your income on it as the principal of the loan goes down. The negating factor is interest rates, which always stifle property sales.
THIS just HAPPENED TO MY PARENTS. They bought an old house thinking it'd just need some cosmetic updates.... and then yes.. each problem lead to 5 more and yes their entire house ended up came down to the studs. Feel so bad for them. God bless you all.
Buying a house will be one of the major purchase and decision of a person's life. This is why we have to get our finances in check before taking that big step. As a person like me who hasn't bought a home yet, this is helpful. Thanks Matt! ♥
Love your videos Matt. Our home in the UK was built between 1690 - 1705 so we know all about hidden costs, it’s been a total money pit but thankfully we’ve absolutely loved living here and hopefully you and Nat will feel the same about your house in the end
I feel for you, my dude. My husband and I bought our first home when we were 25. The first week owning the house, the basement flooded due to a freak winter storm that burst our pipes (we live in Canada). It was a mess that cost us 60K. Truly would not wish it on anyone, but we got through it, and when we sold our first home, we made back all our money and then some. It wasn't easy, but definitely still worth it! Keep going, it will get better!
My husband and I bought an old house this past summer, and that “we can lean into the joy and excitement that comes with owning our first home as soon as we get that *-* is fixed” energy is soooooo relatable 😂❤
Great video! I'm turning 26 next week and my partner & I are moving into that stage where we want to consider a house.... but no matter which way I spin it, it doesn't seem possible. I appreciate the honesty in this video, in does give me some comfort to know that it's not laziness or whatever else people say that's keeping young people from buying homes.
What really blows my mind is how you had a 20% deposit and paid up front for those expensive repairs... In Sydney.... I've lived here my whole life and only just now in my early 30s can even begin to contemplate home ownership here. Massive, massive props to the both of you ❤️
I just bought a place in November, but I intentionally undershot my max budget by about 30% and bought in an up & coming neighborhood. So far, I’ve had ~$1500 in unplanned expenses and have about $5000 in things I plan to improve over time. There were a few “turn key” places that would have pushed my budget further, and maybe I wouldn’t have needed to make some of these improvements… but it’s just as possible that I would have, and wouldn’t have had the extra cash to get it done.
We bought our first home in the last 12 months. The price of the mortgage monthly is less than 50% of renting costs. As a parent, it was also a factor to leave a home for our children when we are gone.
As someone in their early twenties who has no idea if they'll ever be able to afford a home, I really appreciated the honesty of this video. I do not like being subject to a landlord's whims, but not having to stress out about any fixes that need to be made or appliances that need to be replaced is a huge weight off my shoulders. I've been lucky that most of my landlords have been quite kind and quick to fix issues (which should be the standard but lord knows it isn't), and I really can't imagine the stress (both financial and emotional) of finding out there's a huge unforeseen issue with a house that I have to suddenly fork out the €€€ for. And I feel free and able to move around as much as I want. Great video!
We know the feeling mate, we bought a house in 2015, thinking exactly the same just a lick of paint and new furniture and we’d own a home finally! Only to find out 5 days later after we moved in, the house had all of the issues and previous owners cut all the corners. 7 years in we’re still in renovation mode and still coming up against issues.
Buying vs renting I think comes down to what you want out of where you live. Renting is good because you can come and go without the worries of maintaining the home. Buying is good because you can completely customize everything to fit your lifestyle.
You can't actually customise everything to fit your lifestyle when you buy a house. Unless you design and build the house yourself it's not going to be everything you want, and once you've actually moved in and started living you'll find things you'll want to change that you didn't foresee. And you can't exactly live the city life in a 5 bedroom home, or be really active driving 3 hours on your commute.
I bought my first home in 2022. The home was built in 1998 and the seller was the originally owner. Yet, I still hire a home inspector for a thorough home inspection before closing. Home inspector identified a few problems/money pits with the home. Never skip home inspection.
You are 100% correct! Never waive your inspections! Being in a seller's market here in Oregon we were seeing a lot of buyers waiving their inspection period to gain leverage in multiple offer situations! I always advise my clients to have their inspections!
Inspections do not catch it all. Some things cannot be seen in an inspection. Hopefully they catch the big ticket items, but almost guaranteed they miss something.
@@mattschmitt9924 wrong. A proper inspection is not a "hopefully" catch something eventually. A proper inspection won't miss anything important. You can test for it all. An inspection is not just a visual inspection but certain inspections require specialized equipment and sensors.
@@TheRealWinser So all foundation cracks can bee seen through the drywall of a finished basement? The wiring inside the walls will be completely inspected, inch by inch, for rodent damage? As well as every electric connection on the property? What specialized equipment tests for those things? I could continue with examples of things that anyone that has bought multiple properties can tell you. There is always surprises when you buy a property. Your ignorance on this subject is shining brightly through the words you type.
Thanks for showing an honest account of buying a house but also the problems that can come with it. We bought our first house last year and while its not been as old as 130 years, we also came across some surprises that needed fixing. We have been lucky so far, as we budgeted enough but it nice to see someone successful on RUclips showing a real scenario :)
Our house has been 50/50 awesome and difficult. We live in a rural area where homes rarely go on the market. When this house came up for sale, we pounced on it! Congratulations on your new home. It will be great in the long-run.
I’ve been so blessed to have a father who is a residential builder. Simply put he could identify items that would need to be fixed/corrected and also made us promise we will not balloon above appraisal value (which sadly, many did in the past couple years). Found a house that is well built, affordable and can be updated at our pace. Btw, always hire an inspector and spend money on one that offers multiple services. I spent $750 and gave my partner and I peace of mind at closing.
Glad I bought a condo! Last year my apartment rent went from $600 to $1,000. I said "nope" and got good downpayment assistance for a condo since I'm disabled, so now I'm living in quadruple the square footage for less than rent.
I’m disabled and I live in an apartment. I know I can’t fix the stuff around a house and I can’t cut the grass or shovel the driveway. Therefore living in apartments is great for me. But my wife keeps looking at houses to buy. So I’m gonna send her this video. Thanks.
You can buy an apartment/condo and not have to shovel snow or cut grass. For stuff you can't fix you'll have to call someone and pay them. Learn to fix things though, it's not hard.
@@vitaminb4869 OP stated their disabled so whatever may seem easy to you, might not be to them. I know that you’re trying to be helpful, but that’s just something to keep in mind. Not everyone can do the same thing and that’s okay. ✨
A big consideration is the location too. My wife and I bought our first house this past summer in South Carolina. We were very diligent and lucky to have a newly remodeled home in a older district. We’ve had little to no issues because the seller had just gutted the home and rebuilt. If you are renovating yourself, that’s a whole other fight
When I bought my house my realtor was upfront about the pros and cons in my decisions. Like the types of repairs I would be doing in certain subdivisions and year of house. First year I did about 30k in repairs but I also bought my a house that I intended to house hack so I still make a return on that side and the appreciation just gave so back so much more.
Hi Matt! I just bought my first home with my partner at 29 - never thought I’d be able to but here we are. A 1930’s downstairs home with a tiny garden in the city. We ran into the same ‘problems' as you did - I know a ton about subjects I never thought I’d know anything about (isolation and ventilation, who knew!). We thought we’d move into a home where we’d have to do a little bit, but that’s when you find out you have to renew all the plumbing, gas and electricity because most of it has been either duct taped or is insanely old (there were some original 1930’s sewage pipes, woohoo!). We’re extremely lucky though to have my dad, who knows a lot about everything construction wise and was able to teach us most of it. Without him it wouldn’t have been possible financially. In the end I’m actually really glad we bought a small home because this way it was still sort of organized and the big renovations took just three months (three very 12 hour work days long months). There’s still a lot to do, but we’ve moved in now and are taking some rest now. For us it made total sense to buy, even with the extra construction costs. Renting has exploded in the city here and compared to buying it’s way more expensive. Plus an advantage that I’m not seeing in the video is that this way you can do anything you want with the house, including investing in stuff (like isolation!) that makes it better. My rental house had a mold problem and no way the housing company would make that a priority to fix. I would though, in my own house.
I feel for you two, and hope the added stress is not too hard on Nat. I'm currently house hunting in France near Lyon where the market is crushing but since we already own our flat and will make a nice profit off of it it just makes sense to buy again (+ this is time sensitive since we're in a one bedroom 50sq meters appt with a one y-o...) It's so stressfull and we'll go from being ok to financially tight for severall years (two small incomes, not many chances of improvement in pour respective fields) but we'll have to absorb the added cost and, thanks for the wake up call, plan for renovation costs.... I really hope my daughter will appreciate the quality of life we're trying to provide here ! Good Luck to all who try for this highly stress inducing venture !
