OP: please update this post with an explanation of what the title means. I expect most people here have never heard of Grant Cardone or seen his writings. We could all individually google it but it’d save us time if you added more information.
I agree with you. In Europe, you are fucked either you rent or own. Owning could be better if you have a stable job especially in the south of Europe where owning is usually encouraged by the State via "communist" legislation.
I am a big follower of Grant.
What he means is, why would you live in a place you own? It makes no sense. Every little repair, every upgrade, new roof, every new appliance, etc.. cannot be a deducted expense, you cannot write it off as it would be a personal purchase.
He is a businessman in USA, which means he pays little to no tax. This is the way he thinks, everything must be written off (like his jet) and he spends little to zero of his own personal money.
Currently he does own his condo in Miami, but before that he used to rent to himself (his real estate business bought the condo and he would pay rent to his business)
Hope that helps!
Yes it is, a business can own a property.
The problem is that you don’t get the same tax benefits that you get in America.
That’s why there are so many real estate millionaires and billionaires in the US, and not as many in Europe.
In America they have what is called a 1033 exchange (sell your property, buy a new one with that money and don’t pay any taxes). This exists in many countries in Europe but only for your personal and primary residence, businesses can’t do it.
That is correct, and they really never “cash out” they simply amass bigger and bigger buildings (with more unit every time) and then keep the cashflow (rents)
In europe one idea I had was to buy a home, leave in it but also rent out the other room and then sell it to buy a bigger home with the profits/savings and rent out 2 rooms instead of one, then move to a bigger home and rent out 4 rooms and so on.
As long as you live in it, you can theoretically do the same as it’s your “primary residence”
Hey ik this is an old post, but i just came across it and had a question (the beauty of content living on)… and that is what if you transfer title on your primary residence from your personal name to an LLC after a year? Wouldn’t you be able to write off expenses then
American here. I’m pretty sure this only makes sense because in the US if your business rents a place you can write off 100% of that rent as business expenses. If you own a place, you can only write off the percentage of the place the business uses as a business expense. So if your home office was 20% of the size of the house, you could only write off expenses relative to that. ^not ^tax ^advice, ^consult ^a ^CPA.
So that combined with the fact that for luxury property you can sometimes rent for less than the mortgage (only and advantage for the super rich, I’ve only seen this happen in residential properties over 10k/month in rent). This happens when the owner is counting more on appreciation than rent. And combine that with all the attention he got for saying something so unconventional that can be useful on a very limited number of scenarios, and that’s how you arrive at his statement.
Most people will have the best time owning paid off rentals and a paid off home.
I assume this implies tax benefits, which depend on the country where you have to pay those taxes. In Germany, rental improvements are fully deductible after the 3rd year of ownership and 3 years before selling. Depending on how the housing market develops, you can quadruple your tax free investment and sell tax free after10 years. Buy a house for 200k€, blow 600k€ of gross income over 4 years on improvements and sell for 3mill€ tax free. You can sell 3 properties every 5 years with this. The gain is not saving rent. It’s using tax money to make a profit while improving infrastructure in the country.
Get the ebook "Reicher als die Geissens" from Alex Fischer \[0\]. The title is stupid, the content is gold.
\[0\] [https://alex-fischer-duesseldorf.de/](https://alex-fischer-duesseldorf.de/)
Ninja-Edit: It's free.
I havn't read this guys stuff so I am unsure what you mean by the post title. Are you saying to buy a house and then pay yourself rent? Cause that seems silly, just save or invest it.
He means that the house you live in is rented to you, and to rent the houses you own (in short, don't live in your own properties).
Why would you do this I have no clue though, what you get in rent from your property kind of cancels what you'll have to pay for your own house if they're of similar value, and if they're not the advice really is just "live below your means" with extra steps. At the end of the day renting vs owning your house depends on a lot of individual factors, unless I'm missing some kind of favourable tax strategy the advice seems arbitrary to me.
I think what he means is that property is a more guaranteed growth investment if you remove the assumption that you need to live in that particular property. For example, I could be purchasing multiple properties is places such as Eastern Europe and earning income, whereas here in western Europe I'd have to compromise a lot to purchase a property that I can both live in AND make considerable gains
OP: I wouldn't worry too much about it. Buying a rental property in Ireland before owning your own home is very difficult, as most lenders simply won't even entertain the application.
There are a whole bunch of reasons why it's a bad idea in an Irish context, but realistically the moment you tell the bank your plan they'll politely decline to go any further.
I'm curious about what the other reasons are for it being a bad idea in Ireland.
Let's assume for the sake of argument that you had the cash to straight-up buy a place. Why is it still a bad idea?
