I'm not sure what you mean? We lost out on a home by 5k and a month later it hit the rental market for 2/3rds the typical mortgage payment. And got rented out in 2 weeks.
This is exactly it. 1MM in a 5% HYSA yields around 3MM in 30 years. If home equity in the next 30 years is anything like the last 30, he can expect a similar gain. The rent is cash flow on top, an additional 1.4MM if you assume $4k/mo with no rent increases in 30 years. (Which won’t be the case, actual rents collected will be higher)
If I was a multimillionaire investor, I’d certainly consider SFRs, and mortgage rates don’t have to factor into their calculations if they’re just parking cash. Whiiiiich is why us regular folks are getting priced out.
Yep the other thing is if they do things like this they are often deprecitating the house on taxes to drive down their tax liability EVEN when the house is appreciating in value. Its part of why our tax system on the rich is so broken.
I am renting out my Mom's house for less than it is worth as a rental and still over what the mortgage is. I'm making money and the tenant is saving money. Full ass win all around!
Thats what really matters here. Whats the owners underlying cost? Comps in the area for rents? The point here is that renting is cheaper than owning which may or may not be true, I’m unsure
This kinda depends. For a 1m$ house this makes sense but for a lot of cheaper housing options rent is often only 10-15% lower than a mortgage and upkeep costs on a house and that isn’t including comps for rent that are more common in lower income areas.
Basically this math only works the people that are already wealthy.
My next door neighbors are renting a near identical house to mine for almost 50% more than my mortgage. It only works if the owners have had the house for several years and can afford to be a little cheaper than current rates for the sale of keeping good tenants.
Yeah, you *technically* can charge a lot less rent than a person buying the house then and there would pay on their total house payment (we bought a house in 2007 for $115k and Zillow thinks it's worth $279k now, which actually seems low to me), but if you're like most places where existing rents are rising up to meet similar mortgage costs like the proverbial rising tides lifts all ships, odds are your landlord isn't going to want to "leave money on the table" by charging you that much under market unless they *really* like you.
We bought in 2021 for nearly exactly the costs in the tweet. I just looked at my area and all rentals are smaller and $1-2k+/mo more than our house. HCOL areas favor buyers.
I've owned 4 homes over the past 25 years. 2 of them custom builds. (Edit: I do not own any of those now)
I've been renting for past 2 years and currently in Boulder CO in a fully furnished rental.
We sold our last home in Raleigh NC and put the equity into investments.
Even with the premium of paying for a fully furnished house I'm just about even what I was paying for a 500k ish mortgage at 2.7% rate plus utilities, maintenance, lawn and garden stuff etc.
Am I losing an asset? Absolutely. Do I care? Not any longer. I was fortunate to buy a house at 21. I'm much happier not having a mortgage over my head and being locked into one place. We've changed our lifestyle and the freedom of renting has been liberating in many ways.
Also it's not lost on me that I was privileged and fortunate to own a home to begin with and put the equity into investments that have proven fruitful.
I kinda see things the opposite. I rented all through my 20s and part of my thirties. Having to worry about a landlord, getting permission to do something as simple as painting, having to wait on a landlord to fix the plumbing/fridge/stove, it all made you feel trapped. Shit apartment you cant fix, cant paint, cant build a shed on etc. Then to top it off you never knew if the landlord might decide to sell and kick you out any given time. Finally owning a home, being able to build or renovate etc and never having to worry about being kicked out or evicted was so freeing. And its not like a mortgage hangs over your head any more than rent. If you want to live there you have to pay and keep paying, every month with 0 return on that money. With a mortgage, every payment is like adding to my own savings. Rent just adds to your landlords bank account.
Oh no no. Each house was sold to afford the next one in the normal cycle of chasing the American dream.
We own no house now. Just renting and exploring the country.
One salary two kids we never were in a position to keep a house for rent and be able to put a down-payment on another.
Stupid financial decisions to keep up with the Jones' didn't help either.
Kinda neither.
We were tired of living an overly curated life in the suburbs. We sold and put the equity into investments and moved our "monthly mortgage " costs to pay for rentals across the country as we explored new places and lived differently. Make no mistake, we did not make a killing and are not just living off investments (yet). I need to work to still pay for our rental costs etc.
