Why I Don’t Own A House as a Multi-Millionaire…
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- čas přidán 22. 05. 2024
- Buy a house or rent? In this video, I'll show you why as a millionaire I don't own or invest in property.
Get my free 3-Step House Guide to decide if buying a house is the right decision for your Rich Life: iwt.com/houseguide-youtube
Ramit Sethi is the host of Netflix's "How To Get Rich" and New York Times bestselling author of "I Will Teach You To Be Rich"
Find Ramit on Instagram: / ramit
The real truth is that don’t buy a house that you can’t afford.
He left out one thing. As a home owner, you don't have to deal with a landlord.
But if you’re in an HOA…
@@Suki0428 HOA: Then every board member is your landlord. :))
@@terry_willis 💯. Will never do it again.
and to add, its generational wealth, his kids might not be able generate as much income as he does
@@jonny_laguna I don't think so. Had my understanding of investing been 10 years ago what it is now, I would've never bought a house and I'd be enjoying my retirement
I've rented all my life, we bought a home 6 years ago and it's one of the best thing I've done for my family. We bought in a nice neighborhood and the value has gone up over 90k in that short time. I'm not saying it's for everyone, but the freedom from landlords feels great to us.
For sure. In Toronto, we bought our house 20 years ago for 300K and now it's worth 900K. We definitely couldn't afford RENT in this area now.
Exactly. These online "gurus" just love to tell you that everyone has been lying to you. He's talking utter nonsense.
maybe he's working for the WEF...you'll own nothing and be happy!@@olddouchebag
I agree, this guy is giving out the wrong advice and I don't believe he's a multimillionaire.
I totally agree, our current home of 23 years, our equity is a 250-300k, we are planning on selling even with a 3.12% rate. Our current mortgage has always been lower than rent. We will move, downsize, then either outright pay for our next house, or have very little mortgage loan that will be at least $500 less than our current mortgage right now. We will have lower utilities, and in a place with year round 4 season mild climate conditions, (no tornados, or hurricanes either). The next interest rate we get on our next home is not an issue.
I'm tired of people thinking of housing as an investment. Housing is meant to shelter people. Its a necessity, not an investment. You dont get rich from buying a house. You want to get rich? Own a business, create something new, sell your genius idea, invest in other people/companies that do well.
You're wrong. It's not about being rich. It's creating wealth. I have done and still do everything your saying to have. I then take my earings and place them into a solid investment such as realeste. I have created wealth from it. Solid wealth that can't be taken away from anyone
that is soooooooo counter intuitive to the entire point of this video lol. "Why I Don’t Own A House as a Multi-Millionaire…" - in other words he's happy to rent and invest any surplus into other things... so who owns the house that he rents it off? oh wait, an investor! you do know that not some people PREFER to rent right? just like some people PREFER to own. there is a balance.
I bought my first house in 1998 for $120k at 8% interest. My total house payment with mortgage, property taxes, and rent was just under $1100. When the rates got low I refinanced at 15 years and now it’s paid off. Rent in my area is now $2000-$2500/month for a two bedroom with no garage. Buying was definitely the right choice for me
It was then but he's talking about now.
@@AnakinSkywalkerrrop Rent has almost doubled in the UK since 2020. Landlords are getting rich while you get poorer. Buy a house.
Ramit can afford to buy anywhere, anytime. You can't!
@@AnakinSkywalkerrrop maybe so but we were a single income family and I was making 42k/year. It’s was rough but it was doable. How much stuff do people buy that they don’t really need?
@@silvafox7719 buy a house now and you are at least a million in debt. If you have a family where will you live if you rent?? Housing prices increases have SLOWED so reselling will cost you just in fees alone. Emigration is now the best choice for many...
@@AnakinSkywalkerrrop he said, "have you ever in your life?" I bought my first house in similar circumstance. Made $46k/ yr, house cost $85k. Same house now cost over $200k. I sold it 9 yrs ago for $105k. Something has gone haywire in the last decade-plus!
I'll say this: it depends on where you are located. I'm in Indiana. Bought my house in 2017 for 150k. It's worth 300k now. My rate is 2.25%. Monthly payment is $1080. 3bd 2.5 bath 2000sq ft. Combined household income is around 150k currently. I'll just say I'm happy I have a house. I know its hard for many, many people in other states.
Yeah but you have a house… in INDIANA! 😬
I live in Indiana as well. I bought a house too in 2020 for $168K for an interest rate of 2.8%, and it’s worth now $235K. I will say buying that house was the best decision I’ve made for investment.
@@davidphones7290 Yeah its in Indiana. But do you want a house or not? If you don't want to sacrifice a bit, then stay in wherever overpriced market that you live.
Homes don’t always appreciate like they are now. So, if you bought a home within the last 3 years, you’ll definitely benefit from it if you sale now. It’s similar to the run that the stock market had since the 2010s, and those returns shouldn’t be your expected returns because the market isn’t always like that
@@rafaelw8115+ closing costs paid during acquisition, - 6% of selling costs if you decide to sell it.
I am a single mom with two children. The security of owning my own home became VITAL after going through the trauma of landlords when I was retrenched twice. 1st time was due to the Canadian gvt (Harper gvt) retrenchments and the 2nd time due to covid. Landlords can treat you like trash when you're down and out and have nowhere to turn. I have also lived in rentals where landlords do not maintain their properties and you must either take it or leave it. I am the kind of tenant who will create a beautiful garden (my passion) and keep the home in as good a condition as possible because I live there and my friends and family visit however, a lot of landlords don't believe in investing in maintainance because they say the next tenant will destroy the property. Renting when you don't have millions to back you can be the most toxic, traumatising, soul destroying lifestyle for you and your children. Definitely not for the faint hearted.
What does you being a single mom with two kids have to do with this topic?
@@adam7349she is literally sharing her story. Did you try your shit in the dudes who mentioned getting a home for their families in the comments. Tell me you eat red pills while screaming that you never get laid.
Do you save and invest your money or just spend it all in a month with no savings?. If you spend all your monthly salary in month with no savings left for the next month, then there is no point owning just a home. Learn how to spend money, learn how to save money and learn how to invest your money from your savings, is the key to making a million dollar in 14 to 15 years, because the value of inflation in the currency increases the value of your investments profit every 1 to 3 years substantially, that you end up making a million, if you save 1500 to 3000 dollars every month from your income and invest it after learning to invest in mutual funds, stocks and bonds.
@@adam7349 I think her point is she doesn't have anyone else to rely on, so owning a home provides a level of security, a peace of mind, and a foundation she and her kids can stand on. We are all quick to judge, but think about it from the perspective of a single parent.
@@alcubierre-drive Dude don't be "super simp" trying to "save the day". The Reality is NOBODY is relying on someone else. Two people households struggle as much as single households. What about the husband that works and the wife is home with the kids? Sounds like you need to take your own advice. Don't be so quick to judge. Those are decisions that she made for whatever reason. Now if she is a widow I can understand but even then "the world doesn't owe anyone any understanding". Yes Purchasing a home is probably the best decision for her. If she is having problems with bad landlords that is because of the quality of places.and people she was dealing with. Maybe dealing with individual landlords wasn't a good idea. Great that you thinking of perspective of a single parent but life is hard for two family homes as well .
Has anyone noticed that price of homes have doubled and tripled in the last 5 years? Coupled with higher interest rates, this is the worst time to buy.
I agree worst time to buy. Take this time and get debt free. Try and focus on only necessary needs and at some point houses will have to go down because otherwise we will have a crisis on our hands.
Totally see the validity in this message. Big fan of Ramit. Something we've found from buying our home is that with a growing family we were able to secure FAR more LAND and HOME to enjoy than if we rented. (We're not minimalists FYI 😅)
That being said, we don't tout our home being an "investment". Simply a vessel for living, raising a family and creating lifelong memories for the next 10-20 years.
And that my friend is the true value of homeownership.
how did this comment get 450 likes? Your third sentence contradicts the first sentence. The guy is arguing AGAINST buying a home!
@@briantomory8399 becuase most of us dont agree with the video. Over 5 years of rent I paid 140k. I bought my home for 110k. with property taxes over 10 years I barely hit 140k in expenses including yard work etc. and taxes with expenses will continue to be cheaper for me over the next 50 years as rent goes up nearly 10% a year but my taxes have been 2-3% a year
where I will teach you got 6k a month compared to the 3k. I have no idea. my expenses are NO WHERE THAT HIGH.
Curious, how do you secure "FAR more LAND and HOME" if you did not take on huge debt from purchasing your home. Are you a first time home buyer or have people who can support you financially??
Do we need to buy a house if we don't have kids?
Bought my house in 2017 for 169k worth 350k now. Mortgage is $1100 per month. Anything similar in my area is about $2500 to rent.
Bought mine in 2018 for $395k, it's worth $750-$800 now.
Best investment I've ever made.
You don’t own it until your mortgage is paid off so you’ve actually made no money. Also over the mortgage term you’re paying more than £169k. If you miss out on mortgage payments then the house will be repossessed.