Very important video, thank you for your insights Matt. Times are changing and yet mainstream advice takes too long to catch up - we’re lucky to have you!
I have never related to a video more! My fiancee and I recently bought a home and our project of upgrading our electrical quickly revealed leaky plumbing, which revealed a failing sewer pipe which then revealed poor building drainage...it just goes on and on. We're committed to doing things "the right way" but it's cost immensely more than we planned for and it often makes me wonder if this the financially smart decision to make, going from renting to buying. There's no turning back now, but home ownership definitely feels like a nesting doll...one problem keeps revealing another!
But once you get that last little one opened up, there's a treasure in there. It's your sanity and future wealth. Keep grinding at it and it will be great soon.
From my experience, renting in NYC was horrible because it was constant fights with landlords to get anything fixed. So, rent raised for nothing in exchange unless you count getting headaches. It made me want to be a homeowner...but I don't think I'll ever afford that. 😂
You can affordably own a nice prime 1br with 200k household in Manhattan or 150k in the outers, no debt 20%+ down. If you buy less prime or further out or less affordable etc you can make it a 2br.
I bought my first house 8 years ago and did a lot of work on it myself. It is a building from 1933, totally loved it but decided to upgrade a few years later. My new property was build in 2001 and its built quality is 10x better. I am paying thousands every months towards remodeling/new furniture etc... but this is normal the first few years of ownership. Owning a house is a ride, you must be passionate about it. I still own my first house and I'm renting it out now. It has always served my family very well.
Hey Matt, great video as always. I’ve been an estate agent in Sydney for the past 14 years, something I would add is that it’s so important to have an independent building and pest report done before purchasing a property, they will pick up on issues in the ‘not so obvious’ places i.e. sub flooring, roofing or between brick cavities, etc as Sydney and I would imagine most capital cities around the world can be very expensive to engage tradespeople or remedial builders if you haven’t built a relationship with somebody that you know and trust.
Complete agree. Even in the US we hire inspectors for this reason before closing on the home. Depending on the terms of the sale, you can use the inspection report to reduce the home price or back out of the deal altogether if the seller is unwilling to cure. I understand that waiving inspection contingencies were the norm in 2021 (wouldn't recommend doing this) but at least having a report would help you navigate a potential mine field in the future. Spend time interviewing inspectors and read their reviews. Even better, get one referred to you from a close friend or colleague that you trust.
Many great points. Some glaring things that stand out to be are also doing your due diligence when purchasing. Here in Canada depending on the age of the home (older than 1975) a sewer scope is a must! Lots of major issues can be avoided by getting proper disclosures from the sellers, a great home inspector and sewer scope. Buying isn’t always what’s best for sure, but if you do, do it the right way to ensure your investment is protected. Once again, great video!
Okay, I'm confused. I did the exact same calculations as you mentioned in the video on a $1.25m home, and it's coming out to $3.6k (if you can rent for cheaper than that, it makes more sense to rent). Trying to understand how after all of that you're somehow at ~$1k/mo? On your computer it was also showing a way lower down payment later in the video (for initial costs), so something had to have been quite off when you got to the number of $1k. What am I missing here...? 😅 Thinking you're being way too kind on the home appreciation metric. Let's take that for a moment and run the math. At 6.5%/yr average growth, your $1.25m home will be worth $2.2m in 10 years... Wait what, yeah that's just not accurate. If it was, all houses on the market would be doubling in value every 10 years, meaning that the median house you'll get in 30 years will be what: ~$10m? Something is just way off in the calculations here and it's a bit deceptive because the actual number here on a $1.25m is somewhere between $4-7k/mo depending on a more reasonable appreciation and mortgage rate. You should absolutely be able to find rentals for less than $4-7k/mo. My wife and I are in the same spot here in Austin, the teardowns in our neighborhood are $1.25m for literally just the land. So the unfortunate number we're looking at is closer to $2m, and thus, we will be paying $3-4k/mo happily over buying with the current 5-6% mortgage rates. I think Matt is looking at the past maybe 10 years of home growth in Sydney, because like Austin, it was a bubble. $400k homes are now worth $1.3m, but the past decade of growth is an exception to the rule, not the rule. All this means is anyone buying now is also buying at the peak, so not only should you not expect 6.5% growth per year, but you should expect some years of decreasing. AKA saying 1-2% growth per year on average is way more fair to the calculation. That piece of the calculation might seem minimal since it's a small percentage, but you up that percentage to 12% and you're now at needing to find a place for $0 or less in order for it to make sense (again, that in and of itself makes no sense). It's exponential growth with that metric.
My issues with the video: His calculator inputs don't make sense, both home growth and market returns are overestimated. The unexpected cost example of the flooring did not come at an unexpected time. He had a preference to change the flooring type and decided to do it immediately and pathologically renovate every adjacent flooring issue in the entire house. That is paying a lifestyle premium, not a standard maintenance expense, and if he were renting that lifestyle change would not be able to be met.
Yeah the 1k was wrong for sure and he should have realized, he just wanted to be right about his nightmare buying fiasco... However, I am a big proponent of buying within limits, renovating, buying again and renting the first house. It's a way of living that requires sacrifices tho but it builds wealth fast.
you know how far i had to scroll to get to this comment! thannnnnk youuu. there are several problems with this video and i have to say it's interesting at a time where investors are desssperately trying to buy homes and force more people to rent...... and here we have an infuelcer talking about how it's cheaper to rent hmmmm..... i watched a cnbc video on renting a few days back and their own analyst said only things that are advantageous to investors like "people love renting because it gives them freedom." lots going on in housing RN
Thanks for capturing this through, Matt! The bells and whistles that not many people mind or mention to you upfront before buying a house are equally important. It's always going to be mortgage...and more :)
Matt and Nat, I hope you don't mind if I say that although my husband and I have gone through house poverty the first time we purchased our house and still going through work after work just to make the house 'in shape' but your story has made me feel grateful that we've been going through only that. You had it so much tougher and I'm glad that your house now is in a much better state.
From my perspective buying a house for ourselves is such a great decision cause we gotta evaluate our financial situation before buying cause the house might need some renovations . We are treated in a unacceptable way when we wanna rent a house just like we are forced to expand the renting without having any reasons …
I am so grateful for this video .. was about to look into buying a home on Monday, and here you are. My hope is for the clarity you brought for me and my family, that something wonderful happen for you and yours.
We bought our house in Sydney innerwest area 3 years ago. Our house is from 1915. We had a report for termites and humidity before purchasing. Either way, we had to fix windows , among other things. I'm glad you had money saved to fix stuff, as we did. Sydney is wild when renting, since you don't know when you can get "kicked out", so it makes more sense to own vs rent, besides all the reasons you mentioned in your video.
Ramit is spot on with Oklahoma. We have a nice house in a nice neighborhood and only budget 25% of our net income to home related expenses (including saving for the unexpected).
Same! For the same price of renting 2br 1 bath, we bought a 3br 1.5 bath in Tulsa. And if you're Native American (like many are here), your tribe likely has a mortgage assistance program for first-time home buyers who buy within tribal territory. That's what we did and it pretty much paid for our down payment and closing costs.
Worthy to mention that it’s important to get multiple estimates and multiple opinions. Sometimes serious problems have simple fixes and other times seemingly simple problems require serious fixes. Obviously spending the money to fix subfloors and joists and install a new floor is far more satisfying than rebuilding drainage. Ugh. All in all taking care of your home has its rewards.
Matt, did you waive inspection? The inspection should have easily noticed this issue from the indicator of the sloped floor and the gaping hole in the wall that a camera can be stuck into.
This was a great video Matt! As someone who purchased our first home last year just as the craziness was ending, navigating the thought of if it is better to rent or buy was a stressful one. In the end, it was much more worth it to buy. But yes, once you get into that home you can discover just how much work needs to be done, which means you discover just how much money you need to spend. A home is a great investment if you are financially and mentally prepared for it!
Depends how old your home is. Mine was 8 years old. I didn't even bother doing home inspection. I've owned it now since 2015 and all I had to repair so far is replace $1 bearing in my dishwasher. So $1 in 8 years, is ain't much to ask. Yes, I did some other updates (new paint, new floors, new washer/dryer - not all at once) too, but those were entirely optional.