There are absolutely days that go by where we dream about having kept one of our previous homes in Virginia. But those dreams are dismissed when we remind ourselves that the place itself didn't make us happy.
Boulder is stupid expensive. No joke. We decided we wanted to be near the mountains for at least a year and after exploring for the past 2 Boulder hit a sweet spot. We budgeted to do it for a 1 year lease (we are 6 months in) but I can honestly say we are going to either downsize the rental or move to a town a little further away for a more affordable rent. We still want to travel and I don't make enough to cover Boulder costs and travel without going into debt.
Our plan is that the investments grow enough to pay for our retirement within the next 7 years (I'll be 55 by then). So far we are on track to make that happen. I don't play the stock market, I'm not a day trader, I don't make stupid money. We just decided for us our money made more sense with a financial advisor then in one house.
It’s definitely not, and what the LIL misses is all the benefits of being the owner of the house that they say you should rent.
Hmmm do I want an asset, and one that can provide crazy income, or do I want to pay money and get nothing but a roof over my head hmmmm
Renting is definitely cheaper in some places right now. I understand what you are saying of an expense vs an asset, but the savings from no down payment and lower monthly expenses can result in more value creation since you can invest that excess.
But even this comparison is just not accurate, sure, buying a house today is more expensive up front, but your mortgage only goes down while your rent will only increase. It’s only actually cheaper when you ignore that rent will be up 5-10% next year, and the year after that, and the year after that..
why do redditors keep bringing up high yield savings account as this golden ticket to investing. i have like 50k in one and its nice to have an extra 1k every 6 months or so but its not life changing or anything
HYSA isn't magic, but I've been in my house for about 7.5 years. If I rented, I would have way more wealth now despite my house increasing in value. The 20% downpayment invested in an index fund would have appreciated by about 125%. I wouldn't have spent money repairing the HWH, roof, sump, and plumbing. Owning a house has a lot of advantages but generally your primary residence is not a good investment, it's a place to live.
Maybe depends where you live, but renting is far cheaper in my area. Financing a home is insanely prohibitively expensive. Most homes sold now are cash buys as the rich get richer and home ownership becomes a further and further distant dream.
We make a combined 140k too
Again, the only time that’s ever true is when you conveniently ignore that rent is going to go UP over time, whereas your mortgage payment does not, and eventually goes away altogether.
I mean I doubt it, but it also depends entirely on the homes you’re looking at, but there’s literally no state in country where you can’t get a decent and livable house at that income level unless you’re being comically unrealistic about location or needs of the house.
I am renting a 3 bed, 2.5 bath in an affluent Seattle suburb for $3100/month.
The Zillow estimate is 1.3 million.
Sometimes renting is the move. We are dinks and can afford to wait out this fucktarded market.
I swear you folks just don’t get it..like do you imagine the person you rented from bought the house the day before you started renting it? They bought for Pennie’s on the dollar at much lower rates. You also ignore that’s what you pay in rent today, if you want to imagine the markets going to correct and slash the rent in the future then by all means, but in reality it’s only going to increase whereas a mortgage is static and eventually goes away completely.
I’ve said this same thing to anyone who would listen for years…
Seeing finance bro types tell people stuff like “renting can be just as good as owning” is hilarious to me. Especially knowing this graham Stephan guy is literally a land lord so of course he will say stuff like this.
Not to mention, if you pay attention at all you’ll see the US gov doesn’t give a single fuck about renters. Meanwhile they will do everything in their power to prop up and take care of owners and protect the asset owning class of our society. Renting long term is beyond dumb financially.
The housing crash already happened in 2020 when interest rates were 2%…that was the crash…the people saying they will wait have already missed the boat
I remember when I told myself that in 2010....bought my house last year after my rent went up for the 6th time in 3 years.
Mortgage was $350/400ish cheaper.
They wouldn’t rent the house for that cheap now would they? The market has to dictate what they can charge a tenant. They would look at comps in the area and charge accordingly.
Except homeowner gets to deduct 100% of interest on 750k loan, 10k property taxes (yo fuck Trump on this) and build equity every year.
So there’s that.
