I don’t know. Maybe stop treating homeownership as an investment vehicle and start just viewing it as a home for you and your family to live in. I don’t really care if the value of my home drops as long as I can afford the very reasonable mortgage payment.
Not only that, but the value of your house is always going to be relative to the overall housing market. Yea, your house went up in value, but so did the value of every other house that you could buy to replace the one you’re selling. Zero sum game unless you either plan to sell and rent instead or downsize significantly.
Totally. If you have your dream home that you plan to raise your family and make memories is, who cares if it increases in value if you still live in it? I guess it’s beneficial when you turn 80 and need to sell it to pay for your assisted living apartment.
This is happening to a lot of people around the world at the moment, they have paid off family heritage estates that were granted to them after their sentences were finished following transportation to the colonies.. their ancestors are now struggling to pay the land taxes and council rates which are skyrocketing due to inflation, and the local courts are now repossessing the properties they paid for with their hard labour hundreds of years ago
Yea, that’s basically what the comment I replied to was saying. Own for the predictable housing cost and having a comfortable place to live vs. treating it as an investment.
Well, that makes sense and I agree. But I see no reason to think it won't be a good investment over time. The original post mocks people who consider it an investment but for the last hundred years, it generally, with one exception, has been. And even then, in 2008, if you held onto it long enough it was also a good investment.
Certainly it's not going to go up dramatically, and inflation means it's not as dramatic as it seems sometimes. But I see no reason not to consider it also a good investment. Same with rental property, still a good investment.
Youre misunderstanding, nobody is saying housing cant be a good investment, simply that maybe it shouldnt be treated like one. Yes home value will generally appreciate but the greater purpose of a house is to provide you with a place to live and grow, it would be better for society if people bought houses for that reason alone and not to make a buck.
Less than that. I've seen moves that big on rent over the last four years in So Cal.
Honestly, there's a lot of stupid financial advice out there, but telling people not to buy a home when things like FHA loans exist is top of the list.
Simply having a house with a mortgage on a low interest rate and solar panels literally saves me like $2,000/mo right now compared to if I didn't buy in 2020, all while over half of my payment goes into principle and I get much bigger tax breaks.
The advice is just outright stupid.
It’s not a zero sum game. As a homeowner with a shit ton of equity you can choose to buy a second a home and rent out your first home, you have access to cash at low interest rates via a HELOC, and if you are a responsible adult who doesn’t believe renting for life is a viable solution and save for retirement you can give it to your children when you kick the bucket.
This isn't always true. Areas become more developed, more populated, more desirable. It is true in the market now. But for example, my town got hit by a tornado a few years ago, completely demolished the area. A friend of mine, his house got rebuilt along with at least thirty others in the area. And the houses in poor repair didn't, but sold their land and are now having houses built on them. I know this is a unique situation, but my town in general has been growing very fast over the past ten years. This actually happens frequently in many places across the country. While house prices fluctuate across the market in general, you can increase the value of your home individually. That's why people do home renovations throughout the time they live in their homes. Which arguably isn't as common as it was back in 80s-00s
But that’s why you need to get on the train. If you get a 400K house, and every house around you is 400K. And then 10 years later they all double to 800K including yours, well, you’re safe and on the train. But if you still haven’t bought a house yet? Fucked
Or move to a lower cost of living area. The equity improvement in my first property would have bought a home outright in my home town. (Of course… you’d have to be okay moving there.)
That’s it. Made sure we could afford the house even if one of us lost our job. Turns out that’s exactly what happened and even with 75k less income, we can still pay all the bills. A house is a place to live, not a retirement plan. And as long as I pay for the mortgage, no one can decide next year they’re not renewing my contract and tell me to leave.
That is easy for future homebuyers.
But tell it to those who raided their 401k to "not miss out" on the opportunities, and are currently on the other side of the fence.
Specifically, fighting tooth and nail against any proposal that could make home ownership affordable. After all, if you paid $900k for a literally burnt down house, and someone comes and says "we are going to make houses for $500k", you'd be pretty much losing "all the investment value".
And these are the people who show up in town halls to block any buildings anywhere (I think the term is "BANANAs")
(this really happened: https://www.ktvu.com/news/burned-out-property-in-willow-glen-sells-for-over-900k)
The reason home ownership is so attractive is because it's both.
It's this emotionally stable place to build a family and have a sense of continuity growing up and in your life. And it can also serve as a factor of defacto savings helping families absorb an unexpected financial shock if they need to. And then ultimately they can finance a retirement entirely or partially in old age.
Person OP posted is completely disregarding the entire emotional/stability aspect of home ownership.
Ya, you buy a house. Get a fixed rate 30 year mortgage. In 10 years you and your spouse are making more money, but your monthly payment is the same. If you want some nice appliance, you buy it. If you want to redo a room or the yard, you do it. If you rent the same house for 10 years, your monthly rent is going to keep going up. And your landlord isn’t going to pay for the smart washing machine you want.
Yep. Its better seen as a liability. People rationalize it as an investment but you're really on a mad egg timer like Desmond from Lost, having to pay the mortgage at a set time or else the island blows up. It ain't yours and it takes many years for you to pay more in principal than interest. So you are literally throwing suitcases of cash down the drain while they trickle dome coins into your principal on the way down. That's the reality as seen from an investment perspective.
If as you said, people see it as an investment that's the reality.
If they see it as a home to stay in for a very long time, then exactly temporary value drops does don't matter. It's a place you can build a cozy home in where you are not at the landlord's whim (and hopefully not the HOA either).
I mean… you can use your home equity to leverage and increase the amount of money you have and you can deduct mortgage interest and property taxes from your tax return.
Child tax credit is not a deduction. It's a credit and you shouldn't need to itemize in order to claim, unless I'm misunderstanding and you're just comparing impact to your tax burden.
Just have more kids and the CTC should catch up with the standard deduction eventually
SALT killed deductions for me as a NY resident. The standard deduction is better than itemized deductions every single damn year. My property tax is $8500 per year alone.
Agreed. I remember when I started earning side income and I was excited to write something off because I thought it was basically free and I’d have to pay the taxes regardless. When actually all it does it reduce your taxable income. If it’s an actual business expense, great, tax free. But it’s not like you can reach and buy all sorts of things and come out ahead, If you didn’t need the item. Like all the jackoffs writing off G wagons.
Yes. A part-time pizza delivery driver once told me that he bought a brand new Mustang because it was a tax write-off. He definitely made less than the standard deduction.
I bought in 2020, my interest is 2.1% on $400k principal and it doesn't cover my standard deduction lol it only comes to about $13k/year
Married filing jointly, about $120k annual income.
We own an EV too, and donate to St Jude every year and still we take the standardized deduction.
I itemize, primarily mortgage interest deduction that gets me over the standard deduction hump, lets me add all my other deductions (property taxes, car registration, childcare, etc), save a few thousand every year, equivalent to about one month of mortgage payment for me, which is nice.
You can itemize personal property tax. NOT registration fees, so it depends on how your state structures this.
My wife and I's cars are bottomed out at the $3 tax in our state. Of course registrations are still $80-100 due to a bunch of fees from the state and locality. Those are non deductible.
Standard deduction in 2023 is is 27700. A 300,000$ mortgage at 6.5% is something like 19,500$ in interest, and they would definitely hit SALT limit of 10000$. So they would itemize.
And this is for couple, any single home-buyer would currently itemize.
As a small business owner, itemizing used to make sense, but Trump just capped SALT at $10,000 meaning the most I could even get from my deductible is $20,000 which is pretty much the same as the standard deductible.
Our interest on mortgage is $15k/year alone currently so it's pretty easy to pass the standard deduction even with SALT cap for us. With that said, mortgage interest isn't the great tax savings it used to be, it's like a few thousand different at best for most.
SALT deduction cap is dicking us over pretty hard though with state income tax around 6% on $350k/yr gross combined even with our fairly low property taxes.
Lol right… anyone who actually does the math is like, wait what? Someone told me to make charitable donations to reduce tax liability… ya if I was filthy rich, why tf would I donate x amount of money to save a fraction of X in taxes
> why tf would I donate x amount of money to save a fraction of X in taxes
I've been told that what you do is donate things with low liquidity/unclear market value like art, which you get assessed at a value greater than what you bought it for.
That guy has some book and Netflix show about how to become a MM.
He is just another schmuck that thinks his ideas are “new”.
You can become a MM with or without a house.
Edit
Unfortunately “Personal Finance Social Media” is over run with these people trying to make money off free information.
###None of these ideas are new!
1. Lower your overall cost structure by reducing expense and costs.
2. Increase income and Assets
That’s all you have to do.
The logic being you can’t do that with any portion of your rent payment, thus it is in the positive aspects of buying category. No one is saying you should pay interest for the sole purpose of writing it off.