Great vid. To anyone feeling pressured into buying a house, definitely run the numbers first. Like Ramit, I also lived in high cost of living cities almost my entire life and it absolutely never ever made sense to buy. I just kept investing the money into other sources and it has given me a ton of flexibility to keep moving around without feeling locked down and committed to one place that I'm on the hook for maintaining and taking care of general upkeep.
Awesome video as always Matt! I hope you guys got a home inspection prior to buying. A home inspection is an absolute MUST for anyone buying a home. The inspection will uncover a lot of these issues you are dealing with and many more. You can also leverage a home inspection report to get the seller to fix thing or give you a better deal on the buying price.
Thank you for talking about something so important. We all want a stable living situation but can’t typically afford the initial price let alone the price of insurance, maintenance, etc. Ownership of a home brings a lack of worry you could get kicked out for lack of rent. It brings you a place you can do whatever you want to. To truly make your own. However the benefits of rent is it costs less than the total costs of home ownership. Hearing from the perspective of does it work for you individually or in a family unit is refreshing to hear. You are being so realistic about it and that's also appreciated.
Hi Matt! Awesome video as always! I would love to see more videos about this topic and similar from you (home prices, renovation costs, taxes, etc,! It's very helpful for potential home buyers but not only from AU but from all over the world hence these situation is similar everywhere! T
I work in construction in Australia and LMAO when you talked about bearer and joist. I was impressed initially not knowing you found all that to make some repairs 😂😂
It's INSANE we're paying MORE for houses that have gotten OLDER 💥 Most people forget you ALSO have to pay for tons of necessary remodel of older aging things in the house
Why? Older houses are usually of higher quality and located in better neighbourhoods. Maybe it’s different in the us, but in Europe and Australia the inner city houses are older and with new builds you end up in the suburbs.
A house (structure) depriciates, and tends to lose value overtime, the land it sits on is what appreciates. Land is a finite resource, there is only so much space in a city, and as people keep moving into big urban areas more people will have to compete for the same amount of space which drives the price of land up.
Great thing about RUclips is that you can really learn how to DIY fix a lot of the issues & maintenance when owning a house. Except for Electrical, most renovations and improvements can be done, however you'll also be spending money on tools and that can get expensive but worth it . Tools you will always reuse during the house's lifetime!
Didn’t have to do half of that stuff, just cosmetic for a 5 year term. You chose to do this… the drains needed to be done but could have been mitigated. Also, house inspections would have proved worthy at least for the last scenario. The fact that you are okay while doing these projects means you are okay, but imagine others in the same situation being approved for the same loan, being totally screwed because they couldn’t come close to repairing these situations. Tough stuff.
As always, great video! I appreciate the insight, but have to point out two major points of influence: location and home age. Most people are not purchasing in Sydney, and Sydney (and LA, NY) have very high costs of living. If I recall correctly, you had to purchase on auction, which may have eliminated the option to have a home inspection. In the U.S., auctions are available but they certainly are not the norm. You can always get an independent inspection to protect yourself from unforeseen costs/hidden damages, and even walk away from a deal with little-to-no money spent. $1.25M AUD is about $888k USD; the median home cost in the US is less than half that. In Chicago (still expensive) the median home cost is around $350k. Homes built in the early 1900s/late 1800s will always have higher cost for maintenance, but most people can find, inspect, and purchase a modern home within 60 minutes or less from a major city, for well under what was represented in this video.
Hi Matt! Awesome video as always! I would love to see more videos about this topic and similar from you (home prices, renovation costs, taxes, etc,! It's very helpful for potential home buyers but not only from AU but from all over the world hence these situation is similar everywhere! Thanks!
Exactly. Stock market has done nothing but go up with cheap money and nowhere for it to go but the market. Things are going to be verrrry different coming up here. Gurus like this will learn that the market does indeed go down too :)
Loved that you brought Ramit in!! Been following him for years. As much as I want a house, I think buying land and building ones own home is the way to go… but that cost is so high 🫠
Building your own home is the ultimate way!! If you can find vacant land where you want and build a home that you want for the money you have to spend. And can save some money if there is anything you can do yourself in the build process.
I''m a home junkie. What this means is that I knew my market (vancouver canada) and was ready for anything. I was in for the long game. So many people said I was crazy and while that's generally true, 20 years of home ownership paid off
I first learned about ramit from matt’s videos. he’a been my go to pf info ever since. IWT is a great book. Love that we’re digging deeper into the rent v buy discussion here
My partner and I have been planning for years about doing this, but we’re just to scared. What has push us to make the decision was the rise in renting and the options available. Since 2020 so many people move to our location and what it used to be a 2K to rent a place now is 4k. Not only that, but there’s not that many places available and we been push out of neighborhoods, because the house owners decided to sale and there’s a shortage on housing for renting. Also dealing with landlord is very annoying. All that has make us decided that maybe owning is the best option. Obviously we’re doing all the research and seeing if we do it this year or next.
Absolutely true about all that, especially the rent doubling. The awesome thing about buying is that you lock in that price you bought it for. Sure, mortage interest rate can increase (or go lower too!!), but it won't double like that.
Honestly buying a home from 1890 and not expecting a ton of problems? I would have expected you to have known better with how analytical you appear to be. The importance of a good realtor and prepping you to understand the pros and cons is huge for a novice first time home buyer. In the end, you will have a great home and take it as a learning experience. At least you will know the fixes were done right and finished to your liking!
Great video Matt. Before buying a home perspective buyers should really start with building a real estate investing knowledge base. Even if they don't go on to build a portfolio of more than one. Groups like bigger pockets are really great at breaking down the costs of an investment, and just a little bit of knowledge on how to think like an investor can save you big $$$. Agents often don't explain the whole story so it's on the buyer to know what to ask. Also buying older homes is often a risky investment. Homes do have a lifespan just like a car. The older it gets the more expensive it will be to maintain until the maintenance costs are so high no one will want to bother. Buying a home from the 60s,70s,80s is often a sweet spot. Less maintenance and still affordable compared to newer builds. Btw I love talking real estate so anyone looking to get pointed in the right direction, I'm here to help.
Great video! Another thing to take into account is brought up in the book "The Psychology of Money". It looks a heck of a lot like you guys bought in the Inner West region of Sydney... which is a flippin' pricey market... AND you probably had to outbid people who were looking to patch the home up and flip it for a cool $200K profit. But because you guys actually want to LIVE there, you are doing it properly, meaning that if you're forced to sell (pray not!), you'll make a loss. But since you're living there, it's good to have it done right. The author's point in that book is that you don't want to copy the decisions of someone who has different financial goals to you. If they were looking to flip for a profit, they would have a set price that they could afford... but if they'd gotten into a bidding war with you guys who are actually looking to set up life, then they may have won the bid but they'd lose at the real estate game. Only consider whether a certain price makes sense for YOU.
Very interesting! It's so different in the Netherlands! Here buying a home is always the better option...but there just arent enough houses to buy! For those maintenance costs we also can do an inspection before buying to have an idea of the state of the house!
Great video! Only thing is the graph axes at 3:45 don’t appear to make sense. Time should be the independent variable and on the x-axis rather than how it’s presented in the video
Thank you for this video being a member of a new family and being a freelance photographer, we been thinking about our next step as a family. This real really really helps.
My wife and I bought our first house in July. Discovered a leak in our crawlspace in September after the hot water heater line burst. It absolutely wrecked our footing wall, all of our cabinets & hardwoods. Luckily insurance is taking care of everything….but we’ll spend about 9 months of our first year living in a rental.
LOVED this video Matt, different to what I expected from the title. Beautiful to see you and Nat's house coming along :) My partner and I bought our first place last year, a 2 bed apartment in Melbourne. The stress of stretching a mortgage to the price of a house VS an apartment was not worth it for our current life situ of no kids/late 20's! SO many hidden costs 💯
This is a great way to explain it for those who are unsure. Living in the Midwest, there were no rental options for the cost. We ended up building a brand new home and stuck to Dave Ramsay’s principle of 25% or less of your take home pay. You’re exactly right though. Depending on your situation and location, that greatly depends on what you do for a home. Great video Matt.
Wow Matt, thinking about your first videos and all the growth! Now you’re a husband, homeowner, businessman and soon to be dad! Congrats on your channel and dream home. So cool to have seen this all. Remember when you didn’t even have YT ads? NOW YOURE SPONSORED ! Thanks for all the helpful info and awesome content.