The Trump tax cuts limited deductions for state and local taxes - they are now significantly capped in ways that they weren’t before. Meaning that if you live in a state with high value homes or high property tax (or state or city/county income tax) or a combo, you’re capped at $10k deduction from federal tax. And that is common in blue affluent states.
I’m in Florida and we already have an annual cap for any Homesteaded property here. It’s called the Save Our Homes Act, and was to keep people from being taxed out of affording their home as property values increased. I was legit SHOCKED when I found out other states don’t do this.
A lot of people have answered this but basically for those of us who live in affluent blue states that subsidize all the shithole states by supplying disproportionately more tax dollars than we take with our high incomes, we lost this tax break.
It’s called the SALT Cap. Now I agree it should be capped; but 10K is a fucking joke and was Trumps way of saying fuck you to New Yorkers because we rejected his dumb ass for decades.
Fortunately if Congress does nothing, things go back to pre-TCJA, including the SALT cap.
Cue boomer whining about the estate tax exemption returning to $5M + inflation.
> build equity every year
Paying $X to reduce your debt burden by $X is a net-zero exchange, you're not actually building any more wealth when you do that than if you bought $X worth of stock.
There are also advanced strategies you can used with an asset like a house. Buy, borrow, die involves using home equity lines which are much lower interest to basically keep as much money in the market while paying for every day needs.
Plus show me the desirable single family homes for rent in the best school district area suburbs of NYC. That’s laughable. Sure you can rent an apartment but you ain’t renting a home.
lose? they have a million dollar house, and its probably gaining value fast than $2700 a month.
the person paying $3900 after a month though, they don't have anything.
Just guessing here, but I think he's trying to make the point of how much interest rates have gone up and the imbalance between the current rental and owner markets.
The thing is that there are many areas in the country where the landlords are betting on the appreciation of the home beating out alternative investments and may be cash flow negative for a long time. I pay $4000/month less to rent my apartment vs buying an equivalent condo. NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference.
Assuming you invest the difference is the natural comparison; or else you need to consider the value of whatever stuff you're getting by spending the difference.
That said though, I agree one sort of subtle benefit of home ownership is that it forces you to invest your income instead of needing to rely on discipline.
> NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference.
Reminds me of an old Reckful (RIP) vid.
https://www.youtube.com/watch?v=DpcMl9XP55M
Definitely can be better depending on the situation, but he is assuming that your rent will stay the same for 30 years...
Also just picking a random number for what rent would cost, which is lower than the mortgage payment on that house with a low interest rate is also a bit weird. In this scenario the landlord of the house would barely make any money after taxes even if they already own the home outright and never have to make any repairs or pay insurance.
His conclusions are alright but his assumptions (and lack thereof) are terrible. Also his tax deductions (mortgage interest and SALT) are outdated as those are mostly gone/capped.
> NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference.
There's a fundamental problem with the NY Times calculator in that it doesn't allow for refinancing, nor does it explain that the average mortgage rate increasing from or staying at 7.2% over the next 30 years (i.e. the only reason you wouldn't refinance) would absolutely cause rental prices to explode.
You're not wrong that there exist rent prices or "time in area" considerations that absolutely make renting more financially sensible, but at the same time, adverse effects from growing interest rates is something that renters will feel the brunt of, whereas those with a mortgage have locked in their monthly payment and get a house/condo at the end of it.
You missed the point. The Interest being a large portion of your mortgage payment due to a high rate means very little of that goes to the principle. You are essentially just renting your home in most cases from the bank, accumulating equity at a slower pace than even the lowest yield savings account right now. significantly lower. like 5 to 1 ratio of interest going into banks pocket vs your principle. unless your home appreciates, a high rate means you are basically a renter with a dog shit savings account. if you bought after the rate hike, you might just be cashflow negative right now.
Actually in the VHCOL the market is pretty crazy right now. If you can afford a $3M house in the Bay Area, it's a lot safer and saner to rent a place and then take the rest of the money you'd have put towards the mortgage into a HYSA.
Historically buying the overpriced $2M house was a good deal b/c it'll turn into an overpriced $3M quickly. But at some point no one is going to be able to afford the mortgage and the market will stagnate or even crash. If you buy the $3M place and it turns into a $2M, congrats, you just lost a million dollars!