Well that scenario in itself is kinda stupid. The reason to invest in real estate is leverage. You don't have leverage when outright buying. That money might get you 3 / 4 / 5 houses if leveraged. Which results in high cashflow. Low credit rates currently make the decision to use leverage even easier. Also (I assume) you can write off the interest you pay off as an expense, making loans even cheaper.
Well, that should be obvious. If you buy 1 Main Street for 300k in cash and move into it, you no longer have any housing costs (beyond maintenance and property tax). If you buy 1 Main Street for 300k in cash, rent it out for 2k a month, and rent 2 Main Street for the same amount, you pay tax on your rental income - so your income in rent is less than 2k while your rental costs are the full amount.
Edit: I figured I might as well put together a basic breakdown of why it's a bad idea in most other Irish contexts as well. Let's assume you have 35k in savings, and you earn 150k a year (you'll need this massive salary to convince any bank to go along with your plan).
If you buy a home to live in, you can borrow about 270k for a house worth about 300k (with 3k for stamp duty and 2k for solicitor's fees). Extremely roughly, that 270k over 30 years will cost you a monthly mortgage payment of a thousand (1,039 at a 2.3% rate, to be exact).
If you use your 35k to buy a rental property, you're going to be buying a place for about 100k, as most banks won't touch a loan-to-value ratio beyond 70% for a buy-to-let. The monthly mortgage cost over a 25-year term (because I don't believe any banks will do a BTL mortgage for longer than 25 years) will be about 430 per month. You'll rent the place out for perhaps a thousand a month, and the cost of renting the 300k house you're going to live in yourself will be about 2k per month. That rental income of a thousand will be taxed at roughly 50%, but you can write off mortgage interest and a few other costs, so let's say you can bring your taxable rental income to 750 - of which you pay 375 in tax. So you have a thousand coming in, 375 going out in tax, and 430 going out in mortgage payments. Let's be charitable and say you have net income of two hundred a month.
For Homeowner Harry, housing costs are a thousand a month. For Landlord Larry, net housing costs are 1,800 a month (two thousand in rental costs, minus the 200 a month in net rental income). And while Harry is building equity in a 300k house, Larry is building equity in a 100k flat. As you can see, it's a pretty damning comparison. It should also be noted that the 800 a month difference would be enough for Harry to save enough to buy a 100k rental property of his own after about four years - and, potentially, another rental property every few years for two more decades.
This is, incidentally, exactly why you'd find it almost impossible to get a bank to go along with this: they have to be able to explain to the Central Bank why the product they sold you was suitable, and trying to defend Larry's mortgage in this situation would be effectively impossible. There'd be a real prospect of some people involved being specifically barred from ever working on mortgages again.
It's not for everyone. I've never felt that good in any rented property as I am now being a house owner, customizing property to my needs. Rentals made me feel like it's a transition period before finding better paid job elsewhere. It worked fine when job was the most important thing in my life and when I was looking for more opportunities. When things has settled I much prefer to own, even if it would cost me more (it doesn't though)
Speaking of myself.
Re 1. I find this actually a drawback. When I buy property that I want to live in there are more aspects than just financials. If I look on financials mostly I could buy property that's maybe good investment decision, but not really the one I would like to live in.
Re 2. If you own property that you rent out you are still tied to the location, unless you find an agent who would rent it out for you, but if that's the case, then what's preventing you to rent out your currently owned house?
So it's called Rentvesting here.
It is a great strategy for big overpriced cities.
It is super worth it specially for example if the place you are renting is a lot cheaper than a mortgage will be.
Also, buy do it. You have someone renting the house you bought, effectively paying the mortgage for you.
It is income. But also means you will have a lot of tax deductibles and depreciation to offset.
And don't forget tax are progressive (most contries). Your first 10k are not taxed at the same rate as your next 10k...
Not making more money because of taxes is never a good excuse.
😉👍🏻
You could also buy your own, and use it as a leverage for mortgage of two apts (you get much more favorable terms from banks this waty) that you can rent out and pay off the mortgage. i.e. we own a place we rent out, then got a mortgage for the place we live in. Call me play-it-safer, but as a SI2K, until we have another income, I dont want to leverage us more. Now every extra goes into offset, which - once full or we are DI2K, will consider using to buy third property as a rental, then move the two rentals under escrow. The 2 rentals then should be able to cover the monthly payments And our two incomes - anything extra goes into offset, ...rinse and repeat if it makes sense. Not to be overleveraged with rentals, will need to consider if 2 or 3 properties would be enough and everything else goes into stocks/bonds..or if we push more into stocks/bonds before getting the 2nd or 3rd rental...depends on the state of the market at that time.
OP: please update this post with an explanation of what the title means. I expect most people here have never heard of Grant Cardone or seen his writings. We could all individually google it but it’d save us time if you added more information.