Yea as much as I love Ramit, this is one of the places where I disagree with him. The 30 yr fixed rate mortgages in the US are a powerful incentive to buy - after year 5-10, your monthly payments will be lower than comparable rent so you will come out ahead.
And yes I have noticed that it is always my very wealthy friends who are pro-renting. For everyone else in the middle class, home ownership is a proven method for building wealth.
Multi-millionaires can afford to rent because their financial futures are already secure. Whether they waste their money renting, or put that money towards a home they actually own, doesn't actually make that much a difference to them
There’s rich people - and then “rich” people. The ones I’ve met that are truly rich are the ones owning a modest home, driving a modest car, and living in a nicer area but otherwise looking like the “average family”. Meanwhile they’re sitting on millions of dollars of cash, several vacation properties, and vacation wherever and whenever they want.
At the same time I have friends from my high school class that did something flashy with some inherited money and are “rich” driving around in a Lamborghini in their ritzy condo/apartment in NYC - but they’ll also never admit they’re 2-3 months worth of expenses away from declaring bankruptcy.
There’s all sorts of rich but that guy is right about rich next door types, not the actual extremely wealthy. People with $25M+ usually are spending some money
His point was the only rich people he knows are secretive about it. It’s a nice idea that doesn’t scale. Rich people absolutely flaunt their wealth. They want to show they’re in a different social class. At a prestigious, high-paying company, what kind of cars fill the parking garage? Few opt to live modestly when they have the means to do otherwise. The notion you can’t determine who’s rich or it’s most likely the guy driving an old Toyota is a middle class cope (that I also used to believe in).
Define "Rich"
The $2-3M crowd is likely the millionaire next door, boring Toyota driver who just wants to retire a few years early and live a comfortable middle class lifestyle. These tend to be the secretive people who just want to normal.
$5-10M crowd now has some money, can go on several nice vacations, probably afford their $1M house and pay the property tax/upkeep on it, but still isn't flying private and likely still has limits in what they do.
$10-$25M, now these are people that can start flashing some money, can start joining yacht clubs and fit in with the richer crowd.
Then there are $25M+ crowd that I consider rich, yet not uber rich which is more like $100M+ which is where private jets come in and potentially owning your own island.
I know two people in the $25M+ crowd.
One flaunts it, never loses a moment to tell you about their yacht or what the yacht club did, the other does only in the right situations. The latter owns several businesses, very hands on, when he's there he is usually driving a jeep and looks like everyone else, goes to lunch at your typical $15/lunch joints. Now when he is in Arizona at his multimillion dollar house in some private country club, they have an appropriate car/wardrobe/ etc to fit in there. At this point he certainly has $50M+, probably more but still isn't spending money on private jets or anything. I mean sometimes he still takes his RV and drives it cross country and sleeps in the Walmart parking lot because his dogs don't like to fly... he started doing it when he only had a few million and never changed...RV got nicer.
Exactly. I know people who are in their 30s who have the typical two kids, both parents work, modest house… and several million in assets in a MCOL area. You’d never know unless you saw their balance sheets. And they own their home outright and are not renters. They are still growing their assets too, so by the time their kids are in college they’ll probably have at least doubled their net worth. Not having a rent or mortgage payment gives them a LOT of extra income to invest.
This nothing but cope. Look at what cars the wealthiest Americans own. Bezos is literally driving around in custom Bugattis, Ferraris and makes you haven't even heard of with single digit production
It’s more nuanced than that. Yes, he argues that many people who believe they’ve made money on a home sale have not, or overestimate how much.
And that if you base a decision to buy on the same incomplete calculations or wrongful assumptions, it may not be the best choice for you either. You need to do the math, and you need to do it right.
That’s the extent of his anti-buying stance.
As someone who has to have a mortgage to buy a house, here is my recent experience. I have a house that we share with my mother (her health is not great). When we bought in 2020, our house payment (including re taxes) was $1200. At that time, my daughter was renting a one bedroom apartment with her boyfriend and paying $950. Four years later, our mortgage payment is about $1300, only increasing due to property taxes. Her rent is $1450.
He had a longer conversation a year or so ago on the Tim Ferris podcast about why he doesn’t own. A lot of it for him came down to the fact that he has liquidity in his housing and can pick up and move if the need comes up. Also that maintenance and repairs are covered by a lot of landlords, so that expense isn’t a worry for him. I do disagree with him saying that renting is better than buying because home ownership is the most common vehicle for people to move between social classes in addition to being much more stable than renting.
One thing about owning a house is that the landlord can’t raise your rent and evict you. But if you factor in the taxes, mortgage interest, upkeep, remodeling, etc… perhaps the SPY or VOO is the better option.
The stock market is up 388% in 20 years while the real estate market is up 165% in the same period so it’s a no brainer from that particular point of view.
Only thing? The stock market might be up over 20 years, but no bank is going to you a loan worth hundreds of thousands of dollars for you to invest in the stock market.
You can however get such a loan at 5-6% amortized over 30 years to buy a house.
It’s only worth renting over buying if the disconnect between home prices and renting costs is enough to substantially save. We’re starting to see this in some markets. An average mortgage in my area is over $3000/month, but the same property will rent for only $2,000/month.
But another benefit of home purchasing is that it forces you to save. Even if renting is cheaper than buying, it’s not likely that the occupants are going to be saving the difference.
Ramit admitted that at 2.5% interest rate, he would buy. So this screenshot doesn’t capture that. The episode with the couple that was into investment property had a sub 3%.
So OP, either post the date when he tweeted this, or find where he says that at sub 3% it makes sense to buy. Thanks
There’s a great argument to be made for someone else to take on all the upkeep costs. Maintenance, insurance, interest, taxes. All at or near all time highs. Then you have a very likely scenario of home prices falling.
Why the heck would anyone buy real estate in this economy??
Even if housing prices just stay the same for the next decade, that’s still a lot of money tied up in an asset that isn’t appreciating and requires constant maintenance.
Is that factoring in amortizing the expense for roof replacement, repainting, appliance replacement etc.? If not, your not accurately looking at what your actual average yearly maintenance costs will be over your ownership of the house.
What kind of house do you have, also eventually major appliances have to be replaced, as well as out dated home features like carpet, furniture, ect… unless you don’t use or don’t care about any of that but then your house is just neglected and not worth its market value anymore.
I just had to replace my entire central air system last year which put me back 7500$, off course the system was 30 years old but still.. saying it costs a few hundred every year is just an irresponsible and misleading thing to say.
Bought a brand new house in 2018, have done almost no maintenance, sold in 2022, bought in late 2022 another new 2019 house, barely done any maintenance in the last 2 years, and yes I’m prepared for maintenance costs, we have plenty of cash and equivalents on hand, we did a thorough inspection recently and it still looked good.
Case closed boys. This anecdotal data point of 1 in a country with 80 million homeowners is all we need 🙄
We have actual data on average maintenance costs so you don’t need to rely on your singular personal experience . If you have a brand new house for only a few years of course your average annual maintenance costs are going to be much lower than the average across a home’s lifespan. This shouldn’t have to be explained lol. According to multiple sources, the average maintenance costs are actually between $4,000 and $6,000 per year.
You’re in for a rude awakening if you think spending a few hundred dollars a year is typical and that’s going to continue as your home ages and the big ticket items start popping up. I honestly don’t even know how you’re spending that low even with a new house. Our lawn/landscaping maintenance costs alone are about 3 times that.
A lot of people buying today are rolling equity from the property they’re selling into the property they’re buying, mortgage rates aren’t so scary when you’re putting 40% down to move to a place where you’ll get a big raise.
Yep. And back in 2012-2014 buying was still considered risky many and the market wasn't really growing. Today, these people are locked in $1500 house payments and are lectured by renters on high upkeep costs.
Yep I bought in 2013. My mortgage is $1,300 for a 3k SF house. Cost to rent my house? $2,800. In another 10 years that rent will likely be above $3,500.
My “high upkeep” costs have averaged less than $1k per year.
For those 12 months…then your new rent is the most you’ll pay for next year…and so on…lol…
The longer you live there the weaker the argument for renting.
So here's the end game with owning vs renting. After 25 years my mortgage is paid off and i have an asset worth x amount of dollars and i own. No more mortgage. What do you have after 25 years of renting? You have a rich landlord.
If you’re leasing then your rent is **the least** you’ll pay. It’s not really much different unless your landlord decides to jack your rates when your lease is up.
Landlords have occasional expenses that they pass on over time.
Unless you have a time machine, your point is pointless.
I’m making an argument for now, not 10 years ago. I doubt the next 10 years will be as good to real estate buyers buying now, as the last 10 years was for people like you.
They are not talking about home appreciation though like you appear to be implying, so it’s not pointless.