How to calculate intrinsic value of a rental property(not market value) (Average Annual Rent minus Service charges Annualy) multiplied by 10 Example:- 1BHK apartment Average annual rent: 35,000 Service charges: 10,000 Intrinsic value of the property: (35,000-10,000)×10=2.5lacs Market value may be 7.5lacs, 3 times the intrinsic value of the property Note: It's average annual rent of that area for a similar property, not peak annual rent. Also you need to adjust the property price if it's an older property. Apartment prices usually follow Bell Shaped graph in Prices to Duration curve, where as Villas, Townhouses usually follow a positive linear line which is closer to x-axis line in the graph, but depends on the initial purchase price of the property
heres some tips from someone who worked in the industry/works in a different part of the industry now. 1. HOME INSPECTION. 2 HOME INSPECTION. 3. LEARN TO DIY, youtube is your friend. 4. find friends who work in the industry. i bought a 1965 home, gutted it, reno it and now we are doing the basment. Still way ahead of renting since my house has trippled.
Our first home was built in the 80s and it still needed so many updates! Every time we'd opened a wall, we'd find something new. We thought we were good and then our 5 year old metal roof started leaking because the previous owner didn't do it right. It adds up, for sure. In the end though, we sold it for nearly double what we bought. Now we're running a different calculation and it looks like the numbers say its actually cheaper to build rather than buy here right now. At least I'll know what's in the walls!
Home from the 80s is way too old, so not surprising it had issues. Buy something that was built in the last 10 years. I did and had no problems whatsoever. Didn't even bother with a home inspection.
@@vitaminb4869 Well that's not really an option for every budget is it? Not to mention, what do you do with the homes older than 10 years? Tear them down? Seems like a waste.
@@mrs.marken4609 Buy something smaller, maybe a tiny bit further from where you want, but newer construction. Not saying homes older than 10 years are junk (mine is now 16yo and going strong!), but they're a safe bet to buy. Old homes can be left for those who don't know any better, or just tear them down and build new ones.
@@vitaminb4869 That legitimately does not exist where I live. New houses are 2500SF at minimum, no matter where you go. I would know, I design them. We're all just working with what's available to us! I still maintain that tearing down those older homes would be a terrible waste though.
if you just need a place to stay, not long term, dont mind less freedom it makes sense to rent, especially at a young age. As you get older you wont mind as much for the extra cost to do what you want, and when ever you want to leave you still have money in the house, allowing for a more expensive house at a similar rate, or similar house at a cheaper rate. I think the biggest piece of education you can gain from this video is that renting out houses is expensive and a chore, if you own the house you live in you get to paint and put new quality floors in, make everything as you want, make a hidden room if you wanted. this isnt the same with renting, where you get stuck with what you have.
You know, society makes you feel like crap for not owning but I’m just looking at my renting life right now as so much less stress. I’m not spending my free time maintaining a house or going to bed with worries of major repairs. There’s no price tag for peace.
Finished Ramit's book month ago. I'm a student now, but even with little income I have, his book really helped to manage my finances. Love your videos Matt!!!
Haha we bought a house in Boston built in 1915. We faced many of the same issues you did, lots of old house problems. 20 years later it's finally a home we love but dang, it was a lot of money, time (had to spread the expenses out over time), and work!!
Just bought a house with my (now) fiancé, and MAN we were unprepared. Had to replace the entire AC unit inside because whenever it ran during the summer, IT LEAKED. smh Luckily got a deal with family who was able to replace the entire thing for much cheaper than if we had used someone else. But man, houses have so many hidden costs.
Amazing, how living in a system where the number one rule is to maximize as much money large corporations and property owners can make off of others, while that same system avidly keeps people as poor as possible without breaking that system. Costs go up, pay stays (relatively) the same, even accounting for inflation... and we're at where we're at.
buy the property to seize the means of production! We have to get corporate greed out of the housing system and the best way to do that is for people to own there own homes. Be the change!
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Run the numbers for yourself here: www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
My husband and i wish we had bought sooner, because even with the unforseen/unplanned costs of owning a home, we would have had our home paid off by now (15 yr fixed home mortgage). We have been living in our community for 15 yrs now, but married/living together for 20 yrs.
Matt, just one point, I think you had a bit incorrect. While the value of your home may rise in the future due to market conditions, all homes will eventually depreciate. To understand depreciation, consider whether you could buy a brand new house in the same location with the same features for less money than the price you will receive for your current house after ten years. Typically, the answer is no, because houses always lose value regardless of market appreciation.
Hi Matt, congrats on your house! Your experience is very similar to our purchase of a 100 yo Queenslander in Brisbane 5 years ago. We ripped up the floor, and did a not-so-proper fix so it can be at least functional. Now we rented it out, and starting to make positive return after 5 years. It was a lot of work, but definitely worth it. Wish u luck! And good luck with your baby too!
This is such a great calculator, I highly recommend it for anyone curious about buying vs renting
@WhY So SeRioUs? I’m sure they did, so did we (in Ireland you have to in order to get a mortgage) but generally they won’t rip out your floor to check underneath.
I've been watching the housing market closely, Prices have been skyrocketing for years. It's going to be tough for first-time buyers to enter the market." how can one diversify $280k reserve .
I agree, It's not just the prices, but also the increasing interest rates that are making it more difficult for people to afford homes. With a good FA you can make up your portfolio.
Precise asset allocation is crucial, with some employing hedging strategies or allocating to defensive assets for market downturns. Expert guidance is vital for success. This approach has kept me financially secure for over five years, yielding almost $1 million in investment returns.
in times like these, it's crucial to be cautious and not rush into the market , Who is this your FA , my portfolio needs urgent attention , been a lot of loss.
“Tenley Megan Amerson” is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
I appreciate it. After searching her name online and reviewing her credentials, I'm quite impressed. I've contacted her as I could use all the help I can get. A call has been scheduled.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
I'm sure the idea of an investment-Adviser might sound controversial to a few, but a new study by Motley-fool found out that demand for Financial-Advisers sky-rocketed by over 42% since the pandemic and based on firsthand encounter I can say for certain their skillsets are topnotch. I've accrued north of 580k within 16-months from an initially stagnant Portfolio.
@@joshbarney114 I've been thinking of going that route been holding on to a bunch of stocks that keeps tanking and I don't know if to keep holding or just dump them, do think your Inv-adviser could guide me with portfolio-restructuring as i wouldn’t mind a recommendation
@@FabioOdelega876 Actually, I've shuffled through a few advisors in the past, and "Colleen Janie Towe” remains the most resourceful thus far. Her strategy proves profitable, and sustainable both in a bull & bear market. Most likely, her credentials can be found on the net, so you can confirm yourself.
Design shows have really romanticized fixer uppers, but if you're going to buy a house that old, it is impossible to do so financially (for most people) without having the skills to be able to fix those issues yourself. For example, we also bought an 1890s row house. However, we only chose to do so because my father-in-law is a carpenter/contractor. Without him (considering the electrical, plumbing and structural issues we discovered) this house would have ruined us financially if we had needed to hire outside help. Old houses will always, always cost more than you think to renovate.
they also have the most room to go up in value, compared to newer houses that loose values initially similar to cars. Most cases its best to buy a house 10-20 years old, not old enough to have a bunch of problems, not new enough to continue going down in value.
Value moving also trends with how ever the market is and the last few years has been a bad example of what it normally is.
doing it yourself you lose your wages from working though so unless your income is less than what youre paying a labourer to do then you're leaving money on the table
I sold my house a year ago at the peak of the market, and went back to renting. I was tired of paying for and worrying about repairs. In 2021 I spent $25k on repairs and maintenance. Not everyone has that kind of cash laying around, but you need it when you own a house. You can't just look at the mortgage payment. Houses are expensive to maintain!
Thank u for sharing ur experience! Its been a worry of mine as well
I’m glad you put this out. Society makes you feel like a loser if you don’t own a home…
Stop hanging out with that "society" they're not good for you.
Yeah. They want me to buy something in the suburbs. Never! The #1 regret when buying is location. I will not leave the city life, however, it’s insane to buy a 1b1b for $900k + 1.2k/mo in HOA, + $500/mo in taxes + any addt’l repair costs while rents for the same apartment are at $3,500. You can put the “buying” monthly payment difference towards your retirement, and you can leave that property any year if you see the building falling apart.
@@deskubrir yeah, I heard a Rob Bell quote, “renting is buying the option to leave.”