That is ridiculous. You have made money because the house has increased in value over the years. Jeez. @@sanjayd7
@@sanjayd7
This statement is wrong. You don't make money until you sell, however, you actual value, ie. your total assets still increase. Also who gives a rats ass if you don't own it til you pay it off, if you sell those are YOUR proceeds and of course you pay off the mortgage (and you don't have to pay interest at that point either) and walk home with the rest - taxes for gains.
@@Delimon007 lets get it right off the bat you are banks slave bruush and there are no two ways about it, you own them money then you are owned by them.
Have rented most of my life, invested heavily in markets, lived in 8 countries, never been tied down until more recently. Could buy a house with cash but choose not to. The life experiences enjoyed to date would never have happened had I tied myself to property ownership from the get go. If you know you're going to stay in the same place until you retire / die, probably makes sense to buy. Otherwise...
Does not sound like you have a spouse nor kids.
@@jade-oh5wn Have both. I assume you make the comment because one cannot live the lifestyle I've chosen with dependants? I'm afraid to tell you, it is entirely possible. We don't need to accept the 9-5 work till you're 65 and dying lifestyle bequeathed to us by our parents. That time has long past, let it go.
I am not into living the nomad life so that would not work for me. Working a 9 to 5 has worked for me. Got my first $100k by working for a start-up company. That was an easy $100k. My two homes are paid for. I have investments and multiple retirement plans. It's good to have options. One makes do what is best or most comfortable for one. I couldn't imagine moving frequently with my family & we still manage to enjoy life experiences. Again, it's great to have options.
@@jade-oh5wn Was an option that was opened and encouraged to me by my parents, but it never rubbed off. There is nothing that I would change to trade money and property for the experiences I've had, they are beyond price. Change is key. My children now enjoy an appreciation for other cultures and knowledge their peers know little about but perhaps that they read in a library book. But you have two properties bought and paid for, and multiple retirement plans. Why wait to enjoy life when your body is less able than in the present, I could never understand this choice so many make.
I live the same travel lifestyle with properties and a family..the problem isn't being tied to properties, those can easily become passive income. The problem is a 9-5 working to build someone else's dream. Working for yourself is they key. And it's not as difficult as it's made out to be.
I bought in 1998 ONLY for the following reasons:
1. The school district is excellent.
2. I planned to be there until all 5 kids were through public school (21+ years).
3. The town was "safe" (low crime).
If these three criteria wasn't there, I would have thought long and hard about buying a home... and instead invested the difference in growth stocks. All said, the home price only grew 2.1% CAGR over the last 26 years... but the real estate taxes grew 2.4% CAGR over the same timeframe. If and when I sell, I will have to pay 6% off the top in commissions, plus roughly 3% in fix-up costs to make for a better sell. With that taken into account, 1.7% would be the CAGR for the house. Houses do NOT make you rich if you're living in them unless you are VERY lucky!
How much would you have paid in rent throwing money away you forgot to mention that.
@@muradshawarExactly, you have to live somewhere, better to invest in yourself. Typically, rents increase over time as well, so by not buying in this scenario, the person would have funded someone else's retirement (real estate investor). Opportunity costs of not owning a home exist also.
Warren Buffet said 30 year mortgages are "the best instrument in the world."
@@jasongillis1336 Exactly . People who rent for 30 years with no equity baffles me
Mortgage free and I love my house. As a multimillionaire, Ramit doesn’t have to put up with noisy neighbors, cigarette smoke seeping through the walls, etc. Most of us can’t afford bougie rental properties. I’d rather own a home I can call my own.
Lifestyle definitely matters. Keep in mind that it's currently cheaper to rent than to own in nearly every city in America (not an exaggeration -- look that exact phrase up). If you want to move further away, great! But if we compare apples to apples, owning is often more expensive, and right now almost universally more expensive. Therefore: run the numbers.
Do you think that's because Americans are so brainwashed to buy? In a renter culture where people think like ramit I imagine that's the other day around.
You never own your home. It can be taken at any point. This is why you always pay taxes on it... it's never yours. Research it and check the history. People have had property taken all throughout history, for various reasons, even with being consistent and timely with paying taxes
@@cegecej That is extremely rare. My brother had the house he was renting sold out from under him twice. Two times in 3 years. He had to pack up a family of five and move.
Home ownership is a fallacy. You never own it. Like everything in life it’s rented.
I love this guy... love the idea of questioning buying a house just to buy a house. Judging from the comments, no one actually listened to the video. He literally said he is not telling you to dont buy a house... he said to run the numbers and figure out if buying the house is a good idea for you and your situation... and it's absolutely valid. I bought a house.. made a lot of money off it.. but I was absolutely miserable owning. The maintenance, repairs, harrasment from HOA, irresponsible homeowners making loud noises or leaving dog poop on my yard... no one talks about the mental toll owning a home takes on you. I like renting and yes I crunched a number on a spreadsheet and its better for ME to rent. But ultimately, I hated owning a house.
I know what you mean. I built my own house. It took me a lot of money, energy, and I couldn’t travel, do whatever I wanted, and I still had a lot of things to do. I got fed up, sold the house, took that money used for some investments, and started doing the trips I wanted my entire life. Now renting and living the best of my life.
No one runs the numbers unfortunately lol
Common rule never to violate. If you are moving every 1-5 years never ever buy. I was in the military and always rented. My friends who bought were always getting close to 10% transaction cost every time they moved
Dont buy in an HOA
@@hugoglenn9741 How much appreciation did they realize? More than 10 percent?
We bought a water-front property in 2006. Turned out to be the biggest money-pit ever. Plus, there is far more freedom in renting.. Easy to relocate.
I love the freedom I have with owning a home, no permission needed from landlords for who can live with you or how long they can visit, no monthly walk throughs, rent increases or noisy neighbors, purchased my home during the pandemic with a 2.75% interest rate with no regrets. Pros and cons with both renting and owning, you just have to decide which is best for you.
This is really what it boils down to. If you can't afford the down payment or you can't afford all of the costs that come with buying a home, rent. I know many people who bought a house because they were told that renting was throwing money away. However, they couldn't afford to buy a home and weren't prepared. They ended back up in an apartment or with parents. Bottom line: if you can afford to buy a home and you don't plan to move within the next 10 years, it's the better option. Otherwise, rent.
@@misspriss2482thank you. Renting is better for me
I purchased a townhome in 2021 for $156k and it is worth over $200k now. To me, the peace of mind of owning something where I can stay in as long as I want, do whatever I want to it and not worry about increasing rent is huge. My mortgage (and taxes/insurance) is the same as my previous one bedroom apartment. I do live in Ohio, but I think renting only makes more sense in incredibly high priced areas. Plus being 28, I feel like I am setting myself up for a better financial future than my peers that are still renting high priced apartments and have not yet built up an equity cushion.
That sounds like a great outcome. I'm happy for you!
Now consider the following, which is what I want everyone to think about in their analysis before spending $$$:
- What if you'd invested your down payment and rented instead? What would you have after 10, 20, and 30 years?
- What if you get a higher-paying/better job elsewhere? What then?
- What if you hadn't experienced a generational price increase due to COVID? (What happens if prices decline for the next X years?)
- What if you'd rented and rent stayed stagnant, increased, or even decreased?
- What are the other options for equity growth besides owning a house? How much does it cost?
@@ramitsethiyeah stock market went up 40% in the same period!