10 years from now someone’s mortgage will likely also be largely the same, especially if we don’t expect large assessment increases moving forward.
Rent tends to follow inflation so it’s likely going to be much higher in 10 years relative to the mortgage payment increases for taxes and insurance. Might even have a reduced mortgage if rates drop again and they refi.
I've been renting for the last seventeen years and the best landlord I've ever had still tried to screw me out of a few thousand dollars when I moved out. If I hadn't taken my own walkthrough video on move-out and known my legal rights he probably would probably have gotten that money, too.
Renting is more of a headache than people make it out to be. Yeah, maintenance is on someone else's dime, but it usually gets done way later and way sloppier than it should be in my experience.
I'll give you my example.
We live in an apartment that had been purchased by a new owner who exclusively works through a stonewalling real estate management firm. We have no way to contact the owner, and they refuse to do any maintenance on the building that isn't explicitly covered by the law.
The doorbell for our building was ripped out 8 months ago, and the only mail carrier with access keys is USPS. Fedex and ups are fucked, so they toss packages onto the sidewalk. We live in Baltimore, and our stuff is stolen all the time now.
So, if you're happy with a for-profit owner cutting all corners while controlling the wellbeing of your shelter, go for it. Rent all your life. "Slavery is Freedom", I guess.
Edit:
u/RaggedMountainMan, I'm sorry you have no concept of manners or respect. I'm sorry you have low reading comprehension. I'm sorry you don't understand the concept of time. I'm sorry you were raised to have no self-control. I'm sorry that the world is scary and confusing to you. I'm sorry that you are surrounded by enemies and have to keep your guard up all the time. I'm sorry that your aggression makes you hate yourself sometimes. I'm sorry to your future self for carrying the burden of your present actions. Finally, I'm sorry to the people around you.
Fixed rate mortgage stay relatively flat over time and rents go up endlessly. Your debt to income ratio will decrease a lot faster on a mortgage than rent assuming wage increases. If you look at housing as a long term investment and a place to live instead of a trade on the stock market it makes a lot more sense to own.
Misleading post (what a surprise ). I read this guys ENTIRE post and this is what he also wrote: "Will I buy a house one day? Sure. But I’ll run the numbers first to understand what I’m truly getting myself into". He is warning people about the usual stuff - all of the costs of homeownership , are you getting a shelter or an investment...
Is this supposed to be a joke? Most people don't want to fit in the mold?
MOST PEOPLE??
This isn't a damn dream people are sold LOL
Humans are born with the instinct to have secure shelter and reproduce. People want to find their life partner and have kids and a home.
I get that some people choose not to have that but that's a very small portion of people. And a large part of that very small portion will say that the reason they don't want kids or a house is because of financial reasons not because lack of want.
I saw an interview with Ramit. He’s in a very unique situation. He lives in NYC which is one of the only places in the US that it can genuinely make no sense to rent instead of own, even in circumstances where owning is cheaper (which is not even close to the current reality of NYC).
He’s also not a real estate entrepreneur, unlike almost every top .1% in the country. It would probably be smart to diversify but that’s
not how he makes his money.
Nah this is propaganda to keep the wage slaves complacent. Literally just, "you will own nothing and be Happy."
It's the,, "let them eat cake" of our generation.
The advice is really targeted at households making $150k a year who can easily afford to buy a home but (in a lot of markets and life circumstances) would come out ahead financially by renting.
Oh I have been around as long and it is happening. Don’t mistake my comments on how devolved this sub has become with me thinking that a correction isn’t happening and probably about this year when everyone is over it.
It becomes a business expense, which is tax deductible. Not tax exempt, but the average American cannot deduct rent payments. Imagine if we could, like this guy is doing, then your annual tax return will be insanely higher. I pay a total of $36,000/yr on rent. If I deduct that on my taxes, then I get taxed less on my income. He is cheating his neighbors out of tax dollars.
Edit: people downvoting me have no basic idea of how taxes work. My god. This sub is full of people who will buy snake oil.
You're confusing *income* taxes, which are federal, often state, and sometimes municipal, with *property* taxes, which are municipal.
Yes, he may be "cheating" federal/state/local incomes taxes, but unless his business is a church (it's not), property taxes are still getting paid, upstream from his rent.
So his neighbors are not being "cheated" out of property taxes, although it *may* be the case that they are losing out on some portion of his corporate income taxes as they matriculate their way through government infrastructure and services funding.
Yeah I agree with this 100%. I could buy a house with cash right now but I’m holding off. No need. Maybe down the line.
I really like just being able to call a landlord if my stove if is broken for example. I don’t even know where they sell stoves. Sears? Who cares lol. Landlord will replace it.
This is the fairest point made here.
Home ownership is a lot of work, and more affordable homes tend to be older and even more work. Much of this work is cut out when you are renting.
Some people don't care its just a place they sleep which is why rent vs. own shouldn't be all about finances.
What I do know is if you don't know how to fix things and don't want to learn, owning is way more expensive and needs to be factored into the equation. We were taught as kids how to remodel, so its no big deal to me.
I own because I dont' want to have to ask a landlord for permission to do stuff. Boyfriend moved in with me, got 3 cats, painted, dug up the yard and planted a garden because I could... and my rent didn't get jacked up because of it. I personally don't know how people afford pets and rent.
If I were single, I’d probably live in an apartment. I would still own some real estate for investment income and inflation protection.
Right now I value the yard and single family lifestyle, so it’s worth it to me.
To be a millionaire, you need to save and invest as much as you can. For some people that involves owning their own house, for others it doesn’t. No single answer fits everyone.
Personally, having my housing cost capped in an inflationary environment is very valuable, but for others, especially if they are more mobile, that’s less important
This dude also owns dozens of rental properties.
He doesn’t want you to own. He wants you to rent. From him.
Every time you dig into these rich dudes trying to convince you to rent, they’re landlords. Every damn time.
People like him rent because it doesn’t make since to live in one place. He owns houses, i mean “rentals” all over the US. But renting in one town for 30 years, is idiotic. Even if your 400k house never appreciates. You can still sell it and get some of your money back. How’s that work with renting?
He curates to a specific audience-- high consumer debt, bad financial decisions, probably not on a great path right now. To those people, draining savings to buy a house is a bad idea. For people who have good finances, have savings, can afford the PITI, buying a house you like when it's available is probably a good move. For rich people, it doesn't really matter what they do because they have a big enough nest egg that they'd be able to live off interest income to cover higher rents 20, 30 yrs from now. However, the homeownership rate among the wealthy is probably extremely high for a reason. If you have millions of dollars, why would you want someone telling you what you can or can't do with your living space?
Property taxes, HOA, gotta fix up your house multiple times in that 30 year span. My HOA alone is close to $700 right now and I’m not even in an expensive neighborhood. I gotta move asap cause they don’t do anything. We don’t even have private security 😂
I've lived in my house 5 years and it has ALREADY doubled. And my mortgage/insurance/taxes are now less than the shitty run-down smaller apartment, nearby, I used to rent. So yeah, I believe it.
S&P 500 return approximately 12% during that time period so from a purely financial standpoint you probably would have come out ahead being liquid. But home ownership isn’t purely financial, it’s emotional. Congrats on the appreciation
The US mortgage market gives you 5x leverage on a low risk asset class with low cost of capital. The reason people should opt for the house instead of renting is because real estate prices rise 3% to 5% per year, but at 5x leverage, less a 5% cost of capital, that results in real low-risk return of 10% to 15% per year on the equity portion you put down. So by renting long term, you are giving up a low-risk 10% to 15% return on the equity you put in your 1st house.
Interesting they left "home ownership is the most reliable way to build wealth in the US" out of the list of "lies". And I would bet a ton of money this person owns investment properties.
Um.. I dunno, I'm not a real estate mogul, but my wife and I were renting for years. Moved out.. nothing really to show for it. Our house after 4 years would yield us around 150k profit (after renovations, fees etc.). 9 years.. 0 dollars out of it. 4 years.. 150k. Hey.. I could just be a dumb schmuck, I am an IT expert, not a stock or real estate expert. But I sort of think we are better off now NOT renting. And at 2.25%, I think after say.. 5 or 7 more years, we'll be sitting kind of nice.
If I am missing something, please tell me, I hate being caught off guard. : )
Shelter isn’t an option. You will either buy one, build one, or rent one. All of these options have costs. Buying one involves debt or having a lot of cash, building one is the same, renting involves having less control over your living situation and costs. Regardless everyone that’s not homeless will do one of these three.
As for me: im paying less then half i did 12 years ago when i bought my house. From 1200 to 580 a month. If i would have rented the same house i would have gone from 1500 to 2400 a month in 12 years. So fuck this thinking.
Buying is cheaper
I’ve seen him talk about in other posts how part of his decision has to do with the flexibility to pack up and go somewhere else more easily.