I found the same place to rent or buy. I would have had to live there for 45 years, have zero maintenance costs, have no inflation, no renovations, to just break even. fortunately my family owns a home, and I can see how often things break, need updating, and loose value if not maintained... I do not think I would be alive to see the day I break even. And that debt would loom menacingly over me for the rest of my possibly shorter and with fewer days off life. Now the upside is that you can make the place your own, and if you are not a minimalist, you need space to keep your stuff somewhere. Living simple, makes renting easier, living with children, lots of toys and miscellaneous, it makes renting more complicated. Having a bad neighbour can ruin your owning experience, getting away from that is easier by moving. Selling an expensive place, is also hard. I see properties decaying waiting oi be sold for over ten years now. Don't forget about recessions... yes, life, adult life is fun. buy a cheap place, at least one car, and commute, or rent in the city and bike... don't forget to factor in the price of vehicles, insurance, maintenance, in the cost of living further away...
Salut Alex
Depends where you live and what you buy.
I appreciate the original post. Just in reading it I had the thoughts of how rent will greatly increase over the next 45 years and the renter has no choice but to pay it. The money you save by biking in the city will get eaten up by the higher costs of city life. Bad neighbors are everywhere, but owning a home on property gets you physically away from them. Most renters don't have that luxury. Buying is not for everyone, but renting is NOT for me.
That's why I say to hell with the cities, move to the countryside and live on acreage, then you'll rarely have to deal with neighbours.
You buy the house at a fixed price but as time goes on, you're paying less and less of your income on it as the principal of the loan goes down. The negating factor is interest rates, which always stifle property sales.
THIS just HAPPENED TO MY PARENTS. They bought an old house thinking it'd just need some cosmetic updates.... and then yes.. each problem lead to 5 more and yes their entire house ended up came down to the studs. Feel so bad for them. God bless you all.
Buying a house will be one of the major purchase and decision of a person's life. This is why we have to get our finances in check before taking that big step. As a person like me who hasn't bought a home yet, this is helpful. Thanks Matt! ♥
You are 100% correct! Having your finances in order is the most important first step!
Love your videos Matt. Our home in the UK was built between 1690 - 1705 so we know all about hidden costs, it’s been a total money pit but thankfully we’ve absolutely loved living here and hopefully you and Nat will feel the same about your house in the end
I feel for you, my dude. My husband and I bought our first home when we were 25. The first week owning the house, the basement flooded due to a freak winter storm that burst our pipes (we live in Canada). It was a mess that cost us 60K. Truly would not wish it on anyone, but we got through it, and when we sold our first home, we made back all our money and then some. It wasn't easy, but definitely still worth it! Keep going, it will get better!
Did your home insurance cover the pipe damages?
Did you put in an insurance claim? This should have been covered under your homeowners policy. Asking because we deal with burst pipes frequently.
Another thing is, buying a home won’t “make you happy”, remember to never let buying be an emotional decision to fill a void
I did not have a void to fill, but it simply made me happier because my quality of life improved.
It's a quality of life aspect and a backdrop for your life. It shouldn't be a burden, it should be a place where good memories are made.
My husband and I bought an old house this past summer, and that “we can lean into the joy and excitement that comes with owning our first home as soon as we get that *-* is fixed” energy is soooooo relatable 😂❤
Great video! I'm turning 26 next week and my partner & I are moving into that stage where we want to consider a house.... but no matter which way I spin it, it doesn't seem possible. I appreciate the honesty in this video, in does give me some comfort to know that it's not laziness or whatever else people say that's keeping young people from buying homes.
Consider renting out your extra rooms to friends to help cover the mortgage/maintenance
What really blows my mind is how you had a 20% deposit and paid up front for those expensive repairs... In Sydney.... I've lived here my whole life and only just now in my early 30s can even begin to contemplate home ownership here. Massive, massive props to the both of you ❤️
I just bought a place in November, but I intentionally undershot my max budget by about 30% and bought in an up & coming neighborhood. So far, I’ve had ~$1500 in unplanned expenses and have about $5000 in things I plan to improve over time. There were a few “turn key” places that would have pushed my budget further, and maybe I wouldn’t have needed to make some of these improvements… but it’s just as possible that I would have, and wouldn’t have had the extra cash to get it done.
We bought our first home in the last 12 months. The price of the mortgage monthly is less than 50% of renting costs. As a parent, it was also a factor to leave a home for our children when we are gone.
Congratulations on your home!
As someone in their early twenties who has no idea if they'll ever be able to afford a home, I really appreciated the honesty of this video. I do not like being subject to a landlord's whims, but not having to stress out about any fixes that need to be made or appliances that need to be replaced is a huge weight off my shoulders. I've been lucky that most of my landlords have been quite kind and quick to fix issues (which should be the standard but lord knows it isn't), and I really can't imagine the stress (both financial and emotional) of finding out there's a huge unforeseen issue with a house that I have to suddenly fork out the €€€ for. And I feel free and able to move around as much as I want. Great video!
We know the feeling mate, we bought a house in 2015, thinking exactly the same just a lick of paint and new furniture and we’d own a home finally!
Only to find out 5 days later after we moved in, the house had all of the issues and previous owners cut all the corners.
7 years in we’re still in renovation mode and still coming up against issues.
Buying vs renting I think comes down to what you want out of where you live.
Renting is good because you can come and go without the worries of maintaining the home.
Buying is good because you can completely customize everything to fit your lifestyle.
You can't actually customise everything to fit your lifestyle when you buy a house. Unless you design and build the house yourself it's not going to be everything you want, and once you've actually moved in and started living you'll find things you'll want to change that you didn't foresee. And you can't exactly live the city life in a 5 bedroom home, or be really active driving 3 hours on your commute.
I bought my first home in 2022. The home was built in 1998 and the seller was the originally owner. Yet, I still hire a home inspector for a thorough home inspection before closing. Home inspector identified a few problems/money pits with the home. Never skip home inspection.
This is why you do your due diligence and definitely never waive inspections. There shouldn't be any surprises when you buy a home.
You are 100% correct! Never waive your inspections! Being in a seller's market here in Oregon we were seeing a lot of buyers waiving their inspection period to gain leverage in multiple offer situations! I always advise my clients to have their inspections!
Inspections do not catch it all. Some things cannot be seen in an inspection. Hopefully they catch the big ticket items, but almost guaranteed they miss something.
@@mattschmitt9924 wrong. A proper inspection is not a "hopefully" catch something eventually. A proper inspection won't miss anything important. You can test for it all. An inspection is not just a visual inspection but certain inspections require specialized equipment and sensors.
@@TheRealWinser So all foundation cracks can bee seen through the drywall of a finished basement? The wiring inside the walls will be completely inspected, inch by inch, for rodent damage? As well as every electric connection on the property? What specialized equipment tests for those things? I could continue with examples of things that anyone that has bought multiple properties can tell you. There is always surprises when you buy a property. Your ignorance on this subject is shining brightly through the words you type.
@@mattschmitt9924 I could explain it but I have a feeling I'd just be wasting my time.
Thanks for showing an honest account of buying a house but also the problems that can come with it. We bought our first house last year and while its not been as old as 130 years, we also came across some surprises that needed fixing. We have been lucky so far, as we budgeted enough but it nice to see someone successful on RUclips showing a real scenario :)
Our house has been 50/50 awesome and difficult. We live in a rural area where homes rarely go on the market. When this house came up for sale, we pounced on it! Congratulations on your new home. It will be great in the long-run.
I’ve been so blessed to have a father who is a residential builder. Simply put he could identify items that would need to be fixed/corrected and also made us promise we will not balloon above appraisal value (which sadly, many did in the past couple years). Found a house that is well built, affordable and can be updated at our pace. Btw, always hire an inspector and spend money on one that offers multiple services. I spent $750 and gave my partner and I peace of mind at closing.
Glad I bought a condo! Last year my apartment rent went from $600 to $1,000. I said "nope" and got good downpayment assistance for a condo since I'm disabled, so now I'm living in quadruple the square footage for less than rent.
I’m disabled and I live in an apartment. I know I can’t fix the stuff around a house and I can’t cut the grass or shovel the driveway. Therefore living in apartments is great for me. But my wife keeps looking at houses to buy. So I’m gonna send her this video. Thanks.
You can buy an apartment/condo and not have to shovel snow or cut grass. For stuff you can't fix you'll have to call someone and pay them. Learn to fix things though, it's not hard.