@@ramitsethiu can't value the emotions, memories he had with family in the same home, comfortness etc and u said what if x year price goes down, same can be apply to stock what if price goes down, what if company goes bankrupt so measuring something value on what if is not good idea
I told u again, with 200 yrs of best investment return, the best return is stock index s&p, $1 INVESTED INTO STOCKS 200 YRS AGO, TODAY (200YRS LATER) IT BECOMES $1M, do the math it said STOCKS GIVES about 7%-10%/yr (1+r)^200, compound annually turn $1 INVESTMENT 200YRS AGO BECOME $1M TODAY using 200 yrs of LONG-TERM 200YRS HISTORY AS TRACK RECORDS, THAT'S WHY WARREN BUFFET LOVES STOCK INVESTMENT AND HATE R.E. (LL=LANDLORDING - imagine invest $2B=buy 2,000 apartment units each building cost $1M and hire teams of lawyers try to collect rents from ALL KINDS OF LGBTQ/SMART/POOR/RACIST/CRIMINALS/DRUGGIES/MENTAL PROBLEMS/ILLEGAL BF-GF-FAMILY FROM ALL CROSS PATH, U CANNOT GUARANTEE FILTER OUT 99% OF THESE 2,000 FAMILIES EACH LIVE IN YOUR 2K UNITS ARE ALL GOOD TENANTS and mental health/druggies/Zombies or future kids bring in NEW ILLEGAL/CRAZY/CRIMINALS BF/GF POP OUT crazy kids rewire electric to grow WEEDS then burn-your-house or SF famous Oakland Ghost-ship turn warehouse into party then killed over 36 then drag u in court fight n yrs=no fun and RETURN OF INVESTMENT IS SO LOW compare to STOCKS. Again, MATH AND IRS/RENTAL LAWS ARE EVERYTHING, nobody is above the LAWS. Invest JUST 1 DOLLAR into STOCK EARNS 7.15%-10%/YR then the math tell u (u need to pay me to make video edu u make u smart b/c u r bad in math, logic, science and know A-Z IRS/RENTAL LAWS ARE ALL ARE WRITTEN AGAINST LL except 1031 Exchange law which Biden wants to change this law; and President TRUMP KNOWS WHAT I EDU U HERE, HE OWNS MANY R.E. AND THE R.E. KING HIM STILL TAKES 2+ GENERATIONS & 75+ yrs to DARN SLOW TO BECOME A $BILLION while FB, AMAZON, TESLA, NVIDA, AMD THOSE BECOME 5X OR 10X MORE $B RICHER THAN TRUMP ALL WITHIN LAST 20+ YRS NOT 75 YRS slow R.E like Trump; and President Trump knows what I edu u in his head ask 'why all laws against R.E.? WHY R.E. takes 27.5-39yrs to DEPRECIATE TOO SLOW OFFSET OTHER INCOME MEANS IRS TAX LAW PUNISH LL PAY MORE TAX while ALL OTHER BUSINESS TAKES 1-5YRS with 100% FAST DEPRECIATION vs 27.5-39 yrs TOO SLOW=pay more tax. i.e. BUY a heavy 6k lb heavy car/plane, u WRITE OFF 100% IN 1 YR=PAY LESS/NO TAX=FAST DEPRECIATION OFFSET MORE INCOME SO PAY LESS TAX vs RE only LET Improvement part (say 40% is LAND Value=UNABLE TO DEPRECIATE=SO U LOSS 40% OF VALUE UNABLE TO OFFSET INCOME RIGHT OUT OF BET COMPARE TO ALL OTHER BUSINESS TAKES 100% WRITE OFF IN 1-5YR SO RE. IS 1 OF THE WORST BIZ=DON'T WATCH YT RE GURUS LIE TO U/STUPEFY U = just sudden last 5-15yrs R.E goes up crazily does NOT mean 100yrs or next 30yrs will ALSO GO UP=I USE 100-200YRS HISTORY RECORD PROVE TO U, Nobel Prize Econ Case Chiller said 100yrs R.E. only goes up just a bigt BETTER THAN 2.X% inflation or 0.6%/YR BETTER, U WON'T LISTEN 1)GENIUS INVSETOR WARREN BUFFETT HATE R.E./LL; 2)NOBEL prize Econ edu u Shiller RE INDEX; 3) I edu u... TRUMP THINKS "WHY ALL IRS LAWS AGAINST LL/RE, I'm the president now so let me INTRO NEW LAWS, BONUS DEPRECIATION FOR temp only ~5 yrs ONLY=SOON RETURN TO SLOW 27.5-39 YRS; THAT BONUS DEPR IS ONLY FOR ~5YRS after I left office then we keep the law or not! ALL RE GURUS GONE SO EXCITED ABOUT BONUS DEPR LAW WHILE ALL SMART BIZ OWNERS KNOWS ALL OTHER BIZ ALREADY HAVE 1-5 YRS fast depr ALWAYS DECADES AGO, only Trump makes u happy for 5 yrs BONUS DEPR law b/c it benefits LL him who owns many RE=takes 75yrs to get rich SLOW $B vs TESLA/GOOGLE/NVIDIA 3X OR 10X STOCK IN 5-10 YRS, CAN YOUR $300K HOUSE GO UP 5-10X become $3m or your $3K/MO RENT BECOME $4*3=12K/MO IN 5-10 YRS so it drives your R.E. VALUE UP 500% or so? NO WAY LOL, told u DON'T LISTEN TO YT RE GURU BS b/c BIGGERPOCKET, MEET KEVIN, GRAHAM STEPHEN,. ETC ALWAYS TELL U THE GOOD SIDE OF R.E. but NEVER tell u downside of R.E.=tenants STOP PAY RENT 3YRS=NO INCOME 3 YRS WHILE TESLA/AMD/NVIDA STOCK INVEST UP 200% 3 YRS, WHO MAKES MORE $ & WORRYLESS? No need to hire teams of lawyers evict them in COSTLY TIME CONSUME COURT. Back to point1: $1 invest 200yrs earn 1.0715^200=$1M today, LET'S USE LOGIC/MATH LOOK IN REVERSE (I'LL MAKE VIDEO EDU U WHEN I'M FREE BUT U CAN BUY my friend's "world's best mouse trap kills 400 rats" invention lol)... let's say R.E your house goes up at 5%/yr, then 1.05^200=17,292X; let's assume today's media USA house is $450k, that means 450/17,292=$26/house, meaning if R.E. GOES UP 5%/yr then U CAN BUY A HOUSE FOR $26 back in 200yrs ago but CAN YOU REALLY BUY A TYPICAL MEDIA HOUSE IN US FOR MERELY $26 back then? or better yet, 450k/10^6=$0.45 per house if R.E. goes up at same return like stock index at 7.15%/yr, yeah, let's do the math in reverse: say u buy a house for $0.45 in 200yrs ago, then 0.45*(1+7.15%)^200 ~=450k, but the logic proof R.E. CAN'T GET 7%/YR RETURN ON AVG b/c YOU CANNOT BUY AVG HOUSE FOR 45-CENT IN 200YRS AGO LET ALONE those upkeep in 200yrs & repair & roof (every 20yrs OR LESS replace, TORNADO/SNOW/WIND/FLOOD DESTROY YOUR HOME COST 2 MUCH vs TENANTS JUST HAPPILY FIND 2ND HOME CHEAP & WATCH $1 INVEST EARN 7%-10%/YR vs R.E. ONLY GETS under 2.7%/yr or 3% max while inflation is about 2.x%/yr). MATH IS POWERFUL. U go ask Asians b/c most Asians are very good in math, science, logic and using IRS TAX LAW & RENTAL LAWS ALL WRITTEN AGAINST LL/R.E., that's why BUFFETT LOL AT U STUPIDITY DIDN'T PAY ME EDU U AND ONLY WATCH YT RE GURUS ONLY TELL U HOW MUCH $ THEY MADE FROM R.E, but history prove EVEN THE KING OF R.E PRESIDENT TRUMP STILL TAKES 75YRS 2+ GENERATIONS TO EARN HIS $9B or less (if NOT w/o BK 2+ times) while STOCKS makes AMD, GOOGLE, TESLA, AMAZON, NVDIA ALL BECOME WORLD RICHEST WITHIN 25 YRS vs 75yrs TOO SLOW & protesters said "why rent is darn high all b/c GREEDY LL u charge 2 much, f u #@#", that's why TRUMP/BUFFETT DONT WANT ME EDU U ESP buffett HATES R.E./LL=collect rent from jobless 3yrs & there's no LAWS HELP LL STOP PAY MORTGAGE OR PROPERTY TAX 3YRS but only all laws HELP THE TENANTS DON'T PAY RENT OR CANNOT EVICT THEM 3+ YRS LOL. Nobody is above MR. LAWS and math=the language of GOD b/c PPL speak English/Chinese/Spanish all will lie but God/science languge=math won't lie lol. U need to pay me edu u:)!
It's really much more dependent on where and when you're buying. And how much you're willing to sacrifice and wait. For the most part, you don't buy a single family, a condo or coop for the investment but it can be one.
I bought a townhouse condo in NJ for 80K in '87. Sold it for 80K 12 years later. Bought a multifamily in Brooklyn in '99. The value increased 70K in 9 months. That building went from 440K to over 3M in 20 years and bought me 2 more! And market rents are 5-7x higher than at purchase.
Location, location, location...and timing. I was investing for growth and future comfort.
My landlord came to me this year and said he is 90 years old, and either I need to buy the house or he was going to sell it to an investor. The first thing the investor was going to do was raise our rent. So I went to chase bank, asked to apply for a mortgage to get the home. Keep in mind at the time I was Landscaping for chump change, and I hadn’t even been doing it for 2 years like most banks want you to be at least 2 years in the field. Long story short I bought a 4 bedroom, 2 bath, basement, 2 car garage, for $80,000…. The house was already on Zillow for $120,000. Thank you Paul, you allowed me to buy a home at 23 years old and BLESSED ME with easily over $30,000 of equity. The house needs some touch ups but nothing serious. I wasn’t even looking to buy a house, but it was thrown onto my lap and I sure ain’t complaining!
Well put! I've been living and considering a house purchase, but many of the points you brought up have been a concern for me. Your video is reassuring!
wow Ramit - I am 52 and am starting again financially, and I just finished your Netflix series and bought your book, it is at the post office as we speak, and I wanted to state or say that I so grateful for you doing your CZcams channel, your books and your other knowledge-sharing-endeavours, because looking at everything in my life, without shame or bashing, and now seeing it clearly (esp. after the Netflix series) and now starting to make a plan of what I need to do, where I really need to improve and then do the work. Ramit ... I am super grateful for you and greetings from Reykjavik.
Thank you for watching!
Owning my own home(s) is the best thing ever. I couldn't care less about marketing, the National Association of Realtors, investment, etc. There is no way that living in a rented home would give me the same feeling, satisfaction or pleasure. My home is my castle.
I completely agree with you.
I agree. Also, in most cases, mortgage payments don’t fluctuate much and there is an end to them. Rent, on the other hand, can go up every year and sometimes quite significantly. To some degree , your ability to stay in your home is in the hands of someone else. I like the feeling of control that owning gives me.