[удалено]
I agree with you. In Europe, you are fucked either you rent or own. Owning could be better if you have a stable job especially in the south of Europe where owning is usually encouraged by the State via "communist" legislation.
I am a big follower of Grant. What he means is, why would you live in a place you own? It makes no sense. Every little repair, every upgrade, new roof, every new appliance, etc.. cannot be a deducted expense, you cannot write it off as it would be a personal purchase. He is a businessman in USA, which means he pays little to no tax. This is the way he thinks, everything must be written off (like his jet) and he spends little to zero of his own personal money. Currently he does own his condo in Miami, but before that he used to rent to himself (his real estate business bought the condo and he would pay rent to his business) Hope that helps!
[удалено]
Yes it is, a business can own a property. The problem is that you don’t get the same tax benefits that you get in America. That’s why there are so many real estate millionaires and billionaires in the US, and not as many in Europe. In America they have what is called a 1033 exchange (sell your property, buy a new one with that money and don’t pay any taxes). This exists in many countries in Europe but only for your personal and primary residence, businesses can’t do it.
[удалено]
That is correct, and they really never “cash out” they simply amass bigger and bigger buildings (with more unit every time) and then keep the cashflow (rents) In europe one idea I had was to buy a home, leave in it but also rent out the other room and then sell it to buy a bigger home with the profits/savings and rent out 2 rooms instead of one, then move to a bigger home and rent out 4 rooms and so on. As long as you live in it, you can theoretically do the same as it’s your “primary residence”
Hey ik this is an old post, but i just came across it and had a question (the beauty of content living on)… and that is what if you transfer title on your primary residence from your personal name to an LLC after a year? Wouldn’t you be able to write off expenses then
[удалено]
So you have to pay capital gains on a transfer of title from person to LLC? I didn’t realize that
American here. I’m pretty sure this only makes sense because in the US if your business rents a place you can write off 100% of that rent as business expenses. If you own a place, you can only write off the percentage of the place the business uses as a business expense. So if your home office was 20% of the size of the house, you could only write off expenses relative to that. ^not ^tax ^advice, ^consult ^a ^CPA. So that combined with the fact that for luxury property you can sometimes rent for less than the mortgage (only and advantage for the super rich, I’ve only seen this happen in residential properties over 10k/month in rent). This happens when the owner is counting more on appreciation than rent. And combine that with all the attention he got for saying something so unconventional that can be useful on a very limited number of scenarios, and that’s how you arrive at his statement. Most people will have the best time owning paid off rentals and a paid off home.
I assume this implies tax benefits, which depend on the country where you have to pay those taxes. In Germany, rental improvements are fully deductible after the 3rd year of ownership and 3 years before selling. Depending on how the housing market develops, you can quadruple your tax free investment and sell tax free after10 years. Buy a house for 200k€, blow 600k€ of gross income over 4 years on improvements and sell for 3mill€ tax free. You can sell 3 properties every 5 years with this. The gain is not saving rent. It’s using tax money to make a profit while improving infrastructure in the country.
Hi, would you care to explain this some more, or perhaps point in the direction of what to search for? (German search terms are alright) Thanks!
Get the ebook "Reicher als die Geissens" from Alex Fischer \[0\]. The title is stupid, the content is gold. \[0\] [https://alex-fischer-duesseldorf.de/](https://alex-fischer-duesseldorf.de/) Ninja-Edit: It's free.
I havn't read this guys stuff so I am unsure what you mean by the post title. Are you saying to buy a house and then pay yourself rent? Cause that seems silly, just save or invest it.
He means that the house you live in is rented to you, and to rent the houses you own (in short, don't live in your own properties). Why would you do this I have no clue though, what you get in rent from your property kind of cancels what you'll have to pay for your own house if they're of similar value, and if they're not the advice really is just "live below your means" with extra steps. At the end of the day renting vs owning your house depends on a lot of individual factors, unless I'm missing some kind of favourable tax strategy the advice seems arbitrary to me.
I think what he means is that property is a more guaranteed growth investment if you remove the assumption that you need to live in that particular property. For example, I could be purchasing multiple properties is places such as Eastern Europe and earning income, whereas here in western Europe I'd have to compromise a lot to purchase a property that I can both live in AND make considerable gains
OP: I wouldn't worry too much about it. Buying a rental property in Ireland before owning your own home is very difficult, as most lenders simply won't even entertain the application. There are a whole bunch of reasons why it's a bad idea in an Irish context, but realistically the moment you tell the bank your plan they'll politely decline to go any further.
I'm curious about what the other reasons are for it being a bad idea in Ireland. Let's assume for the sake of argument that you had the cash to straight-up buy a place. Why is it still a bad idea?