@@vitaminb4869 OP stated their disabled so whatever may seem easy to you, might not be to them. I know that you’re trying to be helpful, but that’s just something to keep in mind. Not everyone can do the same thing and that’s okay. ✨
A big consideration is the location too. My wife and I bought our first house this past summer in South Carolina. We were very diligent and lucky to have a newly remodeled home in a older district. We’ve had little to no issues because the seller had just gutted the home and rebuilt. If you are renovating yourself, that’s a whole other fight
When I bought my house my realtor was upfront about the pros and cons in my decisions. Like the types of repairs I would be doing in certain subdivisions and year of house. First year I did about 30k in repairs but I also bought my a house that I intended to house hack so I still make a return on that side and the appreciation just gave so back so much more.
Hi Matt! I just bought my first home with my partner at 29 - never thought I’d be able to but here we are. A 1930’s downstairs home with a tiny garden in the city. We ran into the same ‘problems' as you did - I know a ton about subjects I never thought I’d know anything about (isolation and ventilation, who knew!). We thought we’d move into a home where we’d have to do a little bit, but that’s when you find out you have to renew all the plumbing, gas and electricity because most of it has been either duct taped or is insanely old (there were some original 1930’s sewage pipes, woohoo!).
We’re extremely lucky though to have my dad, who knows a lot about everything construction wise and was able to teach us most of it. Without him it wouldn’t have been possible financially. In the end I’m actually really glad we bought a small home because this way it was still sort of organized and the big renovations took just three months (three very 12 hour work days long months). There’s still a lot to do, but we’ve moved in now and are taking some rest now.
For us it made total sense to buy, even with the extra construction costs. Renting has exploded in the city here and compared to buying it’s way more expensive. Plus an advantage that I’m not seeing in the video is that this way you can do anything you want with the house, including investing in stuff (like isolation!) that makes it better. My rental house had a mold problem and no way the housing company would make that a priority to fix. I would though, in my own house.
Glad to see Ramit back in the channel. You together make personal finance more understandable/friendly to discuss with youngsters like me. Cheers!
I feel for you two, and hope the added stress is not too hard on Nat. I'm currently house hunting in France near Lyon where the market is crushing but since we already own our flat and will make a nice profit off of it it just makes sense to buy again (+ this is time sensitive since we're in a one bedroom 50sq meters appt with a one y-o...) It's so stressfull and we'll go from being ok to financially tight for severall years (two small incomes, not many chances of improvement in pour respective fields) but we'll have to absorb the added cost and, thanks for the wake up call, plan for renovation costs.... I really hope my daughter will appreciate the quality of life we're trying to provide here ! Good Luck to all who try for this highly stress inducing venture !
Very important video, thank you for your insights Matt.
Times are changing and yet mainstream advice takes too long to catch up - we’re lucky to have you!
The biggest loss in owning a home is your TIME. It takes a crazy amount of time to maintain a home, even a brand new one.
I have never related to a video more! My fiancee and I recently bought a home and our project of upgrading our electrical quickly revealed leaky plumbing, which revealed a failing sewer pipe which then revealed poor building drainage...it just goes on and on. We're committed to doing things "the right way" but it's cost immensely more than we planned for and it often makes me wonder if this the financially smart decision to make, going from renting to buying. There's no turning back now, but home ownership definitely feels like a nesting doll...one problem keeps revealing another!
But once you get that last little one opened up, there's a treasure in there. It's your sanity and future wealth. Keep grinding at it and it will be great soon.
From my experience, renting in NYC was horrible because it was constant fights with landlords to get anything fixed. So, rent raised for nothing in exchange unless you count getting headaches. It made me want to be a homeowner...but I don't think I'll ever afford that. 😂
You can affordably own a nice prime 1br with 200k household in Manhattan or 150k in the outers, no debt 20%+ down. If you buy less prime or further out or less affordable etc you can make it a 2br.
I rent in NYC and I have been fortunate with my building. It's very well insulated so it's quiet. I can't even hear my neighbor's parties.
I bought my first house 8 years ago and did a lot of work on it myself. It is a building from 1933, totally loved it but decided to upgrade a few years later. My new property was build in 2001 and its built quality is 10x better. I am paying thousands every months towards remodeling/new furniture etc... but this is normal the first few years of ownership.
Owning a house is a ride, you must be passionate about it.
I still own my first house and I'm renting it out now. It has always served my family very well.
Hey Matt, great video as always. I’ve been an estate agent in Sydney for the past 14 years, something I would add is that it’s so important to have an independent building and pest report done before purchasing a property, they will pick up on issues in the ‘not so obvious’ places i.e. sub flooring, roofing or between brick cavities, etc as Sydney and I would imagine most capital cities around the world can be very expensive to engage tradespeople or remedial builders if you haven’t built a relationship with somebody that you know and trust.
Complete agree. Even in the US we hire inspectors for this reason before closing on the home. Depending on the terms of the sale, you can use the inspection report to reduce the home price or back out of the deal altogether if the seller is unwilling to cure. I understand that waiving inspection contingencies were the norm in 2021 (wouldn't recommend doing this) but at least having a report would help you navigate a potential mine field in the future. Spend time interviewing inspectors and read their reviews. Even better, get one referred to you from a close friend or colleague that you trust.
Yup! 👆
The picture painted in the video is "you just never know what'll cost you $50k"
But a good home inspection should catch most of those.
Many great points. Some glaring things that stand out to be are also doing your due diligence when purchasing. Here in Canada depending on the age of the home (older than 1975) a sewer scope is a must! Lots of major issues can be avoided by getting proper disclosures from the sellers, a great home inspector and sewer scope. Buying isn’t always what’s best for sure, but if you do, do it the right way to ensure your investment is protected. Once again, great video!
Okay, I'm confused. I did the exact same calculations as you mentioned in the video on a $1.25m home, and it's coming out to $3.6k (if you can rent for cheaper than that, it makes more sense to rent).
Trying to understand how after all of that you're somehow at ~$1k/mo?
On your computer it was also showing a way lower down payment later in the video (for initial costs), so something had to have been quite off when you got to the number of $1k. What am I missing here...? 😅
Thinking you're being way too kind on the home appreciation metric. Let's take that for a moment and run the math. At 6.5%/yr average growth, your $1.25m home will be worth $2.2m in 10 years... Wait what, yeah that's just not accurate. If it was, all houses on the market would be doubling in value every 10 years, meaning that the median house you'll get in 30 years will be what: ~$10m?
Something is just way off in the calculations here and it's a bit deceptive because the actual number here on a $1.25m is somewhere between $4-7k/mo depending on a more reasonable appreciation and mortgage rate.
You should absolutely be able to find rentals for less than $4-7k/mo.
My wife and I are in the same spot here in Austin, the teardowns in our neighborhood are $1.25m for literally just the land. So the unfortunate number we're looking at is closer to $2m, and thus, we will be paying $3-4k/mo happily over buying with the current 5-6% mortgage rates.
I think Matt is looking at the past maybe 10 years of home growth in Sydney, because like Austin, it was a bubble. $400k homes are now worth $1.3m, but the past decade of growth is an exception to the rule, not the rule. All this means is anyone buying now is also buying at the peak, so not only should you not expect 6.5% growth per year, but you should expect some years of decreasing. AKA saying 1-2% growth per year on average is way more fair to the calculation. That piece of the calculation might seem minimal since it's a small percentage, but you up that percentage to 12% and you're now at needing to find a place for $0 or less in order for it to make sense (again, that in and of itself makes no sense). It's exponential growth with that metric.
Renting a 1.2mil home for 1k a month would definitely be an example of ‘rent’ before buy situation😂 - especially with rates over 5%
My issues with the video:
His calculator inputs don't make sense, both home growth and market returns are overestimated.
The unexpected cost example of the flooring did not come at an unexpected time. He had a preference to change the flooring type and decided to do it immediately and pathologically renovate every adjacent flooring issue in the entire house. That is paying a lifestyle premium, not a standard maintenance expense, and if he were renting that lifestyle change would not be able to be met.
Yeah the 1k was wrong for sure and he should have realized, he just wanted to be right about his nightmare buying fiasco...
However, I am a big proponent of buying within limits, renovating, buying again and renting the first house. It's a way of living that requires sacrifices tho but it builds wealth fast.
you know how far i had to scroll to get to this comment! thannnnnk youuu. there are several problems with this video and i have to say it's interesting at a time where investors are desssperately trying to buy homes and force more people to rent...... and here we have an infuelcer talking about how it's cheaper to rent hmmmm..... i watched a cnbc video on renting a few days back and their own analyst said only things that are advantageous to investors like "people love renting because it gives them freedom." lots going on in housing RN
Thanks for capturing this through, Matt! The bells and whistles that not many people mind or mention to you upfront before buying a house are equally important. It's always going to be mortgage...and more :)
Matt and Nat, I hope you don't mind if I say that although my husband and I have gone through house poverty the first time we purchased our house and still going through work after work just to make the house 'in shape' but your story has made me feel grateful that we've been going through only that. You had it so much tougher and I'm glad that your house now is in a much better state.