@@BeautybytracileiSo does property taxes. An fix mortgages can change as well. Seen it happen plenty of times. Hope you realize you don't own you're home in this country. It's an illusion. If you're still paying mortgage? You're still renting. Then you have to worry about keeping you're Job on the deal you wrote off. Higher Insurance as well. How many years are you In a lock lease ?
In other countries you actually own a home. But like everything else ? It can be taken from you. But not as common as U.S. Technology is driving everything to mobile. An so will everyone else. Agenda 2030. You won't own anything. People are the commodity. Black Rock, Vanguard? Other firms are buying property left an right. The boomer day generation is ending. Prepare !!
Amen
Totally agree, not to mention all rules we have to follow when renting a property.
I rented for 25 years. Then I had kids. The stability of not having to switch homes, keep consistent schools, build a steady community, etc., was worth spending the extra money. In 18 years my youngest will be out of the house and we are going to sell our 3700 sqft monstrosity and go back to renting a 1 bedroom. Owning a home is a pain in the ass.
yeah but you're making his point for him. its a pain in the ass... but you built equity
@@robi6317 Owning a home is a pain in the ass, and renting is a pain in the ass. If you own a home you might have the roof leak, if you rent you might get a shitty landlord (or a roof leak that he wont fix!) its tough to say which is easier, just different.
@@TonyCox1351but this isnt about "easy" this is about the best USE OF YOUR MONEY. and thats almost always buy vs rent. oh and ive had a roof leak for 20 yrs... hasnt been a pain so far ha ha just some buckets in the attic
@@robi6317 I cant speak for anything else but for me, making my life easy is a big part of my decision making. Some things arent worth the hassle even if they make you money.
Your contribution is Confusing : “ Owning a Home is a pain in the ass " yet you admit that you and your family BENEFITED from the Home Owner status. You Highlighted Stability, Not having a move the family etc. That doesn't sound like “ Pain " ...that sounds more like “ Pros outweighing the Cons " .
I foolishly rented for 10 years of my early life. Costing me $96,000.00 total for 10 years for living in an luxury apartment and finally decided to purchase a house at age 30 . I Paid it off in 8 years. The value has now quadrupled . I haven't had a house payment in 10 years . I'm totally debt free and living a fabulous life , able to travel and pay cash for anything including another investment property. Because I'm not paying those outrages cost of rent that continues to increase yearly. For me it was the best decision I ever made. I wish I could get back those 10 years of making someone else rich by renting but when you know better you do better.
That's what I'm talking about! They don't want us to know nor do this. They wanna keep us sick and broke. Happy for you I'm on the same exact path.
Defintiely agree with you. People always forget about the fanton costs
I don't know about being lied to. I live in the Bay Area and I purchased my home at 650k, now it's worth 3x that. My mortgage is 2400 a month that includes insurance & property tax. 2400 in the Bay Area today is only a studio apartment. My home gives my child leverage when she will be the sole owner after im gone, along with my investments, cars, etc...
Where in the bay ?
@@vanessacazares2615 Manila by the bay lol
Hey when did you buy at 650k? Great deal tbh
@@codediva007 during the mortgage crash
Unfortunately you underperformed. Because with dividends reinvested the stock market is up over 5X.@@TheLegendaryLinx
I went semi-viral on Tiktok for talking about why I live in an apt as a millionaire (for most of the reasons Ramit listed in this video) and the real estate warriors tried to eat me up in the comments 😅 What I didn't have time to explain in that video is that my husband and I actually DO still own a house and it has been a HEADACHE.
Every single year for the past 5 years, we've had to do a 4-figure repair on the house... the water heater went out....the next year, it was the AC unit... then a pipe burst...this year we replaced all of the flooring throughout the house. (For reference, the home is about 20 years old. Everything was fine right up until year 15 of the house. We've owned it for about 10 years) These are things people don't account for when they give blanket advice to buy a home.
Anyway, we live in a luxury apartment now and rent out our house... I have a concierge, floor to ceiling windows, and I literally just called maintenance 3 days ago to fix our garbage disposal 😂 I MUCH PREFER being a renter and building my portfolio in other ways.
I think main advantage is the leverage in a house, but most people don’t really understand that they are leveraged
Owning a home is a headache for shure. A large family would probably be better off in a house but small families can be fine renting just the space you need not want😅
This is what depreciation is for, cash flow and a war chest. The tenants pay for all the repairs. Personal home it's on you.
Was that house in a development? Builders with tract homes cut corners and get low end stuff. Not surprising a water heater went out after 20 years, nor an AC unit or low end flooring. But the burst pipe, yikes. And @rafaelw8115, I think @RobertHasty meant that tenants ultimately pay for repairs with their rent. People pay rent to cover such costs, not just mortgage/insurance/taxes/opportunity/holding costs, but also repairs and maintenance. That's where the landlord gets the money to pay the repair person.
@TheMidasTouch11 If the rent you are charging for the house covers the cost of your apartment as well as continued maintenance on the house, then you have a good deal. If not, you're throwing money away.
Thank you great video
We bought our first house in 2001. It was $107K, 4x our income. Things were TOUGH for the first few years but buy has that been worth it!
I think the reason a lot of our parents aspired to buy homes is so that they had a place to live rent free after retirement. The thought of paying rent when I no longer work is scary to me.
And how about the risk of paying real estate taxes, repairs etc..does that scare you?
@@tango4ever244 no because taxes and repairs is going to be lower then the market rent in my area. So I'm still going to be living cheaper then the same people renting in my neighborhood. by more then 50 percent.
Your comment is true. I agree! But housing is more complex for senior citizens. Every older adult is different.
Because conversely, a lot of senior citizens sell their house and rent in a 65+ community/or apartment because they can’t manage upkeep of a home. Or there is fear of falling down steps, loss of autonomy to repair things due to health issues, etc.
Many seniors citizens prefer to spend their ss check, pension, retirement on their climbing health care costs instead of thousands on home repairs. Or they want to spend their golden years traveling.
Thank. You!
I agree this was/is a generally held plan. Sadly I don't think it's as good as many seem to think it is. As the video mentions - it's about doing the math. If you could rent for 20-40 years at a savings of $3000+ a month - that you are then investing ON TOP OF what you are saving for retirement - then you'll likely be just fine renting during your retirement as well.
Of course if rent is similar to buying, and you can keep the other house induced costs down, it could be worthwhile to own.
Wish more young kids would hear this message. They are so worried about "never being able to buy a house"! I'm 64, have significant retirement accounts (two 401k accounts + roth IRA + public employee pension + generous SS) and am renting a 3BR/3BA home in a "resort" town, well-under market. In my many years I have owned, I have rented and I have been a landlord. Right now, I just rent. I have a ton of freedom and am continuing to put over 25% of my income into my employer sponsored 401k. Since 2018 I have lived in Marin County, Maui County and now live in Bend, OR. I'm looking to spend my retirement years in Italy. Or perhaps Mexico. Or maybe both!?! I lost a ton of money in the 2008 downturn due to bad advice from a real estate broker. Never again.
Beautiful job creating your Rich Life! Whether it's renting or owning, I simply want people to think carefully about these decisions
That's great to hear my only concern is if rent prices and house prices go up, aren't you susceptible to the market like people were from 2020 to 2023 meaning rent goes up but mortgage would stay comfy if you bought beforehand? That is my only worry I guess at the moment and verge of buying a house
retirement savings are not a guarantee either, that can go down just like real estate.
You don't know shit. Back in 2012. All 401k investors lost almost all their retirement money.
You don't understand the basics of owning a home, hold onto it through the bad times..
Something Ramit failed to mention is that, although property taxes and insurance go up, mortgage payments on fixed mortgages do not. My parent’s house is worth $400k but they bought it 20+ years ago for between $100 and $150k. So their payment is ridiculously low, even lower than my tiny 720 sq. ft house I bought in 2022 for $175k. And since property taxes are reassessed at sale, if a house is not sold for a long period of time, the property taxes might be very low. I pay more taxes on my house than my parents do on theirs. This can make home owning a lot better deal in the long run but maybe not so great in the short run if you only keep your house a few years.
If you rent, rent will typically go up every year unless you have found a really good rent control deal. So in your comparison of rent vs. buying, keep in mind that the first year of home ownership is the worst that the home owning scenario will look. Every year that rent and inflation increases while your mortgage stays the same, owning the house will be a better deal.
Also, Ramit was selective with his year range for home appreciations. The average increase in the last 30 years has been closer to 5.5%. We can’t really expect prices to increase like they did in the past few years but I don’t think a 3% increase per year going forward is unreasonable to expect. But keep in mind that due to leverage, the return is even higher. If you have 20% equity and your house appreciates 3%, that’s actually a 15% rate of return (3% * 5 = 15% as 20% is 1/5), much better than you can expect from the S&Ps average.
My house is now assessed by Zillow to be worth $220k which seems reasonable based on the market. That’s a 25% increase from my $175k purchase price , which is at least a 125% return on my $35k down payment (I now owe less than $140k on a house worth $220k, so my equity went from $35k to more than $80k). I’d say that’s a pretty good deal.