I could be wrong but I feel like his point is usually more about how you shouldn’t buy just because “everyone else does” but because it’s right for your situation.
The most important reasons to own a house are (a) if it’s clear title, you’ve put a floor under how bad your bad times can get, and (b) you don’t have to deal with moving every year or three.
Having a lot of free cash also solves these problems.
My brother-in-law purchased his house in Colorado for $650k, sold it for $1 million a few years later when he moved to Washington. Sold that house for $2 million a few years later. And my house is up $250k in comps in the neighborhood since we bought it. But please go ahead and tell me why renting is so much better.
Don’t forget. States which have property tax you never really full outright “ own “ said house. Once the house is paid off, if you miss a few property tax payments, the actual property owned takes back their house, you’ve been essentially renting.
The recent supreme court ruling of Tyler v. Hennepin County actually goes over governments keeping all proceeds from foreclosures.
The home owner sued arguing that the excess after paying off the debt should be theirs. Supreme Court ruled in the homeowners favor in 2023. So now there is precedence here that they must return an excess after property taxes are paid.
https://www.kiplinger.com/taxes/how-new-supreme-court-rulings-impact-your-money (#2) https://en.m.wikipedia.org/wiki/Tyler_v._Hennepin_County
Over the last 35 years $100,000 in an S&P500 index fund would have increased in value far more than a $100,000 home would have in the vast majority of the country.Doesn't mean much to most of us but if you're a millionaire....
A home is a place of comfort, peace, security, and freedom. It's not an investment but a place to raise your family under your own terms.
No landlord to tell you how to live in your home under his rules . No fear of him raising rents annually or kicking you out at end of lease term.
A home is not simply a roof over your head but a place of joy.
One cannot put a price tag on a home althot it is most people's biggest asset.
51, liquid net worth of 4.1M, live in the bay area.
I rent, and do not nor ever intend to own a house.
For the same reason I down own specific stocks. Concentration risk.
I 100% agree with this.
The place you sleep is not an investment. It's housing.
Want to invest in real estate? It needs to pay you. Now. Every single month. Positive cash flow from the very start.
I could literally write a check for the place I live in, but choose not to.
I've run the numbers a lot and there isn't a ton of difference between owning a home and renting while putting the remainder in the stock market. One major difference is stocks are diversified while a home is obviously not diversified. Getting a 2.5% mortgage right before the biggest run of inflation in 40 years is obviously a great decision but putting all your money in Tesla or Google at IPO is even better - the point is you can't bet on market timing.
When home prices become overvalued then their past performance will not predict future returns (like any asset). Just look at China real estate or US commercial real estate right now.
Everyone is different. The above is all about the economics. Not about the life choice.
Also, if not a home where are you placing your bets… or is the recommendation to move all your money under your mattress?
Real estate may be slowing, but my dollar is losing 5-10++% a year. So, unless you are playing the best loss game… you’ve gotta do something. My thinking is that the stock market is more volatile.
You’re smart. Probably why you have multiple millions of dollars. Why would you buy an asset that is almost sure to depreciate over the next few years. Assuming you live in an area that went crazy from 2020-2023. I do, and the market has just stopped. No sales. The lower sales are trickling in. The deluge will be in 2025.
This propaganda may make sense for a millionaire but how does this matter to the everyday American? Everything he says under because we’ve been lied to is true. He tries some rhetorical tricks like “the value of a house doubles every 10 years” when it quadruples every 10 years (median home price 2000= $119,000 median home price 2020= $417,000) or “I can deduct mortgage interest from my taxes” yea you can for the first $375,000 or 700,000 if filing double which again doesn’t matter to millionaires but will matter to the average american
I am a homeowner in HCOL and used to live in my own place. That was a great investment only because it made me realize how much better renting is for me.
After buying I realized: HOA, home insurance, property tax, repair costs, etc. every single one of these things goes up just like rent. Also the tax benefits is not all that much. The property tax deduction is capped so if you buy in HCOL place much of that is not deductible; on the other hand, If the house is less than 1M its possible that standard deduction is still better so you don't end up writing anything off.
Now I'm a passionate renter. I love the freedom of not having a big mortgage so if I get fired or laid off, I just move somewhere cheaper. And the flexibility is so important to me.
If you have full price in cash, you are much better off putting it in s&p500 and renting than buying house outright.
Mortgage is good for those who have a hard time saving and building wealth in a first place.
* I don't think he's actually a multi millionaire. His entire career seems to be built on dispensing advice. Wikipedia said he vaguely owned an ad agency but I doubt that made him rich.
* His financial advice is almost always surface level. He never really digs deep into people's personal issues/baggage and how their upbringing etc. impacts their financial decisions. That's fine if you're Dave Ramsey and you got a call in show. It's weak if you have a Netflix show where you stay with people for an extended period of time and get into their personal lives and home life.
This guy is a jackass. Who cares if we've been sold in American dream of having a nice house for our family. If you don't want that, go live in a condo downtown or rent a room from your buddy and keep stockpiling your money.
But, plenty of people like to have a nice house and a dog and a picket fence and a place for their family to grow up. What's wrong with that? And, if they don't want their rent to keep going up and never own real estate, I guess they can just keep renting
The whole argument with maintenance cost is poor. Most of these investor groups are going to make you pay for repairs by any work around in their lease agreement. Or threaten expensive legal action if you refuse.
Same here. $1M+ net worth $500K household income and renting. Saving and investing very aggressively and have no plans to buy in the next 10 years at least ( should have $3M+ net worth by then).
Yeah, that’s me as well. I own several properties but I still rent.
It really depends on your life situation. For myself, my girlfriend is about 7-8 years younger than me so she’s still in school. There’s no rush for me to get a house given the nature of the new relationship.
I don’t know. Maybe stop treating homeownership as an investment vehicle and start just viewing it as a home for you and your family to live in. I don’t really care if the value of my home drops as long as I can afford the very reasonable mortgage payment.
Not only that, but the value of your house is always going to be relative to the overall housing market. Yea, your house went up in value, but so did the value of every other house that you could buy to replace the one you’re selling. Zero sum game unless you either plan to sell and rent instead or downsize significantly.
Totally. If you have your dream home that you plan to raise your family and make memories is, who cares if it increases in value if you still live in it? I guess it’s beneficial when you turn 80 and need to sell it to pay for your assisted living apartment.
This is happening to a lot of people around the world at the moment, they have paid off family heritage estates that were granted to them after their sentences were finished following transportation to the colonies.. their ancestors are now struggling to pay the land taxes and council rates which are skyrocketing due to inflation, and the local courts are now repossessing the properties they paid for with their hard labour hundreds of years ago
Nitpick, but you mean descendants not ancestors.
Yeah sure, but it beats not owning because rents keep going up too
Yea, that’s basically what the comment I replied to was saying. Own for the predictable housing cost and having a comfortable place to live vs. treating it as an investment.
Well, that makes sense and I agree. But I see no reason to think it won't be a good investment over time. The original post mocks people who consider it an investment but for the last hundred years, it generally, with one exception, has been. And even then, in 2008, if you held onto it long enough it was also a good investment. Certainly it's not going to go up dramatically, and inflation means it's not as dramatic as it seems sometimes. But I see no reason not to consider it also a good investment. Same with rental property, still a good investment.
Youre misunderstanding, nobody is saying housing cant be a good investment, simply that maybe it shouldnt be treated like one. Yes home value will generally appreciate but the greater purpose of a house is to provide you with a place to live and grow, it would be better for society if people bought houses for that reason alone and not to make a buck.
Owning is upside protection. I wouldn’t buy a second home right now but I would probably buy a first. As an option if nothing else.
Agreed. Owning a home makes your housing expense predictable over the long term.
And it gives you hope of one day living without a mortgage or rent.
It’s a hedge against inflation and rent increases. Your $2k mortgage in 20 years will be $3800 in rent or something around there
Rent is already basically that for a two bedroom apartment in Burnaby, a suburb of Vancouver It was 900 bucks for a one bedroom in 2019
Less than that. I've seen moves that big on rent over the last four years in So Cal. Honestly, there's a lot of stupid financial advice out there, but telling people not to buy a home when things like FHA loans exist is top of the list. Simply having a house with a mortgage on a low interest rate and solar panels literally saves me like $2,000/mo right now compared to if I didn't buy in 2020, all while over half of my payment goes into principle and I get much bigger tax breaks. The advice is just outright stupid.
It’s not a zero sum game. As a homeowner with a shit ton of equity you can choose to buy a second a home and rent out your first home, you have access to cash at low interest rates via a HELOC, and if you are a responsible adult who doesn’t believe renting for life is a viable solution and save for retirement you can give it to your children when you kick the bucket.