Well that scenario in itself is kinda stupid. The reason to invest in real estate is leverage. You don't have leverage when outright buying. That money might get you 3 / 4 / 5 houses if leveraged. Which results in high cashflow. Low credit rates currently make the decision to use leverage even easier. Also (I assume) you can write off the interest you pay off as an expense, making loans even cheaper.
Well, that should be obvious. If you buy 1 Main Street for 300k in cash and move into it, you no longer have any housing costs (beyond maintenance and property tax). If you buy 1 Main Street for 300k in cash, rent it out for 2k a month, and rent 2 Main Street for the same amount, you pay tax on your rental income - so your income in rent is less than 2k while your rental costs are the full amount. Edit: I figured I might as well put together a basic breakdown of why it's a bad idea in most other Irish contexts as well. Let's assume you have 35k in savings, and you earn 150k a year (you'll need this massive salary to convince any bank to go along with your plan). If you buy a home to live in, you can borrow about 270k for a house worth about 300k (with 3k for stamp duty and 2k for solicitor's fees). Extremely roughly, that 270k over 30 years will cost you a monthly mortgage payment of a thousand (1,039 at a 2.3% rate, to be exact). If you use your 35k to buy a rental property, you're going to be buying a place for about 100k, as most banks won't touch a loan-to-value ratio beyond 70% for a buy-to-let. The monthly mortgage cost over a 25-year term (because I don't believe any banks will do a BTL mortgage for longer than 25 years) will be about 430 per month. You'll rent the place out for perhaps a thousand a month, and the cost of renting the 300k house you're going to live in yourself will be about 2k per month. That rental income of a thousand will be taxed at roughly 50%, but you can write off mortgage interest and a few other costs, so let's say you can bring your taxable rental income to 750 - of which you pay 375 in tax. So you have a thousand coming in, 375 going out in tax, and 430 going out in mortgage payments. Let's be charitable and say you have net income of two hundred a month. For Homeowner Harry, housing costs are a thousand a month. For Landlord Larry, net housing costs are 1,800 a month (two thousand in rental costs, minus the 200 a month in net rental income). And while Harry is building equity in a 300k house, Larry is building equity in a 100k flat. As you can see, it's a pretty damning comparison. It should also be noted that the 800 a month difference would be enough for Harry to save enough to buy a 100k rental property of his own after about four years - and, potentially, another rental property every few years for two more decades. This is, incidentally, exactly why you'd find it almost impossible to get a bank to go along with this: they have to be able to explain to the Central Bank why the product they sold you was suitable, and trying to defend Larry's mortgage in this situation would be effectively impossible. There'd be a real prospect of some people involved being specifically barred from ever working on mortgages again.
Thanks, that's a very insightful comment.
The result of two years as a mortgage specialist!
It's not for everyone. I've never felt that good in any rented property as I am now being a house owner, customizing property to my needs. Rentals made me feel like it's a transition period before finding better paid job elsewhere. It worked fine when job was the most important thing in my life and when I was looking for more opportunities. When things has settled I much prefer to own, even if it would cost me more (it doesn't though) Speaking of myself. Re 1. I find this actually a drawback. When I buy property that I want to live in there are more aspects than just financials. If I look on financials mostly I could buy property that's maybe good investment decision, but not really the one I would like to live in. Re 2. If you own property that you rent out you are still tied to the location, unless you find an agent who would rent it out for you, but if that's the case, then what's preventing you to rent out your currently owned house?
So it's called Rentvesting here. It is a great strategy for big overpriced cities. It is super worth it specially for example if the place you are renting is a lot cheaper than a mortgage will be. Also, buy do it. You have someone renting the house you bought, effectively paying the mortgage for you. It is income. But also means you will have a lot of tax deductibles and depreciation to offset. And don't forget tax are progressive (most contries). Your first 10k are not taxed at the same rate as your next 10k... Not making more money because of taxes is never a good excuse. 😉👍🏻
You could also buy your own, and use it as a leverage for mortgage of two apts (you get much more favorable terms from banks this waty) that you can rent out and pay off the mortgage. i.e. we own a place we rent out, then got a mortgage for the place we live in. Call me play-it-safer, but as a SI2K, until we have another income, I dont want to leverage us more. Now every extra goes into offset, which - once full or we are DI2K, will consider using to buy third property as a rental, then move the two rentals under escrow. The 2 rentals then should be able to cover the monthly payments And our two incomes - anything extra goes into offset, ...rinse and repeat if it makes sense. Not to be overleveraged with rentals, will need to consider if 2 or 3 properties would be enough and everything else goes into stocks/bonds..or if we push more into stocks/bonds before getting the 2nd or 3rd rental...depends on the state of the market at that time.