What Ramit is right about is that we should be making the comparison. There are advantages to both renting and owning both financially and non-financially. I personally just love the idea of having my own place that I can do anything I want with and not having to share walls with neighbors in an apartment building. Non-financial factors like this should also be considered.
Anyone saying they bought their house in "199x-20xx" and it's worth "X" amount is simply missing the point. You cannot do that like you could back then. In some areas yes, but most, no. I am in the Bay Area so im bias on the home buying debate lol if anything I want to buy/repair/flip, yet that comes with much risk as well. To each their own when it comes down to this amount of money and what/how to provide for one's self or especially, family. Good luck to all during this difficult time
We worked overseas for 40 years so we never had the need to buy a house anywhere. Listening to all our friends complain about everything you just mentioned in this video made us realize that we unintentionally dodged a bullet. As we get ready to retire, we have the money and the luxury to live anywhere in the world, for as long as we want and to choose how much rent we are willing to pay.
And, I'm guessing you have no bossy landlords to deal with?
This is very complex and I have a lot to say, but I’m going to limit my comment to one thing…..make sure when you’re making this decision you think of your life after retirement and what housing costs you can afford when you’re old. If you own, housing costs go down drastically when you’re old.
Definitely. And be sure to factor in that a large portfolio can also pay your housing costs in perpetuity...and also what you'll do if you own a house but have very little in retirement saved up. In other words, run the numbers.
@@ramitsethiat what level of security?
@@TamunoOpuboCooksCookeyGam enough to buy a small place for the "level of security"
If one does not plan to move around traveling the world, the paid off house should still be quite alright. @@ramitsethi
@@ramitsethi Some of us have the financial discipline to live exactly how you describe. But please understand that so many Americans do not. Sad, but true. So the home equity which is pushed upon us works as sort of a forced savings account.
YOUR MIC SOUNDS GREAT, BRO. NICE WORK 👍
It absolutely makes sense. Thanks Ramit!
I get the logic in Ramit's position. Also, I've always told friends and family that your home is your home. Not an investment. I prefer to own my home. Got tired of annual rent increases, and having to get permission from landlord for mundane things, so i bought my own place during the pandemic. I'm fine with it. I'm all about the numbers, but i also want to live the way i want to live, while I'm here. After all, you can't take it with you. Great video.
With you! I do not get much in my retirement so paying in full was a great option for me and really has helped me to be able to save every month. That plus a small amount of part time when I feel like it works...
I agree. As a home owner, you don't have to worry about if the landlord paid the mortgage on the home you are renting.
Finally someone buying rental estate that uses the correct motivations and math. However your last argument is off. You can typically rent a much nicer house than you can buy, especially if you are burning principle you would otherwise put into a house. If you can’t take it with you then rent a luxury house while burning down the cash.
Or hay Im selling the house. Ya gotta move@@TheBolo2010
you dont own your home the bank does
The reason you don't own a house is because you can buy a house anytime you want since you are rich, thats all. If you depended on a job, or how the economy was doing, your mentality would be different. It is 2 different levels of purchasing power, hence, the outlook on things will be different. No matter how high prices go, you have the money today or next year regardless of the price because you have the cash.
I will! Really cool seeing all the positive comments here
actually...if you're worried about losing your job, then you definitely should NOT buy a house. A house is a liability and could prevent you from moving across the country to a better job in a better cost of living area. A home ties you down and reduces your ability to be flexible.
@@toptechhawaii8156 Not worried about loosing a job, but these millionaires want to make you think like them when they are clearly loaded and the variables in their life's equation and yours are different. What makes sense for them might not work for a poor person. Watch out listening to these people!.
@@toptechhawaii8156 Also, it is becoming more expensive to rent than to own. Rent is about the same for a 3 bed house than a 1 bedroom, in some states and they are making you pay for everyting, even the sewer. The reason people dont get into more houses is because they dont have a downpayment money.
@@toptechhawaii8156 A house is not a liability unless you owe more than it's worth.
I like this guys perspective. Subbed
A home warranty company only costs $52 a month and for $85 covers repair or replacement..includes roof problems & sewer lines
Will be sharing this video instead of answering people's questions about why I don't want to buy from now on 💁🏾♀️🎉
Glad you enjoyed it! Thank you for watching and sharing
to each their own at the end of the day. one can rent and never own and money still leaving pockets monthly....one can buy and pay mortgage till its paid off then still pay taxes and insurance. money still leaving pockets monthly. so either way no1 is better off....UNLESS after the house is paid off it becomes a rental property earning good income then that beats renting. so in that regard a house purchase is better.
After reading these comments, I’m confident half of y’all didn’t watch the entire video lol. This is great advice for anyone in any location and of any income that is considering purchasing a home.
Glad I heard this message, which confirms I am not ready!
Excellent video. Thank you.
I purchased a Brownstone in 2006 for $700,000 right before the 2008 market crash. Everyone said it was crazy especially in Bed Stuy, NYC. It is now worth $2.5 million.
TMI
I believe you but like he says, times are different now, thre are so many new green lwas compared to 2006, If you make 50k or less, buying a home might be a financial nightmare, depends on the situation.
Maybe dumb. When I was across the river in NJ in the 90s taxes were 4% of value PER YEAR. What would that be on a $2.5million house if you aren’t homesteaded. Not interested in those kind of taxes that’s why I pay 0.1% per year down south
I guess that makes you still crazy
taxes in nyc work different, not sure how they calculate but tax is less than 10k on the property, despite market value of 2.5 million @@hugoglenn9741
So your solution is to rent forever? I bought a house in 2020 for $295K with $30K down and 3% interest. My mortgage is a manageable $1,585, and my house is now valued at $410K. It was one of the best decisions I ever made.
After running the numbers, and accounting for time value of money, what is your annualized ROR?
That same home at current interest rates is 2k a month. You locked in at a great time, covid era policy, those of us who didn't buy a few years ago will regret it, we may never see those sort of low rates again.
Yeah thats an example of getting near perfect timing with buying a property. Right now we almost couldnt be farther from the ideal time to buy a property... and besides if you compare buying a house at the ideal time to a stock at the ideal time i can obliterate your return from your property acquirement
Your home is only worth whatever someone else is willing to pay for it. Also, you forgot to add in taxes and insurance; both will never stop going up;)
@@rdw1968as with rent, and alll the limitations that comes with renting someone else's space.
I live in California. Rent has gone up exponentially to the point where I now live in a truck (I became disabled, for one thing). I wanted to own property, but when the rent kept going up and the prices kept going up and eating away my savings, there was no way to save for a down payment and then prices went way too high to buy. Now rent is $3000 a month. Cheaper than owning a house, but I can afford neither. A friend bought a house four years ago and he has $200k in equity (for now) His mortgage is cheaper than current rent. So, I dont exactly agree with this man's philosophy. When you rent, you always have landlords jacking up the rent and also imposing on you, you have no freedom to do what you want with the property. Renting is miserable, that's why people want to own. But nowadays, that is very difficult in most parts of the country. I hate renting. Perhaps in the current conditions, it's better to rent, but renting is like being a slave in my opinion.
ofcourse he is trying to brainwash you not to buy house so he can buy them. I own 2 properties and yeah my mortgage is nothing compared to rent today especially the one I'm only paying $600/month for mortgage. It's small house but still price has doubled in the past 15 years.
Should have roommates then.
Paid my house off in 15 years with 44 years....best decision ever. Life is soooo relaxed now!
Ramit is correct. Owning a home is not always better. I was a Realtor and would tell people this. Especially if you don’t have great credit. Remember then you’re paying the highest rates for everything. It also depends on what kind of market you’re in. I was a dedicated renter after my divorce. I only bought after I was 10 years out from retirement with excellent credit and I purchased BELOW MY MEANS - I didn’t max out what they said I could afford- and bought a new condo (less maintenance fees and time-which I appreciated the most about renting) after running the numbers and was sure it would cost me less to purchase over that time span. I’m glad I did. The renters market is absolutely insane right now. I definitely made the right decision. But it still wasn’t by a mile. RUN THE NUMBERS.
People with no credit history should NOT be punished by the system.
@@user-gz4ve8mw9lget a credit score improvement SELF gives you credit for on time rent/utilities
@@user-gz4ve8mw9l Now that government backed loans. FHA.. FANNIE MAE.. has decided not only use Experian/Equifax credit score will be higher..Transunion is being ignored.
That was a typo experian and Equifax are the only credit bureau's scores that will be considered when looking at a government-backed mortgage loan TransUnion. Will be deleted?
The property taxes will go up and so will insurance and SO will the rent.!!
I’ve been a fan of Ramit’s work since he first popped up on CZcams with Tim Ferriss maybe a decade ago. The podcast he does is something my wife and I started to enjoy in the last couple weeks, and I think this type of format will help spread this message to more people. Great job to the team!
Thank you
@@ramitsethi your a good guy Ramit although we differ on owning or renting.
How does becoming renters, help people?