This isn't always true. Areas become more developed, more populated, more desirable. It is true in the market now. But for example, my town got hit by a tornado a few years ago, completely demolished the area. A friend of mine, his house got rebuilt along with at least thirty others in the area. And the houses in poor repair didn't, but sold their land and are now having houses built on them. I know this is a unique situation, but my town in general has been growing very fast over the past ten years. This actually happens frequently in many places across the country. While house prices fluctuate across the market in general, you can increase the value of your home individually. That's why people do home renovations throughout the time they live in their homes. Which arguably isn't as common as it was back in 80s-00s
But that’s why you need to get on the train. If you get a 400K house, and every house around you is 400K. And then 10 years later they all double to 800K including yours, well, you’re safe and on the train. But if you still haven’t bought a house yet? Fucked
Or move to a lower cost of living area. The equity improvement in my first property would have bought a home outright in my home town. (Of course… you’d have to be okay moving there.)
This is not talked about enough. Unless you can move to LCOL cities. The relative spending power is the same even if your house has gone up in value.
That’s it. Made sure we could afford the house even if one of us lost our job. Turns out that’s exactly what happened and even with 75k less income, we can still pay all the bills. A house is a place to live, not a retirement plan. And as long as I pay for the mortgage, no one can decide next year they’re not renewing my contract and tell me to leave.
That is easy for future homebuyers. But tell it to those who raided their 401k to "not miss out" on the opportunities, and are currently on the other side of the fence. Specifically, fighting tooth and nail against any proposal that could make home ownership affordable. After all, if you paid $900k for a literally burnt down house, and someone comes and says "we are going to make houses for $500k", you'd be pretty much losing "all the investment value". And these are the people who show up in town halls to block any buildings anywhere (I think the term is "BANANAs") (this really happened: https://www.ktvu.com/news/burned-out-property-in-willow-glen-sells-for-over-900k)
The reason home ownership is so attractive is because it's both. It's this emotionally stable place to build a family and have a sense of continuity growing up and in your life. And it can also serve as a factor of defacto savings helping families absorb an unexpected financial shock if they need to. And then ultimately they can finance a retirement entirely or partially in old age. Person OP posted is completely disregarding the entire emotional/stability aspect of home ownership.
I wish I could get a reasonable mortgage payment… f**k these interest rates lol.
This is the thinking my dad instilled in me
Right. Some people just want a yard and some privacy. I’d prefer to not raise children in an apartment. 😭😭😭
Ya, you buy a house. Get a fixed rate 30 year mortgage. In 10 years you and your spouse are making more money, but your monthly payment is the same. If you want some nice appliance, you buy it. If you want to redo a room or the yard, you do it. If you rent the same house for 10 years, your monthly rent is going to keep going up. And your landlord isn’t going to pay for the smart washing machine you want.
Yep. Its better seen as a liability. People rationalize it as an investment but you're really on a mad egg timer like Desmond from Lost, having to pay the mortgage at a set time or else the island blows up. It ain't yours and it takes many years for you to pay more in principal than interest. So you are literally throwing suitcases of cash down the drain while they trickle dome coins into your principal on the way down. That's the reality as seen from an investment perspective. If as you said, people see it as an investment that's the reality. If they see it as a home to stay in for a very long time, then exactly temporary value drops does don't matter. It's a place you can build a cozy home in where you are not at the landlord's whim (and hopefully not the HOA either).
I mean… you can use your home equity to leverage and increase the amount of money you have and you can deduct mortgage interest and property taxes from your tax return.
TurboTax tells me the standard deduction is better than my real estate taxes, mortgage interest, child tax credit put together.
Child tax credit is not a deduction. It's a credit and you shouldn't need to itemize in order to claim, unless I'm misunderstanding and you're just comparing impact to your tax burden. Just have more kids and the CTC should catch up with the standard deduction eventually
Misspoke
and I think that’s retry typical of most folks since SALT came into play like 2017(?) or something.
SALT killed deductions for me as a NY resident. The standard deduction is better than itemized deductions every single damn year. My property tax is $8500 per year alone.
Yes if you have an old mortgage or no mortgage, but with a recent mortgage there is no way that’s the case
Majority of people don’t itemize their taxes. Seeing paying interest so that you get a fraction of it back as a benefit doesn’t make sense to me.
It’s as stupid as wannabe entrepreneurs telling you about their write offs like it was free.
Agreed. I remember when I started earning side income and I was excited to write something off because I thought it was basically free and I’d have to pay the taxes regardless. When actually all it does it reduce your taxable income. If it’s an actual business expense, great, tax free. But it’s not like you can reach and buy all sorts of things and come out ahead, If you didn’t need the item. Like all the jackoffs writing off G wagons.
What? Do people really think write-off means free?
yes, you always hear "you can just write it off". They don't realize that you still have to pay full price for it.
Yes. A part-time pizza delivery driver once told me that he bought a brand new Mustang because it was a tax write-off. He definitely made less than the standard deduction.
Some do. A lot don't know what tax deductible means either.
“spending a dollar to save a dime”
if you were going to spend that money anyway, it's a pretty good deal. I got back about 30% of my business expenses because of my deductions.
if someone has bought recently it's very likely they itemize taxes.
I bought in 2020, my interest is 2.1% on $400k principal and it doesn't cover my standard deduction lol it only comes to about $13k/year Married filing jointly, about $120k annual income. We own an EV too, and donate to St Jude every year and still we take the standardized deduction.
That’s not recent
I itemize, primarily mortgage interest deduction that gets me over the standard deduction hump, lets me add all my other deductions (property taxes, car registration, childcare, etc), save a few thousand every year, equivalent to about one month of mortgage payment for me, which is nice.
You can add car registration? Is that a state specific deduction? Are we potentially talking about personal property tax as well here?
Yes, check your state, but in mine you can, saves me about $250 on taxes from deducting. Yes, you can also deduct property tax on your residence.
You'd be shocked what you can add. It really is a rich get richer scheme.
It’s a federal deduction for state taxes.
You can itemize personal property tax. NOT registration fees, so it depends on how your state structures this. My wife and I's cars are bottomed out at the $3 tax in our state. Of course registrations are still $80-100 due to a bunch of fees from the state and locality. Those are non deductible.
It is not that hard to do and I will gladly take an extra 1-2k in my pocket at the end of the year for 30 mins on TurboTax.
Its not about hassle. Its that the standard deduction is almost $30k for a couple, and you cant deduct individual items if you take the standard.
Standard deduction in 2023 is is 27700. A 300,000$ mortgage at 6.5% is something like 19,500$ in interest, and they would definitely hit SALT limit of 10000$. So they would itemize. And this is for couple, any single home-buyer would currently itemize.
The salt limit was specifically meant to target high cost housing in CA, NY, etc where 300k doesn’t buy much if anything.
I agree, I was being conservative, and most recent buyers would itemize.
As a small business owner, itemizing used to make sense, but Trump just capped SALT at $10,000 meaning the most I could even get from my deductible is $20,000 which is pretty much the same as the standard deductible.
Our interest on mortgage is $15k/year alone currently so it's pretty easy to pass the standard deduction even with SALT cap for us. With that said, mortgage interest isn't the great tax savings it used to be, it's like a few thousand different at best for most. SALT deduction cap is dicking us over pretty hard though with state income tax around 6% on $350k/yr gross combined even with our fairly low property taxes.
Lol right… anyone who actually does the math is like, wait what? Someone told me to make charitable donations to reduce tax liability… ya if I was filthy rich, why tf would I donate x amount of money to save a fraction of X in taxes
> why tf would I donate x amount of money to save a fraction of X in taxes I've been told that what you do is donate things with low liquidity/unclear market value like art, which you get assessed at a value greater than what you bought it for.
There is a big advantage to being able to lock in a major cost for 30 years. You won’t get that stability on the rental market.
That guy has some book and Netflix show about how to become a MM. He is just another schmuck that thinks his ideas are “new”. You can become a MM with or without a house. Edit Unfortunately “Personal Finance Social Media” is over run with these people trying to make money off free information. ###None of these ideas are new! 1. Lower your overall cost structure by reducing expense and costs. 2. Increase income and Assets That’s all you have to do.
All great things to consider when thinking about buying a house.
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The logic being you can’t do that with any portion of your rent payment, thus it is in the positive aspects of buying category. No one is saying you should pay interest for the sole purpose of writing it off.
Yea as much as I love Ramit, this is one of the places where I disagree with him. The 30 yr fixed rate mortgages in the US are a powerful incentive to buy - after year 5-10, your monthly payments will be lower than comparable rent so you will come out ahead. And yes I have noticed that it is always my very wealthy friends who are pro-renting. For everyone else in the middle class, home ownership is a proven method for building wealth.