Enjoy the honesty and questions to ask yourself when purchasing or renting. Great work as always Matt 👍👍
From my perspective buying a house for ourselves is such a great decision cause we gotta evaluate our financial situation before buying cause the house might need some renovations . We are treated in a unacceptable way when we wanna rent a house just like we are forced to expand the renting without having any reasons …
I am so grateful for this video .. was about to look into buying a home on Monday, and here you are. My hope is for the clarity you brought for me and my family, that something wonderful happen for you and yours.
So basically the lesson is: Live at your parents' house as much as possible. I shall gladly do it, too many benefits lol
Cult of Neoteny
This is the reality for many young adults now. They can't afford to move out.
Yes, mom's home cooked meals is a fantastic reason!
As someone living in their parents attic and saving ~50% of my income - it's nice.
We bought our house in Sydney innerwest area 3 years ago. Our house is from 1915. We had a report for termites and humidity before purchasing. Either way, we had to fix windows , among other things. I'm glad you had money saved to fix stuff, as we did. Sydney is wild when renting, since you don't know when you can get "kicked out", so it makes more sense to own vs rent, besides all the reasons you mentioned in your video.
Ramit is spot on with Oklahoma. We have a nice house in a nice neighborhood and only budget 25% of our net income to home related expenses (including saving for the unexpected).
Same! For the same price of renting 2br 1 bath, we bought a 3br 1.5 bath in Tulsa. And if you're Native American (like many are here), your tribe likely has a mortgage assistance program for first-time home buyers who buy within tribal territory. That's what we did and it pretty much paid for our down payment and closing costs.
Can I just say your house is BEAUTIFUL. So glad you're treating it well, I hope life there treats you well, too.
Worthy to mention that it’s important to get multiple estimates and multiple opinions. Sometimes serious problems have simple fixes and other times seemingly simple problems require serious fixes. Obviously spending the money to fix subfloors and joists and install a new floor is far more satisfying than rebuilding drainage. Ugh. All in all taking care of your home has its rewards.
Matt, did you waive inspection? The inspection should have easily noticed this issue from the indicator of the sloped floor and the gaping hole in the wall that a camera can be stuck into.
This was a great video Matt! As someone who purchased our first home last year just as the craziness was ending, navigating the thought of if it is better to rent or buy was a stressful one. In the end, it was much more worth it to buy. But yes, once you get into that home you can discover just how much work needs to be done, which means you discover just how much money you need to spend. A home is a great investment if you are financially and mentally prepared for it!
Depends how old your home is. Mine was 8 years old. I didn't even bother doing home inspection. I've owned it now since 2015 and all I had to repair so far is replace $1 bearing in my dishwasher. So $1 in 8 years, is ain't much to ask. Yes, I did some other updates (new paint, new floors, new washer/dryer - not all at once) too, but those were entirely optional.
I'm starting to get really invested in your houses journey. Please keep us updated.
Great vid. To anyone feeling pressured into buying a house, definitely run the numbers first. Like Ramit, I also lived in high cost of living cities almost my entire life and it absolutely never ever made sense to buy. I just kept investing the money into other sources and it has given me a ton of flexibility to keep moving around without feeling locked down and committed to one place that I'm on the hook for maintaining and taking care of general upkeep.
Awesome video as always Matt!
I hope you guys got a home inspection prior to buying.
A home inspection is an absolute MUST for anyone buying a home.
The inspection will uncover a lot of these issues you are dealing with and many more.
You can also leverage a home inspection report to get the seller to fix thing or give you a better deal on the buying price.
Thank you for talking about something so important. We all want a stable living situation but can’t typically afford the initial price let alone the price of insurance, maintenance, etc. Ownership of a home brings a lack of worry you could get kicked out for lack of rent. It brings you a place you can do whatever you want to. To truly make your own. However the benefits of rent is it costs less than the total costs of home ownership. Hearing from the perspective of does it work for you individually or in a family unit is refreshing to hear. You are being so realistic about it and that's also appreciated.
I agree with all of this, owning can cost but ultimately no one wants to be renting when your old. The goal is to have a paid off house eventually.
Hi Matt! Awesome video as always! I would love to see more videos about this topic and similar from you (home prices, renovation costs, taxes, etc,! It's very helpful for potential home buyers but not only from AU but from all over the world hence these situation is similar everywhere! T
Hi Matt! I love your videos. Thank you for motivating me to start my own RUclips account.
In Japan we have a somewhat saner premise to the housing market: if your house is old it's worth less. Houses are for living in, not speculating on.
I work in construction in Australia and LMAO when you talked about bearer and joist. I was impressed initially not knowing you found all that to make some repairs 😂😂
I think this is one of the best RUclips videos you've made until now. It has informational depth and is therefore interesting.
It's INSANE we're paying MORE for houses that have gotten OLDER 💥
Most people forget you ALSO have to pay for tons of necessary remodel of older aging things in the house
Why? Older houses are usually of higher quality and located in better neighbourhoods. Maybe it’s different in the us, but in Europe and Australia the inner city houses are older and with new builds you end up in the suburbs.
Best model is to think about the structure and the land separately. Probably the land appreciates much faster.
We’ll said Striker.
A house (structure) depriciates, and tends to lose value overtime, the land it sits on is what appreciates. Land is a finite resource, there is only so much space in a city, and as people keep moving into big urban areas more people will have to compete for the same amount of space which drives the price of land up.
You don't have to remodel. That's is discretionary. And can be deferred.
Great thing about RUclips is that you can really learn how to DIY fix a lot of the issues & maintenance when owning a house. Except for Electrical, most renovations and improvements can be done, however you'll also be spending money on tools and that can get expensive but worth it . Tools you will always reuse during the house's lifetime!
best video I have seen on this subject, speaking as a renter and I love renting
Didn’t have to do half of that stuff, just cosmetic for a 5 year term. You chose to do this… the drains needed to be done but could have been mitigated. Also, house inspections would have proved worthy at least for the last scenario. The fact that you are okay while doing these projects means you are okay, but imagine others in the same situation being approved for the same loan, being totally screwed because they couldn’t come close to repairing these situations. Tough stuff.
As always, great video! I appreciate the insight, but have to point out two major points of influence: location and home age. Most people are not purchasing in Sydney, and Sydney (and LA, NY) have very high costs of living.
If I recall correctly, you had to purchase on auction, which may have eliminated the option to have a home inspection.
In the U.S., auctions are available but they certainly are not the norm. You can always get an independent inspection to protect yourself from unforeseen costs/hidden damages, and even walk away from a deal with little-to-no money spent.
$1.25M AUD is about $888k USD; the median home cost in the US is less than half that. In Chicago (still expensive) the median home cost is around $350k.
Homes built in the early 1900s/late 1800s will always have higher cost for maintenance, but most people can find, inspect, and purchase a modern home within 60 minutes or less from a major city, for well under what was represented in this video.
Hi Matt! Awesome video as always! I would love to see more videos about this topic and similar from you (home prices, renovation costs, taxes, etc,! It's very helpful for potential home buyers but not only from AU but from all over the world hence these situation is similar everywhere! Thanks!
I'm glad you're a minimalist!
3:04 "I took the $3000 difference and invested in the market"
Andddd it's gone🤷🏻♂
Exactly. Stock market has done nothing but go up with cheap money and nowhere for it to go but the market. Things are going to be verrrry different coming up here. Gurus like this will learn that the market does indeed go down too :)
If you have children (pets) you want stability of a good neighborhood and schools. Renting and moving with school age kids every few years is tough.
Such a brilliant video, many people (including myself) really want to buy, but didnt know the first thing about preparing
Loved that you brought Ramit in!! Been following him for years. As much as I want a house, I think buying land and building ones own home is the way to go… but that cost is so high 🫠
Building your own home is the ultimate way!! If you can find vacant land where you want and build a home that you want for the money you have to spend. And can save some money if there is anything you can do yourself in the build process.
I''m a home junkie. What this means is that I knew my market (vancouver canada) and was ready for anything. I was in for the long game. So many people said I was crazy and while that's generally true, 20 years of home ownership paid off
wow! thats awesome. I'm in vancouver too. Housing has been INSANE
For a moment remembered about our journey of buying our this house. That was stressful but really worths it.