Great video! I have a question, I have two fraud inquiries on my reports that I would like to get removed. I've seen your video regarding this, but Im still a bit confused. So I know my first step would be making a call with the credit bureau (Experian) but should I also make call what time? And would I be never stop sending a good compny *VRI TOKEN* to my friends and people I know regarding any credit situations
Something I realized too is that people always bring up equity which doesn’t even matter unless you want to eventually sell your house. Other than that it’s just another loan you have to pay back if you take the equity out and then you would have to refinance your home and you better hope when you do the market interest rate on homes is the same as when you bought it or lower. It’s all based on the market.
Another thing is people forget how much extra money they spend when owning a house on the interest alone. So yeah equity went up an extra 100k within 5 years but you more than likely paid the same amount in interest within the mortgage payments. Lol when I crunched the numbers I was at awe but yet people still buy in that buying a house is way better. If you done have a family with children to me it can be a real inconvenience.
I’d love to see your math on this cost analysis because you seem to be excluding the rent you paid in those same 5 years for a similar property with annual rent increases. With that kind of mindset I need to find rental properties for people who think that way.
@@stoicmaster871 most studies suggest you need to live in a home for at least 4 years to come out ahead. Renting is more expensive in most markets but I do agree with you that you are able to move about more freely.
As a homeowner who never had a mortgage - paid cash - I can attest that I haven't made a net dime from my house "investment". This is after accounting for the more than doubling of it's market value. You have to add in all the costs of ownership including the taxes, insurance, and maintenance. House ownership is often a pure luxury, not a wise financial move.
And if you're a smart single man, you'll consider renting my basement as a roommate and investing your money in the stock market.
Finally...wisdom
Seriously, how much is your tax and insurance??
Ain’t no way. Stop it.
@philmarsh7723 You don't seem to be acknowledging that if you hadn't purchased your house then you would have been renting, and you would have thrown all of that money away and had nothing in the end.
Most advices online are: "THIS is bad" and " THIS is good". Saying to look at your own situation and goals is just refreshing to me. Thank you.
( my boyfriend and I bought our house 13 years ago, way under what the bank was willing to give us. It was not a dream house, small, old and needed A LOT of love.)
Nice video!
Ramit, you are hilarious and spot on! I stumbled across your book in 2019 and am happy I did!
There is no greater feelings than owing a house that's paid off. Nothing can give you that freedom knowing that you are living without a mortgage or rent and the taxes is so little.
It's also appreciated in value. Nice. Now that's a rich life. Freedom and house security.
Taxes in New York, Illinois, and California...Yikes!!! 😬 NO THANKS!!! 👍😉
@@la_baby_khalil7703that's why I'm trying to leave ny
Here is a perspective from a European city (Prague): A nice 3 bedroom apartment (90m2) with a balcony in a nice central neighbourhood costs around 1400 USD to rent (including utilities and everything). An equivalent apartment to buy is roughly 500k USD. That means after putting 100k down, the mortgage payment (for 30 years, 5 years fixed interest rate) comes up to around 2300 USD + 300 USD or so for utilities, repair fund, etc. Even without considering most of the phanton costs mentioned in the video, it's currently close to 2x more expensive to buy than to rent.
Yes but a mortgage is locked for 30 years whereas rent goes up 10% every year. The more you know...
Not necessarily. My country has a legal limit of 15% per year. The landlord can't just increase the rent, because their costs are going up. The standard increase is 2-3% a year.
Additionally, the rent increase basis must be specified in the contract or the increase is illegal. There's three options: X euros, x % or tied to x index. If there is no mention of rent increase basis on the rent contract, it's illegal to raise the rent.
The standard contract is valid for an unspecified time, but the minimum period is 12 months.
America needs regulation to combat rent increases.
@@Lumpia_In_Texas Rent is definitely not going up by 10% per year over the long term. Based on Eurostat data, in Europe, rent prices have increased by 20% over the past decade (link to source below), that’s 2% per year. In the US, it’s between 30-40% per decade depending on the decade (source below). So, on average, rent is going up by something like 2-4% per year. So, it would take like 23 years for the rent to catch up to the mortgage payment.
So, for 23 years you would be able to invest the difference between rent and mortgage + the initial 100k into SP500 and appreciate those assets by something like 7% per year. That comes up to roughly 450k USD after 23 years.
In my oppinion, there are way more significant questions to consider than the 2-4% increase in rent. Buying makes you unable to move for roughly 10 years, unless you want to risk losing money. Someone can commit to 10+ years, someone may not be ready. Also, doubling housing prices by going from renting to owning may squeeze the budget for some people to the extent that they have to significantly reduce their lifestyle or even be forced to sell, again risking losing money.
So, I think that renting can be a very competitive option in terms of the financials (if you invest the difference) while offering you more flexibility. Having said that I also belive buying can be the right call, if you run the numbers, you can truly afford the doubling of your housing costs and can commit to 10+ years. And it also has perks like being able to do more home improvements.
So, the point is that both options should be considered, neither is always worse.
ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20230705-3
ipropertymanagement.com/research/average-rent-by-year
But won’t the value of the apartment go up? I bought my house 3 years ago and it has already increased in value by 26%.
@@bluebirdtravelco Over the long term yes. If you can afford to pay 2600 USD for housing instead of 1400 USD and you stay in that flat for 30 years, the financials are leaning in favor of buying.
But short term, the price of the flat can go up or down, and things like taxes, realtor fees will significantly cut into your profit, or even make you lose money.
Great video
this is a good video and I appreciate the different opinion and thought process. However, the validity of many of the claims are highly context specific.
Thank you so much for this video! I am at a point in my life where I am finally taking real control of my finances and seriously planning for the future. I owned a house right after I got married, because I felt that starting out with a house was the right decision. I was wrong. It was a money pit, because the seller had flipped it and put in a lot of shoddy workmanship that I ended up being responsible for fixing. I was simply not ready to be a home owner, although I had felt I had to be one from family and societal pressure. I have been renting for many years now, and I don't plan on buying a property any time soon, although my wife and I have plans for owning in the future. I really want to thank you for your message that people who are renters are not failures. I needed to hear it, and I am sure that so do countless others. You have earned my subscription, and I look forward to your future videos.
Yep you were duped by greedy flippers - sorry.
Well, I guess we got lucky! We bought our house for LESS than our total annual gross income, we had 20% down, and the mortgage payment is about 13% of our net income. Our house doubled in value over 8 years and we've only needed to make minor repairs. It's not a house that many people would consider glamorous and we could have qualified for A LOT more house. But we love it and we don't need to bend over backwards to make ends meet!
Very informative video, changed my perspective
I think what Ramit is trying to say here is, get the total money you need to buy a house of your choice, split the money, pay the rent for an equivalent house, invest the other in the right place. In the long run, you will gain much more from this kind of investment than buying the house outrightly with whole money, even with the usual house price appreciation with time, unless you do the numbers right.
Why not do both, its what i am doing right now. Bought my house five years ago and now its worth plus $200K but not selling as in my area homes are going way up and so is the rents. Its pick your poison for your tea lol.
Rental yield is around 5% on average, price appreciation is also around 5%, so you get around 10% by doing nothing, just living in your house (just minus a bit less than 1% for depreciation). S&P500 historic return is also around 10%. Ramit would be in cuckoo land if he thinks that you can easily beat 10% return. So I always say that buying your property is often one of the easiest and best investments an average person can do. And importantly - if you use mortgage, that return can be considerably higher than 10%. As long as your mortgage payments dont come close to 10%, you are making money.
beyond that, he is saying to run the numbers and decide after following the rules he laid out
Best thing I ever did was buy my house cash when the market was down. Living is not that expsinve when you own what you have.
My house is my luxury. I love it much better than renting. In my last apartment my landlord did not renew my lease. Having a house protects you from this situation.
@@AK-47ISTHEWAY whoa. That’s creepy. Did you confront him or her with the video of them doing this???
I mean it's called foreclosure if you don't make your payment so it technically the same
@@rafaelw8115 I was a good tenant. Paid on time with no problems. I mentioned it in my post to say that owning a home (which I now do) protects a person from a situation of lease non renewal and scrambling to find a place to live. Being a homeowner is hands down a better situation.
The psychological benefit of living in a paid off house that is renovated exactly to your taste is immesurable. I can loose my job, no problem. If I get sick, just chill. You can't live in an ETF or a stock.
@@gerritroe5 True, but that's not entirely accurate. Can you really lose your job no problem and still pay for taxes, insurance, routine and major unplanned maintenance? Also, that "psychological benefit" will quickly go away as you age. Once you're a certain age, your paid-off house can easily become a psychological burden. My father got to the point where he lost the ability to do and oversee maintenance, understand how expensive things were, and could not understand why his children could not immediately drop everything to run over and complete major repairs. My 85-year-old widowed sister has lost the ability to make an intelligent decision about anything regarding maintenance or insurance, and is totally dependent on others to make those decisions for her. For both of them, living in their own home caused them far far more stress and anxiety that simply living n a senior apartment.
I remember in 2007 when I was working in real estate seeing people buy homes new from builders with the intention of selling before close of escrow to a new buyer for profit. The crash was so brutal and fast that I remember seeing a lot of these units foreclosed on with the builder plastic still on the carpet.