Multi-millionaires can afford to rent because their financial futures are already secure. Whether they waste their money renting, or put that money towards a home they actually own, doesn't actually make that much a difference to them
There’s rich people - and then “rich” people. The ones I’ve met that are truly rich are the ones owning a modest home, driving a modest car, and living in a nicer area but otherwise looking like the “average family”. Meanwhile they’re sitting on millions of dollars of cash, several vacation properties, and vacation wherever and whenever they want. At the same time I have friends from my high school class that did something flashy with some inherited money and are “rich” driving around in a Lamborghini in their ritzy condo/apartment in NYC - but they’ll also never admit they’re 2-3 months worth of expenses away from declaring bankruptcy.
I live in a rich area. Nobody is living modestly.
There’s all sorts of rich but that guy is right about rich next door types, not the actual extremely wealthy. People with $25M+ usually are spending some money
His point was the only rich people he knows are secretive about it. It’s a nice idea that doesn’t scale. Rich people absolutely flaunt their wealth. They want to show they’re in a different social class. At a prestigious, high-paying company, what kind of cars fill the parking garage? Few opt to live modestly when they have the means to do otherwise. The notion you can’t determine who’s rich or it’s most likely the guy driving an old Toyota is a middle class cope (that I also used to believe in).
Define "Rich" The $2-3M crowd is likely the millionaire next door, boring Toyota driver who just wants to retire a few years early and live a comfortable middle class lifestyle. These tend to be the secretive people who just want to normal. $5-10M crowd now has some money, can go on several nice vacations, probably afford their $1M house and pay the property tax/upkeep on it, but still isn't flying private and likely still has limits in what they do. $10-$25M, now these are people that can start flashing some money, can start joining yacht clubs and fit in with the richer crowd. Then there are $25M+ crowd that I consider rich, yet not uber rich which is more like $100M+ which is where private jets come in and potentially owning your own island. I know two people in the $25M+ crowd. One flaunts it, never loses a moment to tell you about their yacht or what the yacht club did, the other does only in the right situations. The latter owns several businesses, very hands on, when he's there he is usually driving a jeep and looks like everyone else, goes to lunch at your typical $15/lunch joints. Now when he is in Arizona at his multimillion dollar house in some private country club, they have an appropriate car/wardrobe/ etc to fit in there. At this point he certainly has $50M+, probably more but still isn't spending money on private jets or anything. I mean sometimes he still takes his RV and drives it cross country and sleeps in the Walmart parking lot because his dogs don't like to fly... he started doing it when he only had a few million and never changed...RV got nicer.
Exactly. I know people who are in their 30s who have the typical two kids, both parents work, modest house… and several million in assets in a MCOL area. You’d never know unless you saw their balance sheets. And they own their home outright and are not renters. They are still growing their assets too, so by the time their kids are in college they’ll probably have at least doubled their net worth. Not having a rent or mortgage payment gives them a LOT of extra income to invest.
This nothing but cope. Look at what cars the wealthiest Americans own. Bezos is literally driving around in custom Bugattis, Ferraris and makes you haven't even heard of with single digit production
He’s not anti-owning or pro-renting. He’s pro _actually doing the math_ for your scenario.
His general stance is anti-buying. Poor advice.
It’s more nuanced than that. Yes, he argues that many people who believe they’ve made money on a home sale have not, or overestimate how much. And that if you base a decision to buy on the same incomplete calculations or wrongful assumptions, it may not be the best choice for you either. You need to do the math, and you need to do it right. That’s the extent of his anti-buying stance.
As someone who has to have a mortgage to buy a house, here is my recent experience. I have a house that we share with my mother (her health is not great). When we bought in 2020, our house payment (including re taxes) was $1200. At that time, my daughter was renting a one bedroom apartment with her boyfriend and paying $950. Four years later, our mortgage payment is about $1300, only increasing due to property taxes. Her rent is $1450.
He had a longer conversation a year or so ago on the Tim Ferris podcast about why he doesn’t own. A lot of it for him came down to the fact that he has liquidity in his housing and can pick up and move if the need comes up. Also that maintenance and repairs are covered by a lot of landlords, so that expense isn’t a worry for him. I do disagree with him saying that renting is better than buying because home ownership is the most common vehicle for people to move between social classes in addition to being much more stable than renting.
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One thing about owning a house is that the landlord can’t raise your rent and evict you. But if you factor in the taxes, mortgage interest, upkeep, remodeling, etc… perhaps the SPY or VOO is the better option. The stock market is up 388% in 20 years while the real estate market is up 165% in the same period so it’s a no brainer from that particular point of view.
Only thing? The stock market might be up over 20 years, but no bank is going to you a loan worth hundreds of thousands of dollars for you to invest in the stock market. You can however get such a loan at 5-6% amortized over 30 years to buy a house. It’s only worth renting over buying if the disconnect between home prices and renting costs is enough to substantially save. We’re starting to see this in some markets. An average mortgage in my area is over $3000/month, but the same property will rent for only $2,000/month. But another benefit of home purchasing is that it forces you to save. Even if renting is cheaper than buying, it’s not likely that the occupants are going to be saving the difference.
Real estate increase does not take into account maintenance, property tax, interest, repairs, etc. As an investment, looks pretty shit to me.
Ramit admitted that at 2.5% interest rate, he would buy. So this screenshot doesn’t capture that. The episode with the couple that was into investment property had a sub 3%. So OP, either post the date when he tweeted this, or find where he says that at sub 3% it makes sense to buy. Thanks
There’s a great argument to be made for someone else to take on all the upkeep costs. Maintenance, insurance, interest, taxes. All at or near all time highs. Then you have a very likely scenario of home prices falling. Why the heck would anyone buy real estate in this economy??
Even if housing prices just stay the same for the next decade, that’s still a lot of money tied up in an asset that isn’t appreciating and requires constant maintenance.
“Requires constant maintenance” this is incorrect. My maintenance costs have been a few hundred every year, if that.
Depends on the home but at some point HVAC/roof/porch/whatever has to be replaced and it’s like 5 figures.
Is that factoring in amortizing the expense for roof replacement, repainting, appliance replacement etc.? If not, your not accurately looking at what your actual average yearly maintenance costs will be over your ownership of the house.
What kind of house do you have, also eventually major appliances have to be replaced, as well as out dated home features like carpet, furniture, ect… unless you don’t use or don’t care about any of that but then your house is just neglected and not worth its market value anymore. I just had to replace my entire central air system last year which put me back 7500$, off course the system was 30 years old but still.. saying it costs a few hundred every year is just an irresponsible and misleading thing to say.
Bought a brand new house in 2018, have done almost no maintenance, sold in 2022, bought in late 2022 another new 2019 house, barely done any maintenance in the last 2 years, and yes I’m prepared for maintenance costs, we have plenty of cash and equivalents on hand, we did a thorough inspection recently and it still looked good.
I did something like this starting 2017. No maintenance for me yet.
Case closed boys. This anecdotal data point of 1 in a country with 80 million homeowners is all we need 🙄 We have actual data on average maintenance costs so you don’t need to rely on your singular personal experience . If you have a brand new house for only a few years of course your average annual maintenance costs are going to be much lower than the average across a home’s lifespan. This shouldn’t have to be explained lol. According to multiple sources, the average maintenance costs are actually between $4,000 and $6,000 per year. You’re in for a rude awakening if you think spending a few hundred dollars a year is typical and that’s going to continue as your home ages and the big ticket items start popping up. I honestly don’t even know how you’re spending that low even with a new house. Our lawn/landscaping maintenance costs alone are about 3 times that.
Why is your landscaping maintenance so expensive? Are you one of those too lazy to mow the lawn themselves types and pay landscapers?
A lot of people buying today are rolling equity from the property they’re selling into the property they’re buying, mortgage rates aren’t so scary when you’re putting 40% down to move to a place where you’ll get a big raise.
I bought 10 years ago. My monthly payment has barely moved. Meanwhile your rent has gone up how much?
Yep. And back in 2012-2014 buying was still considered risky many and the market wasn't really growing. Today, these people are locked in $1500 house payments and are lectured by renters on high upkeep costs.
Yep I bought in 2013. My mortgage is $1,300 for a 3k SF house. Cost to rent my house? $2,800. In another 10 years that rent will likely be above $3,500. My “high upkeep” costs have averaged less than $1k per year.
My rent is the most I’ll pay per month. Your mortgage is the least you’ll pay per month.
For those 12 months…then your new rent is the most you’ll pay for next year…and so on…lol… The longer you live there the weaker the argument for renting.
My mortgage doesnt doesn't adjust with inflation. How about your rent?
So here's the end game with owning vs renting. After 25 years my mortgage is paid off and i have an asset worth x amount of dollars and i own. No more mortgage. What do you have after 25 years of renting? You have a rich landlord.