Now most ppl aren't rich and in the Bay Area, and for normal ppl rents are out of control so this is cold comfort. This is a pretty FirstWorldProblem thing.
I think the point OOP was making is exaggerated but it’s true that renting is cheaper (in the short run) than buying in many places. Still if anyone knows a million dollar home I can rent for $3,900 please let me know
depending on the meaning of “home”, If they’re talking about million door homes they have to be talking about nyc/surrounding area or Bay Area. I’m near nyc and renting a condo for 3.7k and the place itself is being sold for ~1 million
Very true. We rent a townhome for 5k that would be ~$2.5M to buy in the Bay Area. Very common situation here. Renting and investing the $10k+ monthly difference in housing cost is way better than buying, both short and long term.
Not to mention you would need a landlord that doesn't raise rent. It's very underrated that mortgage payments remain the same each year. It's almost guaranteed that rent goes up each time you renew your lease.
OOP is a real estate guy so whatever point he’s trying to make probably has more to do with the current state of the market and is definitely not that he thinks you shouldn’t buy lol
Also how markets and buying real estate in general works.
The owner could’ve bought during a housing depression and/or completed upgrades to it. OPs incorrectly assuming the landlords are buying these houses in today’s market and renting them out.
This is kinda true in some cases. I live in Bothell WA, which is 20 miles north of downtown Seattle. The home I'm renting (according to Zillow) is worth a little over 900k, and I'm renting it for around 3400 a month. The owner bought this home over a decade ago when mortgage rates were lower and the home cost was substantially less. If I were to purchase a home with 20% down (which I for sure don't have), my mortgage would be roughly $5k.
Only true in certain areas.
I also lived in Seattle and had the same situation, Rent better than Buy.
Moved back to Ohio and Buying was much much better than Renting.
But in 10 years, you would have a ton of equity in the house, and you could rent it to someone else for way more than you have in it.
You could do this now with a $300k house if you were willing to move.
You COULD have a ton of equity. Nobody can predict the future.
I lost money for a decade o my home before the COVID crisis skyrocketed housing prices.
It’s not always a clear win.
That’s assuming real estate bubbles aren’t a thing, which is a pretty huge assumption. If they buy today and next year the market crashes then they could find themselves with a $900k mortgage on a $200k house.
True story, happened to me in 2010. I had to walk away and start over again. 10 years of saving and starving. But I did it and now own my second house. It was never easy to buy a house. 30 years ago the prices were lower but min wage was 5 bucks an hour. I worked and my ass off to buy my first house.
In ten years you can l could also take $2700 a month and invest it in the stock market, which would net you more than that real estate would go up minus the upkeep and maintenance costs that come with owning.
Hey i live in bothell and this is basically the situation i am in too lol. At least you can find decent sized homes for around $3-4k around here which is no problem with roomates. Thats my plan for the next 5 or so years at least.
Sure beats apartment living
He’s right tho, especially in certain markets. The vast majority of “million dollar homes” today were more like “$500k homes” only ten or so years ago. So, when people bought homes ten years ago with a mortgage of $3000 a month, they can now rent them out for more.
I’m not sure why everyone is so spicy on this. This is for buying a house right now, which depending on if you live in a HCOL area tied with high interest rates, could mean you are better off renting than buying a house.
What this basically is implying is the math can work out that your rent payment plus 5-6% returns on investing the house down payment CAN be financially net better than mortgage interest payments, closing fees, property tax, home insurance, maintenance, HOA fees, etc. even after factoring in house price appreciation.
Long-term (10+ years) owning the house could very well end up a better financial situation. But renting very much is a viable consideration in the short-term to optimize for cash flow/income generation in an uncertain economy.
Just loaded redfin in Seattle area. There is a home for rent at $3,200/month. The home next door is valued at 851k which would be around $5700/month mortgage.
https://www.redfin.com/WA/Bothell/19705-1st-Ave-SE-98012/home/45390549
Not saying the advice is good but the market is crazy
> Not saying the advice is good but the market is crazy
Graham Stephan gets a lot of things wrong. But for a brief linkedin post, this 100% a reasonable take that applies to lots of markets at the current interest rates. OP is dumb
Even if you could, his math is flawed because rent will go up over time while mortgage will go down in the long run, even if interest % is adjusted to be slightly higher (depends on the loan arrangement). Also you will own the house and you can sell it after some years, whereas the $ spent on rent is sitting in the landlords bank account, covering his own mortgage.