Financial decisions are never about money but how money/purchases makes you FEEL. If you feel happy renting - do it. If you feel happy buying (and you can...) do it. One millionaire may give an opinion that other millionaires may disagree with and vice versa - these Internets are littered with opinions and "facts" - don't replicate someone else's views - listen, learn, examine your life and make your own decisions.
I agree with all of these points. My husband and I have always treated our home as a purchase, not an investment. For us, owning was the only way to go. We have enjoyed customizing our home to suit our needs, interests, and taste. We never look at these decisions as contributing to the value of the home, although some of our renovations have certainly increased the desirability of our home. But we never intend to sell. We have over-improved our home. We’re okay with that. However, I know too many people who don’t enjoy maintaining their home and put off critical maintenance that will lead to expensive repairs down the road. They would be so much better off renting-and with a lot fewer headaches. But they have bought into the myth that home ownership is the only smart decision.
That's the only way to look at owning, in my opinion.
@@rafaelw8115May I ask where you're based? I ask this because I find this to be a huge cultural issue. I'm now based in the UK where everyone seems to think buying a house is a money decision but I'm Portuguese, where most people think that owning a house is a stability and family based decision.
@@rafaelw8115 All valid reasons but not "I'm going up the ladder reasons".
@@rafaelw8115 We live in Georgia in the US.
@@BeautybytracileiI believe you missed his whole point, that even Included actual numbers. Buying a house Is not "Only" smart decision, Its actually a "dumb" decision die to the actual overall cost of ownership vs renting. Doesn't matter how you want to look at It, or how much you enjoy It...... Its still dumb costly. Owning a home Is a liability, not a asset.
I was living in a house that I paid off, but after my divorce the ex got the paid off house. I then lived in an apartment $1625/month for 2.5 years until I saved enough and paid cash for my new home. I was going crazy with the loud neighbors upstairs. Sorry Ramit, I had to get back to living in a home again since my mental health is a priority.
Lol and I feel the opposite... my home I could hear everything the neighbors were doing. Now that I'm in an apt again, its actually much quieter and less stress. Mentally renting has been life saving.
@@discoveringhealthandfinanc8328and can’t forget about the high cost of fixing things at a house on the other hand when you rent they will fix it all.
At no cost 😃
If you have lousy neighbors in a house, you're stuck with them FOREVER. In an apartment, you can just move when you're lease it up, or maybe even legally terminate your lease early since your landlord violated the terms of the lease by not maintaining quiet on his property.
@@jasonjames4254you can sell and buy new one
It’s easier to escape bad neighbors when you’re renting.
Thank you! Just thank you.
More people need to hear this!
Buying a house was the best thing. I was renting and the owners sent me a notice they going up $100 and I immediately bought a house when my lease ended. It's more stable to buy a house so you don't have to worry about landlords and evictions. Still taxes and insurance can increase the mortgage, however I feel more content knowing I own my home.
Because you are a woman.The main reason men end up with mortgages is because of thier wives. Women need to have fabulous lifestyles and show off to other women.
You are worried about $100 in rent. Taxes and insurance go up by 200-300 a month a year right now. Haha
Probably better to just buy some land or rent a condo at this point.
You can't get a mortgage to buy land as it is considered as non collateral.
During the first half of the mortgage, renting is immensely cheaper on the avg home (~$1000 per month in savings). However, if you can survive paying down the first 50%, it flips and rent will likely be more expensive (can refinance mortgage). That first decade is just insane! Arguably investing the savings by renting each month for a decade will give you the OPTION to buy a house almost cash… the mortgage interest eats all the appreciation, but taxes on investments don’t eat all you’re interest income. Owning only pays off if you can afford the first half of the amortization and the cost of owning per month because less than the cost of renting per month.
I bought my townhome in 2017. I rent it out and live at home so I can save money. But when I decide to move back, my mortgage 2br 2bath home would still be cheaper than a 1 bedroom apartment in the same city.
My home is my HOME, not an investment. I like having the security of not having to move out on someone else's schedule. I pay $1,025 a month for a 4 bedroom single family home that would rent for $2,700. It makes sense for me.
In my area in Oklahoma, land is cheap in the country. I have a 40' camper on some acreage with 12 solar panels powering it so my biggest bill is $35 a month for my phone which allows me to invest more and play more. I highly recommend you grow your own food.
I agree with your perspective. I also have to add that I find it weird that people consider their primary residence an "investment" it's not an investment, because even if you sell it and make a profit, you still need to find a place to stay and presumably housing in general would be up if you sold at a profit. I do have a question, which is, if renting is cheaper than owning, why do landlords exist and how do they make a profit? Does it work on the idea that they will be holding onto the home for a long time and therefore are able to take a loss for the first 10 years? I haven't heard anyone in real estate talk about this - I only hear discussions about outright profit (even if it is small). I am very curious to hear your perspective Ramit.
@@AK-47ISTHEWAY i am refering to the vast majority of homeowners who dont do that
For my area and time, purchasing my home was cheaper than renting it. In 2014, the purchase price boiled down to $56 per sq ft for an all brick home on over 2 acres. By putting a little extra toward the mortgage each month, it will be paid off in about 3 more years. I subscribe to debt free living.
Even a relatively maintenance free home needs big money over time. New roof $20k, new HVAC $5k, regravel driveway $3k, lawn maintenance $2k/yr, etc.
Yeah if there is an issue with my home I fix it and not sit around and wait for someone else to. I look at owning a home as an investment as well. I couldn't stand giving $1,200-$1,500 to an apt or landlord every month, then in a year or two I have nothing to show for it but increasing costs or having to go through the hassle of moving. I think it is a choice of whatever fits your lifestyle and your goals.
Honestly I believe it’s a good opportunity for people to see and know both sides of renting and owning. Ultimately it is up to that person to know which one fits right for them. Neither are bad, so I believe both options should always be encouraged then just one. We need flexibility vs having a one sided mindset that one is better than the other. Thank you Ramit ❤
If you don't own a property , The landlord can decide to raise rent $ 500 or more . If you paid rent for 20 years , you own nothing , but if you paid your Mortgage in 20 years , you''ll feel a lot better.
I don't find the "20 years" argument very convincing. The average homebuyer doesn't stay nearly that long. And why is it that you only hear people talking about 20-30 years in the future with their money when it comes to a house (not investing in the market)?
If you paid rent for 20 years and own nothing you are the problem, not renting. By investing your down payment and the difference between the mortgage cost and rent every month into an index fund, you will have more cash in 20 years than what the paid property is worth. So by spending the same money you greatly reduce your financial risk by diversifying your investment, you get the convenience of being able to move freely and you can just text your landlord if there is a problem. Buying is an expensive lifestyle choice you definitely can do but it’s certainly not the best decision from a purely financial point of view.
And you can move. Without any commissions. Without any mortgage recording tax. Without any closing fees.
I've noticed a lot of people are resistant to his message because they've already bought property and have to justify in their mind that they made a good decision. He's not wrong that there is a lot of propaganda around purchasing homes. The number one best piece of advice he gave was to always run the numbers before making a financial decision
Exactly. The irrational resistance to simply running a few calculations on a $500,000+ purchase is hilarious (and revealing)
He’s not wrong but he’s not right either. Yes always run the numbers, but it’s not always about the numbers.
Take his example of eating out. The true costs of eating out far outweigh getting your groceries and cooking. And then investing the cost savings.
But we all know, everyone doesn’t want to have to cool. While there will always be opportunity costs, sometimes the cost of “eating out” is worth it because it’s an experience and memory as well.
Spot on.
@@Iamjoeycross That's analogous to what he said about buying a house though
Run the numbers and then run by the numbers. Many people pretend to make good choices by doing the math but then disregarding the result of their calculations.
Skeptic at first, but damn, this was a very good and geniune video. Cheers my guy for your smart conclusions!
Amazing video 👌
Always run the numbers for everything. When you buy a house, get the total of all the monthly payments and you’ll be surprised how much more expensive it is. Run the numbers for every loan, everything you finance, or every recurring payment…
Really great points brought out here! I literally can not afford to rent anything near what I live in currently so it’s a blessing to own my home 😅
Free and clear home owner since 2016. My property doubled in the last 8yrs. Also debt free… never would save that much money if I rented
How do you turn the doubling of your property into actual spendable money?
I was just discussing this with my wife. My home is paid off and worth 500k but that 500k is not doing anything for me, not making me money and stuck in my walls (equity) will the value continue to go up over time? Sure... but it's not even cashflowing me anything and in all reality costing me money each year to maintain and pay taxes, etc. Any advice here?@ramitsethi
take what you were paying in mortgage and put in a index fund and keep reinvesting dividends . @@lifesajourney101
@kingsson7191 Pls reply
Funny how over the last 4 years in the stock market I’m up 7X. That’s what you can do,with available cash instead of a home@@ramitsethi
I figured up most of the expensive I have in my house, and it has doubled in 17 years. I paid it off in about 11 years and cut down on the interest. With a roof, new windows, fix basement leaking, adding on a back porch and roof for it, new ac units, chimney repair, painting, tree removal bathroom remodel. I have of 300k in the house, and it is worth about 350. I gave 175 for in 2005 it was 9 years old. Now if you count the yard up keep , new flooring appliances etc I am closer to 325. I figured up my tax savings it was nothing like they make it out to be.