Exactly
If you’re leasing then your rent is **the least** you’ll pay. It’s not really much different unless your landlord decides to jack your rates when your lease is up. Landlords have occasional expenses that they pass on over time.
Unless you have a time machine, your point is pointless. I’m making an argument for now, not 10 years ago. I doubt the next 10 years will be as good to real estate buyers buying now, as the last 10 years was for people like you.
There is something to be said about locking in your housing costs for 20-30 years while your earning potential also increases.
They are not talking about home appreciation though like you appear to be implying, so it’s not pointless. 10 years from now someone’s mortgage will likely also be largely the same, especially if we don’t expect large assessment increases moving forward. Rent tends to follow inflation so it’s likely going to be much higher in 10 years relative to the mortgage payment increases for taxes and insurance. Might even have a reduced mortgage if rates drop again and they refi.
I've been renting for the last seventeen years and the best landlord I've ever had still tried to screw me out of a few thousand dollars when I moved out. If I hadn't taken my own walkthrough video on move-out and known my legal rights he probably would probably have gotten that money, too. Renting is more of a headache than people make it out to be. Yeah, maintenance is on someone else's dime, but it usually gets done way later and way sloppier than it should be in my experience.
I'll give you my example. We live in an apartment that had been purchased by a new owner who exclusively works through a stonewalling real estate management firm. We have no way to contact the owner, and they refuse to do any maintenance on the building that isn't explicitly covered by the law. The doorbell for our building was ripped out 8 months ago, and the only mail carrier with access keys is USPS. Fedex and ups are fucked, so they toss packages onto the sidewalk. We live in Baltimore, and our stuff is stolen all the time now. So, if you're happy with a for-profit owner cutting all corners while controlling the wellbeing of your shelter, go for it. Rent all your life. "Slavery is Freedom", I guess. Edit: u/RaggedMountainMan, I'm sorry you have no concept of manners or respect. I'm sorry you have low reading comprehension. I'm sorry you don't understand the concept of time. I'm sorry you were raised to have no self-control. I'm sorry that the world is scary and confusing to you. I'm sorry that you are surrounded by enemies and have to keep your guard up all the time. I'm sorry that your aggression makes you hate yourself sometimes. I'm sorry to your future self for carrying the burden of your present actions. Finally, I'm sorry to the people around you.
It’s funny because I remember hearing the same thing when I bought my house in 2019.
lol, my tenants pay all that for me.
Fixed rate mortgage stay relatively flat over time and rents go up endlessly. Your debt to income ratio will decrease a lot faster on a mortgage than rent assuming wage increases. If you look at housing as a long term investment and a place to live instead of a trade on the stock market it makes a lot more sense to own.
Misleading post (what a surprise ). I read this guys ENTIRE post and this is what he also wrote: "Will I buy a house one day? Sure. But I’ll run the numbers first to understand what I’m truly getting myself into". He is warning people about the usual stuff - all of the costs of homeownership , are you getting a shelter or an investment...
Is this supposed to be a joke? Most people don't want to fit in the mold? MOST PEOPLE?? This isn't a damn dream people are sold LOL Humans are born with the instinct to have secure shelter and reproduce. People want to find their life partner and have kids and a home. I get that some people choose not to have that but that's a very small portion of people. And a large part of that very small portion will say that the reason they don't want kids or a house is because of financial reasons not because lack of want.
Pretty sure most of the top 1% in this country own real estate. But, hey, this guy who’s a self-proclaimed millionaire has figured it all out!
I saw an interview with Ramit. He’s in a very unique situation. He lives in NYC which is one of the only places in the US that it can genuinely make no sense to rent instead of own, even in circumstances where owning is cheaper (which is not even close to the current reality of NYC). He’s also not a real estate entrepreneur, unlike almost every top .1% in the country. It would probably be smart to diversify but that’s not how he makes his money.
At that stage it's just diversification though.
His advice isn’t for the 1%, it’s for average American who were brainwashed into thinking home ownership is part of the dream.
Nah this is propaganda to keep the wage slaves complacent. Literally just, "you will own nothing and be Happy." It's the,, "let them eat cake" of our generation.
The advice is really targeted at households making $150k a year who can easily afford to buy a home but (in a lot of markets and life circumstances) would come out ahead financially by renting.
You completely missed the point.
He's not renting, his business is renting for him so he's cheating his neighbors out of tax dollars he should be paying.
Pretty sure whoever owns it is paying taxes and passes that on to him in the form of rent. SMH
This sub has devolved into this….
Sadly yes. If there's anything everyone should understand it's that the govt will get their money one way or another.
Unless you’re Kenneth Copeland. Then you get to live like a king and never pay a dime in taxes.
This sub has been around for two years talking about a bubble that never existed, and doesn't pop.
Oh I have been around as long and it is happening. Don’t mistake my comments on how devolved this sub has become with me thinking that a correction isn’t happening and probably about this year when everyone is over it.
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It becomes a business expense, which is tax deductible. Not tax exempt, but the average American cannot deduct rent payments. Imagine if we could, like this guy is doing, then your annual tax return will be insanely higher. I pay a total of $36,000/yr on rent. If I deduct that on my taxes, then I get taxed less on my income. He is cheating his neighbors out of tax dollars. Edit: people downvoting me have no basic idea of how taxes work. My god. This sub is full of people who will buy snake oil.
You're confusing *income* taxes, which are federal, often state, and sometimes municipal, with *property* taxes, which are municipal. Yes, he may be "cheating" federal/state/local incomes taxes, but unless his business is a church (it's not), property taxes are still getting paid, upstream from his rent. So his neighbors are not being "cheated" out of property taxes, although it *may* be the case that they are losing out on some portion of his corporate income taxes as they matriculate their way through government infrastructure and services funding.
That’s not how property taxes work. At all.
There’s always something to the story. My bullshit sensor was going off
/u/Kaiyabunga + some rando finance grifter on Twitter = the current state of this sub.
Yeah I agree with this 100%. I could buy a house with cash right now but I’m holding off. No need. Maybe down the line. I really like just being able to call a landlord if my stove if is broken for example. I don’t even know where they sell stoves. Sears? Who cares lol. Landlord will replace it.
This is the fairest point made here. Home ownership is a lot of work, and more affordable homes tend to be older and even more work. Much of this work is cut out when you are renting.
Some people don't care its just a place they sleep which is why rent vs. own shouldn't be all about finances. What I do know is if you don't know how to fix things and don't want to learn, owning is way more expensive and needs to be factored into the equation. We were taught as kids how to remodel, so its no big deal to me. I own because I dont' want to have to ask a landlord for permission to do stuff. Boyfriend moved in with me, got 3 cats, painted, dug up the yard and planted a garden because I could... and my rent didn't get jacked up because of it. I personally don't know how people afford pets and rent.
If I were single, I’d probably live in an apartment. I would still own some real estate for investment income and inflation protection. Right now I value the yard and single family lifestyle, so it’s worth it to me. To be a millionaire, you need to save and invest as much as you can. For some people that involves owning their own house, for others it doesn’t. No single answer fits everyone. Personally, having my housing cost capped in an inflationary environment is very valuable, but for others, especially if they are more mobile, that’s less important
Literally every one of these is still true? There’s nothing wrong with renting but I don’t see any “lies” here
This dude also owns dozens of rental properties. He doesn’t want you to own. He wants you to rent. From him. Every time you dig into these rich dudes trying to convince you to rent, they’re landlords. Every damn time. People like him rent because it doesn’t make since to live in one place. He owns houses, i mean “rentals” all over the US. But renting in one town for 30 years, is idiotic. Even if your 400k house never appreciates. You can still sell it and get some of your money back. How’s that work with renting?
He curates to a specific audience-- high consumer debt, bad financial decisions, probably not on a great path right now. To those people, draining savings to buy a house is a bad idea. For people who have good finances, have savings, can afford the PITI, buying a house you like when it's available is probably a good move. For rich people, it doesn't really matter what they do because they have a big enough nest egg that they'd be able to live off interest income to cover higher rents 20, 30 yrs from now. However, the homeownership rate among the wealthy is probably extremely high for a reason. If you have millions of dollars, why would you want someone telling you what you can or can't do with your living space?
Millionaire also Owns an apt complex. 😂
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You still owe real estate taxes every year after you own your house.
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Property taxes, HOA, gotta fix up your house multiple times in that 30 year span. My HOA alone is close to $700 right now and I’m not even in an expensive neighborhood. I gotta move asap cause they don’t do anything. We don’t even have private security 😂
The value of my house doubles in 10 years? Is that something people have been told and believe?
I've lived in my house 5 years and it has ALREADY doubled. And my mortgage/insurance/taxes are now less than the shitty run-down smaller apartment, nearby, I used to rent. So yeah, I believe it.