I first learned about ramit from matt’s videos. he’a been my go to pf info ever since. IWT is a great book. Love that we’re digging deeper into the rent v buy discussion here
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My partner and I have been planning for years about doing this, but we’re just to scared. What has push us to make the decision was the rise in renting and the options available.
Since 2020 so many people move to our location and what it used to be a 2K to rent a place now is 4k. Not only that, but there’s not that many places available and we been push out of neighborhoods, because the house owners decided to sale and there’s a shortage on housing for renting.
Also dealing with landlord is very annoying. All that has make us decided that maybe owning is the best option. Obviously we’re doing all the research and seeing if we do it this year or next.
Absolutely true about all that, especially the rent doubling. The awesome thing about buying is that you lock in that price you bought it for. Sure, mortage interest rate can increase (or go lower too!!), but it won't double like that.
Honestly buying a home from 1890 and not expecting a ton of problems? I would have expected you to have known better with how analytical you appear to be. The importance of a good realtor and prepping you to understand the pros and cons is huge for a novice first time home buyer. In the end, you will have a great home and take it as a learning experience. At least you will know the fixes were done right and finished to your liking!
This was so informative. I appreciate you taking the time to research and put together such a comprehensive video.
Great video Matt. Before buying a home perspective buyers should really start with building a real estate investing knowledge base. Even if they don't go on to build a portfolio of more than one.
Groups like bigger pockets are really great at breaking down the costs of an investment, and just a little bit of knowledge on how to think like an investor can save you big $$$. Agents often don't explain the whole story so it's on the buyer to know what to ask.
Also buying older homes is often a risky investment. Homes do have a lifespan just like a car. The older it gets the more expensive it will be to maintain until the maintenance costs are so high no one will want to bother. Buying a home from the 60s,70s,80s is often a sweet spot. Less maintenance and still affordable compared to newer builds.
Btw I love talking real estate so anyone looking to get pointed in the right direction, I'm here to help.
Great video!
Another thing to take into account is brought up in the book "The Psychology of Money". It looks a heck of a lot like you guys bought in the Inner West region of Sydney... which is a flippin' pricey market... AND you probably had to outbid people who were looking to patch the home up and flip it for a cool $200K profit. But because you guys actually want to LIVE there, you are doing it properly, meaning that if you're forced to sell (pray not!), you'll make a loss. But since you're living there, it's good to have it done right. The author's point in that book is that you don't want to copy the decisions of someone who has different financial goals to you. If they were looking to flip for a profit, they would have a set price that they could afford... but if they'd gotten into a bidding war with you guys who are actually looking to set up life, then they may have won the bid but they'd lose at the real estate game. Only consider whether a certain price makes sense for YOU.
Great video, super useful 👌🙏
Very interesting! It's so different in the Netherlands! Here buying a home is always the better option...but there just arent enough houses to buy!
For those maintenance costs we also can do an inspection before buying to have an idea of the state of the house!
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Great video! Only thing is the graph axes at 3:45 don’t appear to make sense. Time should be the independent variable and on the x-axis rather than how it’s presented in the video
Thank you for this video being a member of a new family and being a freelance photographer, we been thinking about our next step as a family. This real really really helps.
My wife and I bought our first house in July. Discovered a leak in our crawlspace in September after the hot water heater line burst. It absolutely wrecked our footing wall, all of our cabinets & hardwoods. Luckily insurance is taking care of everything….but we’ll spend about 9 months of our first year living in a rental.
LOVED this video Matt, different to what I expected from the title. Beautiful to see you and Nat's house coming along :)
My partner and I bought our first place last year, a 2 bed apartment in Melbourne. The stress of stretching a mortgage to the price of a house VS an apartment was not worth it for our current life situ of no kids/late 20's! SO many hidden costs 💯
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This is a great way to explain it for those who are unsure. Living in the Midwest, there were no rental options for the cost. We ended up building a brand new home and stuck to Dave Ramsay’s principle of 25% or less of your take home pay. You’re exactly right though. Depending on your situation and location, that greatly depends on what you do for a home. Great video Matt.
Wow Matt, thinking about your first videos and all the growth! Now you’re a husband, homeowner, businessman and soon to be dad! Congrats on your channel and dream home. So cool to have seen this all. Remember when you didn’t even have YT ads? NOW YOURE SPONSORED ! Thanks for all the helpful info and awesome content.
How to calculate intrinsic value of a rental property(not market value)
(Average Annual Rent minus Service charges Annualy) multiplied by 10
Example:-
1BHK apartment
Average annual rent: 35,000
Service charges: 10,000
Intrinsic value of the property: (35,000-10,000)×10=2.5lacs
Market value may be 7.5lacs, 3 times the intrinsic value of the property
Note: It's average annual rent of that area for a similar property, not peak annual rent. Also you need to adjust the property price if it's an older property. Apartment prices usually follow Bell Shaped graph in Prices to Duration curve, where as Villas, Townhouses usually follow a positive linear line which is closer to x-axis line in the graph, but depends on the initial purchase price of the property
heres some tips from someone who worked in the industry/works in a different part of the industry now. 1. HOME INSPECTION. 2 HOME INSPECTION. 3. LEARN TO DIY, youtube is your friend. 4. find friends who work in the industry. i bought a 1965 home, gutted it, reno it and now we are doing the basment. Still way ahead of renting since my house has trippled.
@HELPLINE640 sounds good
Our first home was built in the 80s and it still needed so many updates! Every time we'd opened a wall, we'd find something new. We thought we were good and then our 5 year old metal roof started leaking because the previous owner didn't do it right. It adds up, for sure. In the end though, we sold it for nearly double what we bought. Now we're running a different calculation and it looks like the numbers say its actually cheaper to build rather than buy here right now. At least I'll know what's in the walls!
Home from the 80s is way too old, so not surprising it had issues. Buy something that was built in the last 10 years. I did and had no problems whatsoever. Didn't even bother with a home inspection.
@@vitaminb4869 Well that's not really an option for every budget is it? Not to mention, what do you do with the homes older than 10 years? Tear them down? Seems like a waste.
@@mrs.marken4609 Buy something smaller, maybe a tiny bit further from where you want, but newer construction. Not saying homes older than 10 years are junk (mine is now 16yo and going strong!), but they're a safe bet to buy. Old homes can be left for those who don't know any better, or just tear them down and build new ones.
@@vitaminb4869 That legitimately does not exist where I live. New houses are 2500SF at minimum, no matter where you go. I would know, I design them. We're all just working with what's available to us! I still maintain that tearing down those older homes would be a terrible waste though.
if you just need a place to stay, not long term, dont mind less freedom it makes sense to rent, especially at a young age. As you get older you wont mind as much for the extra cost to do what you want, and when ever you want to leave you still have money in the house, allowing for a more expensive house at a similar rate, or similar house at a cheaper rate.
I think the biggest piece of education you can gain from this video is that renting out houses is expensive and a chore, if you own the house you live in you get to paint and put new quality floors in, make everything as you want, make a hidden room if you wanted. this isnt the same with renting, where you get stuck with what you have.
Yep, with the unexpected new roof quote we received, as much as I love our home, I also want to cry. 😀
You know, society makes you feel like crap for not owning but I’m just looking at my renting life right now as so much less stress. I’m not spending my free time maintaining a house or going to bed with worries of major repairs. There’s no price tag for peace.
but most of the money goes to rent for many. Paycheck to paycheck. There is no peace if you can't grow.
I love your videos man! Keep up the good work bro!
Finished Ramit's book month ago. I'm a student now, but even with little income I have, his book really helped to manage my finances. Love your videos Matt!!!
Haha we bought a house in Boston built in 1915. We faced many of the same issues you did, lots of old house problems. 20 years later it's finally a home we love but dang, it was a lot of money, time (had to spread the expenses out over time), and work!!
Just bought a house with my (now) fiancé, and MAN we were unprepared. Had to replace the entire AC unit inside because whenever it ran during the summer, IT LEAKED. smh Luckily got a deal with family who was able to replace the entire thing for much cheaper than if we had used someone else. But man, houses have so many hidden costs.
Amazing, how living in a system where the number one rule is to maximize as much money large corporations and property owners can make off of others, while that same system avidly keeps people as poor as possible without breaking that system. Costs go up, pay stays (relatively) the same, even accounting for inflation... and we're at where we're at.
buy the property to seize the means of production! We have to get corporate greed out of the housing system and the best way to do that is for people to own there own homes. Be the change!
@@msopjes Not really how it works when one can't afford to feed their families, let alone purchase property.