These are all good points, and I think you minimized the impact homeowners spend on their house when they own it. Everyone I know (including us) spends much more on repainting, furniture, decorations, holiday lights, kitchen appliances, etc. If people were genuinely being honest with themselves on their frivolous home purchases, the lack of an ROI would be insane. However, I also believe getting someone to truly take all the saved money from rent vs. own and put it into stock/investments is hard to do. In other words, the $ 6k total payment when the house is owned vs $ 3k for rent should mean someone is putting $ 3k per month into investments, but most people end up not doing this and spending that money on extra vacations, nicer cars, restaurants, etc.
$3k/mo of my paychecks direct deposit into brokerage accounts that I've set to auto-invest or DCA (dollar cost average) daily into assets of my choice. It's become very easy and effortless with today's financial tech.
Yeah the mental discipline to save and invest the difference end up being difficult to most people.
I'm SO glad I watched this video. I'd been batteling this decision for over a decade now for the very reasons you specified. I thought I was just ignorant because I didn't see how the numbers worked.
It seems to make more economic sense in my situation to rent and invest elsewhere in a diversified manner.
Thank you!
Buy a house to sell it in 5 years. Don’t buy it to pay a mortgage for 30 years.
you do realize your rent will only go up throughout your life where your mortgage is fixed. I know owning has maintenance and tax costs, but still 30 year mortgage at a fixed payment or rent where every year your payment goes up. Its a no brainer, owning is most of the time the better option.
@@hepwo91222 It's not in all cases. It's no where close to a no brainer. It takes a lot of analysis (and courage) to wisely come to this conclusion
I'm very well aware of the increasing rent argument (and all the others). Where I live the average rent amount has gone down slightly.
I have been working for a mortgage company for over a decade. I've studied amortization schedules, title policies, escrow disbursements, foreclosure proceedings and more. I've seen the good, bad and ugly when it comes to mortgages and am more intimately familiar with the ins and outs than the average person. Not only that, there are high ranking individuals in this company that agree with me.
I just had to believe that it was certainly the case for me and it helps to have another on a platform like this agree.
@@hepwo91222 You can instead use that money into dividend paying stocks which on average go up 10% per year and right now many pay in the 4-5% range. Over time, as for me, my portfolio is so large now it pays my rent amount plus some. I've also owned but sold in 2021 with a 250% profit Of course a lot depends on whether you have a family and your future desires...
1) historically rent is always higher then Morgage ( no land land will rent his or her apartment for loss ) so it’s always going to be high rent then Morgage .
2) fixed Morgage for 30years ( currently it’s interest rate is high ) but rent goes by year to year .
3) he is keep talking about investments ( it’s so volatile) one can loose there life time savings . But if housing market crash ……. You still have home that you live in it .
4) rich stays rich because people like us pays rent to them ( our land lords )
5) wait for the right time to buy ……. Currently it’s high price and high interest , it’s like double whammy .
6) this guy is worth $25 millions net worth , so when he invest his 20millions and if he gets only 2% returns that’s it like 200k & when you invest your 30k ( for an example ) you are up say like 10% ( only if your luck ) you are making only 3k profit a year .
So his logic is only good when someone has lots of money to invest . Most people buy home with maximum 100k down payments so . Don’t fall in for this guy .
One of the best financial experts in CZcams. Subscribed at first video.
Leaving out a very important factor; if you get a fixed interest on your mortgage, you're going to be in a much better position over the years. For example, we live in Mississippi. Right now, rents are anywhere between $900 and $1400 on average. Our mortgage is $450. The only thing we've ever had to replace is the refrigerator. Any time something goes 'wrong,' like a toilet stopping up or a leak somewhere, we fix it. Even when we get ready to do major repairs, like replacing the roof or the carpet, the amount of money we saved on rent would more than cover those costs. Plus, schools tend to be better closer homes, you tend to have much nicer neighbors, and you don't have to deal with a landlord. Buying a home may not make sense if you don't have a stable job or you move around a lot. But for most people, over time it's much more cost efficient and can be a great decision. As long as you buy something you can actually afford.
My rent-controlled apartment costs $1,099 a month in an area where the median home cost is one *million.* It's amazing to me that for many years I bought the lie that paying rent was "throwing away money." Run the numbers indeed.
Key word, “Rent controlled” that is fake since without that rent control you would be paying 2-3 times that other people must pay with higher paying jobs.
@@jameswiggs9655 You're incorrectly assuming rent control is always income based. There are many places---including where I live---that it's city-wide. By choosing a less prestigious zip code literally one block from multi-million dollar homes I've gotten the best of both worlds and can let someone else deal with things like plumbing issues and roof repair.
I've had colleagues who commuted 2 to 3 hours every day so they could "own" a home with a massive mortgage, while I was able to put extra money into my employer's generous retirement matching program and enjoy biking to work, having money for interesting vacations, and TIME for family, friends, classes, cultural events, etc.
It doesn't mean they were wrong to buy houses in the suburbs if that's what makes them happy. But I'm glad in retrospect I made the choices I did and also stopped believing the lie that rent is "throwing money away." I've gotten MASSIVE value from renting.
U hit the nail on the head luv ur show ur right house is a liability not an asset keep up the good work 👌🏽👍🏽
I’m single and even I believe buying a house is the BEST decision I have ever made. I have ultimate freedom! to travel and rent the house out and make $1500 a month PROFIT even after the mortgage. I am also free to rent out rooms or convert to ADU. My location is in extremely high demand, I can do what I want to my place no upstairs neighbors etc. I pay less than what rents are here because rent goes up 300 dolllars every year. My mortgage does not. I have stability!!! I pay $1000 less than a small apartment per month. Also I may adopt one day. I have the beach the mountains an airport and everything within walking distance or a short drive of my house. Location location location. And how did I get here? I was homeless 4x saved my ass off I bought a house flipped a house and now this is my permanent place of residence. Great decision.
Hey Ramit, thanks for a great video, you are sincerely appreciated, Your Voice of Reason. I have been a die hard "renter" for many decades, I "Ran the Numbers " when I was much Younger, had many battle with Wifey over the Classic Dream Argument, however now with 100 percent Liquidity, we both trade the market haven't had to work in many many years. Recently a young couple bought the townhouse directly across from us for over $600 K, payments are $4300 plus hoa of $550, plus the usual move in prep costs , plus You know the rest. In Total they are paying 3.1 times our lease payment on exactly the same townhouse in Los Angeles. We cover our rent and utilities on CD divies alone.
I think it really depends on the market where you live. I know that in my area I am paying $1200 more than what I currently pay on our mortgage and it’s an older home without all the upgrades we have in our brand new construction. So, I would be throwing away $1200 per month and doing upgrades in order to make it look the way I want because I doubt the landlord will lower the rent to offset the upgrades I want. I do think that in some markets your advice does work but not everywhere. Also, there are some people who are good at paying off their home early so they want that reassurance that they will only need to pay property taxes during retirement vs high rent. One of my friends have paid off their home & two are on their way to paying their homes off.
The point is: PLAN to buy a home and KNOW what you're truly paying instead of jumping into a bad financial situation because of expectations, age, marriage, kids, etc.. My wife and I rent a single family home 3 bed/2 bath for under $2000. We're expecting our first child in January and while the pressure is coming from both sides of our family to buy a house, we have so much more opportunity by renting. If we bought a similar property, it would be well over double what we pay currently. And with the money that we would be spending on a mortgage, we can continue to save for our newborn, pay off student loans, invest in our 401ks and max out our roth IRAs and still have GUILT FREE spending every month.
That doesn't make sense, why would the owner rent it so cheaply?
@@zuzanazuscinova5209 not all landlords are greedy. Thats typical for this rural area, and the homes are older.
Great work. I love how conscious you're being.
@@zuzanazuscinova5209they probably live in a less expensive area. I’m from N Texas and I could rent a house with the same specs for that price or less. For $2k, it might even be renovated/up to current aesthetic standards. Less than $2k it’ll probably look like something from a 90s sitcom, but it’s still a house instead of an apartment.
@@TCL_808 Sounds like your current situation is ideal, and I'm sure you're aware that it could change at any time. Biggest downside to renting. If you have a contingency plan in case the landlord decides to sell/move in/die/etc, then it's all good. In any case, best of luck as new parents!
Gotta have my castle, its worth it.
"You will own nothing, and be happy"😂😅🤣🤥
I don’t know, but for me owning a home is a great feeling. Peaceful, not dealing with a land lord. It’s a great feeling feel, that you actually have something that you own and can stay or leave whenever you wish to.
I've rented for 20 years and never had to "deal" with a landlord. What are you talking about? I pay rent, they fix things. I never see them otherwise. You make it sound as if it having a landlord is such a hastle, like they are always bothering you?
I bought mine in 2011. I paid $135,000. It is now worth about $635,000. I have put in new flooring, painted & added quartz countertops. It was still the smartest thing I have ever done. I have a roommate who pays close to the payment - how can you not say this was a smart investment?
This is in Scottsdale, Arizona🌵😎
You own nothing if you still paying mortgage. They can take your house anytime. Not worth the stress. Renting is so much easier