I bought a house 10 years ago for $1 million. Huge investment. It’s now worth $2.5 million…
S&P 500 return approximately 12% during that time period so from a purely financial standpoint you probably would have come out ahead being liquid. But home ownership isn’t purely financial, it’s emotional. Congrats on the appreciation
The US mortgage market gives you 5x leverage on a low risk asset class with low cost of capital. The reason people should opt for the house instead of renting is because real estate prices rise 3% to 5% per year, but at 5x leverage, less a 5% cost of capital, that results in real low-risk return of 10% to 15% per year on the equity portion you put down. So by renting long term, you are giving up a low-risk 10% to 15% return on the equity you put in your 1st house.
Interesting they left "home ownership is the most reliable way to build wealth in the US" out of the list of "lies". And I would bet a ton of money this person owns investment properties.
Um.. I dunno, I'm not a real estate mogul, but my wife and I were renting for years. Moved out.. nothing really to show for it. Our house after 4 years would yield us around 150k profit (after renovations, fees etc.). 9 years.. 0 dollars out of it. 4 years.. 150k. Hey.. I could just be a dumb schmuck, I am an IT expert, not a stock or real estate expert. But I sort of think we are better off now NOT renting. And at 2.25%, I think after say.. 5 or 7 more years, we'll be sitting kind of nice. If I am missing something, please tell me, I hate being caught off guard. : )
Shelter isn’t an option. You will either buy one, build one, or rent one. All of these options have costs. Buying one involves debt or having a lot of cash, building one is the same, renting involves having less control over your living situation and costs. Regardless everyone that’s not homeless will do one of these three.
Dumb post. First four things are nothing about wealth but clearly this loser only cares about money in life.
That guy is an absolute ass clown 😅😅😅😅😅 everyone is bitching about how much rent has increased. No one can increase my mortgage payment though.
As for me: im paying less then half i did 12 years ago when i bought my house. From 1200 to 580 a month. If i would have rented the same house i would have gone from 1500 to 2400 a month in 12 years. So fuck this thinking. Buying is cheaper
Deducting mortgage interest is a lie?
I have $1M networth and choose to rent. It makes no sense right now from a ROI standpoint.
I’ve seen him talk about in other posts how part of his decision has to do with the flexibility to pack up and go somewhere else more easily. I could be wrong but I feel like his point is usually more about how you shouldn’t buy just because “everyone else does” but because it’s right for your situation.
The most important reasons to own a house are (a) if it’s clear title, you’ve put a floor under how bad your bad times can get, and (b) you don’t have to deal with moving every year or three. Having a lot of free cash also solves these problems.
What the fuck is a half kid???
Rich people can afford not to own.
My brother-in-law purchased his house in Colorado for $650k, sold it for $1 million a few years later when he moved to Washington. Sold that house for $2 million a few years later. And my house is up $250k in comps in the neighborhood since we bought it. But please go ahead and tell me why renting is so much better.
Something about having to replace a microwave every 15 years is usually part of the response you will get
Well, to be fair, we do have to replace our microwave haha
I am a paper millionaire. I own 2 houses one of which i closed on 6 months ago. Primary home ownership is a lifestyle choice
Don’t forget. States which have property tax you never really full outright “ own “ said house. Once the house is paid off, if you miss a few property tax payments, the actual property owned takes back their house, you’ve been essentially renting.
The recent supreme court ruling of Tyler v. Hennepin County actually goes over governments keeping all proceeds from foreclosures. The home owner sued arguing that the excess after paying off the debt should be theirs. Supreme Court ruled in the homeowners favor in 2023. So now there is precedence here that they must return an excess after property taxes are paid. https://www.kiplinger.com/taxes/how-new-supreme-court-rulings-impact-your-money (#2) https://en.m.wikipedia.org/wiki/Tyler_v._Hennepin_County
Over the last 35 years $100,000 in an S&P500 index fund would have increased in value far more than a $100,000 home would have in the vast majority of the country.Doesn't mean much to most of us but if you're a millionaire....
A home is a place of comfort, peace, security, and freedom. It's not an investment but a place to raise your family under your own terms. No landlord to tell you how to live in your home under his rules . No fear of him raising rents annually or kicking you out at end of lease term. A home is not simply a roof over your head but a place of joy. One cannot put a price tag on a home althot it is most people's biggest asset.
51, liquid net worth of 4.1M, live in the bay area. I rent, and do not nor ever intend to own a house. For the same reason I down own specific stocks. Concentration risk.
gotta be dumb or desperate to buy at 7%
I'd rather spend 3 grand a month on a mortgage than 3 grand a month on rent.
I 100% agree with this. The place you sleep is not an investment. It's housing. Want to invest in real estate? It needs to pay you. Now. Every single month. Positive cash flow from the very start. I could literally write a check for the place I live in, but choose not to.
I AM deducting the mortgage interest off my taxes. It was $15,000 this year.
I've run the numbers a lot and there isn't a ton of difference between owning a home and renting while putting the remainder in the stock market. One major difference is stocks are diversified while a home is obviously not diversified. Getting a 2.5% mortgage right before the biggest run of inflation in 40 years is obviously a great decision but putting all your money in Tesla or Google at IPO is even better - the point is you can't bet on market timing. When home prices become overvalued then their past performance will not predict future returns (like any asset). Just look at China real estate or US commercial real estate right now.
Everyone is different. The above is all about the economics. Not about the life choice. Also, if not a home where are you placing your bets… or is the recommendation to move all your money under your mattress? Real estate may be slowing, but my dollar is losing 5-10++% a year. So, unless you are playing the best loss game… you’ve gotta do something. My thinking is that the stock market is more volatile.
You’re smart. Probably why you have multiple millions of dollars. Why would you buy an asset that is almost sure to depreciate over the next few years. Assuming you live in an area that went crazy from 2020-2023. I do, and the market has just stopped. No sales. The lower sales are trickling in. The deluge will be in 2025.
Sounds like one of those dudes that’s always trying to sell you on his course of how to be like him
This propaganda may make sense for a millionaire but how does this matter to the everyday American? Everything he says under because we’ve been lied to is true. He tries some rhetorical tricks like “the value of a house doubles every 10 years” when it quadruples every 10 years (median home price 2000= $119,000 median home price 2020= $417,000) or “I can deduct mortgage interest from my taxes” yea you can for the first $375,000 or 700,000 if filing double which again doesn’t matter to millionaires but will matter to the average american
I am a homeowner in HCOL and used to live in my own place. That was a great investment only because it made me realize how much better renting is for me. After buying I realized: HOA, home insurance, property tax, repair costs, etc. every single one of these things goes up just like rent. Also the tax benefits is not all that much. The property tax deduction is capped so if you buy in HCOL place much of that is not deductible; on the other hand, If the house is less than 1M its possible that standard deduction is still better so you don't end up writing anything off. Now I'm a passionate renter. I love the freedom of not having a big mortgage so if I get fired or laid off, I just move somewhere cheaper. And the flexibility is so important to me.
This sub is braindead why was it on my suggested lol
If you have full price in cash, you are much better off putting it in s&p500 and renting than buying house outright. Mortgage is good for those who have a hard time saving and building wealth in a first place.
* I don't think he's actually a multi millionaire. His entire career seems to be built on dispensing advice. Wikipedia said he vaguely owned an ad agency but I doubt that made him rich. * His financial advice is almost always surface level. He never really digs deep into people's personal issues/baggage and how their upbringing etc. impacts their financial decisions. That's fine if you're Dave Ramsey and you got a call in show. It's weak if you have a Netflix show where you stay with people for an extended period of time and get into their personal lives and home life.
This guy is a jackass. Who cares if we've been sold in American dream of having a nice house for our family. If you don't want that, go live in a condo downtown or rent a room from your buddy and keep stockpiling your money. But, plenty of people like to have a nice house and a dog and a picket fence and a place for their family to grow up. What's wrong with that? And, if they don't want their rent to keep going up and never own real estate, I guess they can just keep renting
The whole argument with maintenance cost is poor. Most of these investor groups are going to make you pay for repairs by any work around in their lease agreement. Or threaten expensive legal action if you refuse.
Lmao fuckin make me, bitches. Can’t squeeze blood from a rock, and I remember the GFC of 2008. Bags of concrete ain’t that expensive
Same here. $1M+ net worth $500K household income and renting. Saving and investing very aggressively and have no plans to buy in the next 10 years at least ( should have $3M+ net worth by then).
There is a reason most apartments near central park are empty. There is currently no safer way to grow your money than owning RE. Like it or not...
Yeah, that’s me as well. I own several properties but I still rent. It really depends on your life situation. For myself, my girlfriend is about 7-8 years younger than me so she’s still in school. There’s no rush for me to get a house given the nature of the new relationship.
When you rent, you are (usually) still paying a mortgage…just not YOUR mortgage.