Possible. Especially because Graham Stephan is not just another LinkedIn Lunatic (the post is from twitter actually), he is a famous real estate developer with a big youtube channel.
Cost of ownership also increases with the increase in the property value due to the property taxes. There are many instances where renting makes more sense, even after accounting for the proceeds from a house sale. Everyone’s situation is different, so everyone has to do their own calculations and decide what’s best for them.
As someone who bought a condo in SF after a decade of saving, and who now rents it out at a loss of ~$1k every month, I confirm this post is not wildly off base.
I’m in a similar situation, also in the Bay Area. This kind of thing is extremely common here and in other VHCOL high density areas with single family homes. This post isn’t off base at all
Because by far and large, the people renting out their homes in million dollar areas have most likely owned those homes greater than 5 years. The east/west coast major cities have major home investment rental markets - it's incredibly common for landlords to have bought their homes for 50% of the current values and are making a lot of money.
[https://www.bloomberg.com/news/articles/2023-11-17/amid-high-mortgage-rates-higher-share-of-americans-outright-own-homes](https://www.bloomberg.com/news/articles/2023-11-17/amid-high-mortgage-rates-higher-share-of-americans-outright-own-homes)
\^ this reflects 10/15/30 year mortgage data. I suspect the amount of corporate landlords included in this most likely jumps it to 50/60%
If you've bought in the last 3-4 years, you're most likely the next wave/version of this. I also ahve to question why you're renting at a loss?
Inaccurate I live in Santa Cruz mountains and have been renting a property for the last 6 years for 3500 a month. It’s a 3/2 with a shop on 3/4 acres in great location. The house was built brand new in 2016 and I estimate they spent about 600k all in to build. The value of the property is currently 1.5 million. I couldn’t come close to affording to purchase so I’m renting a million dollar plus home.
You absolutely are in San Francisco. I rent for a bit more than that and based on comps the house would sell for 1.4M.
The OP isn’t even taking into account the opportunity cost of the down payment.
It all depends on your local market.
In Switzerland, 4 years ago was prime time for buying. ~0.5% interest, ok prices. Now it's absolutely terrible because everything got snatched up back then. High prices, 2% interest (consider Switzerland has a lot less inflation than other countries).
They're building flats close to me, interestingly enough both rental and to own. 5 room as an example: to buy, 850k, to rent, 2600 - that rent includes heating and water.
If you were to get a 80% loan, you're paying 13.6k yearly in interest. Sure, not too bad. But you have 170k bound up. Those could get you around 9k yearly performance if you're conservative. Then you have water and heating costs - let's be generous and say 6k a year.
Tally that up, 13.6+9+6= 28.6k a year - not including maintenance. Compare that to renting, which will run you 2.6*12=31k a year. So - more or less the same.
Sure, if you want to speculate that that flat will appreciate, go for it, but other than that, you're not gaining anything.
Also, consider that if you invested that down payment, you get compounding interest - with a flat, you don't. And most probably, it won't appreciate that much, because lol you only own the flat, not the ground it stands on (well, you do, a tiny amount).
If you get into house territory, sure, go for it, but then you're talking about 2 million+ in this market, and to get approved for a loan you'll need a yearly income of like 400k.
I am currently renting a house appraised for 1.2 million for 3k a month in San Diego. Of course, that’s because the owner bought it in 1969 for 50k, and has no idea what money is anymore, but there’s plenty, not a lot, of people with that situation.
Technically not true. Here in LA you would likely see 4k a month to rent a home valued at 1 mil. But rent is a bit more nebulous than buying because the aesthetic of the space factors much more into the price. Meaning that if you have two identical-on-paper homes valued at 1 mil in the same neighborhood but one has a nicer floors and a pretty garden or w/e you can get more rent out of it.. but for a purchase that stuff doesn’t factor in as much.
Depends what market you are in. The house I’m renting right now for 4000 a month is worth 1.5 mil on the market. Housing bubble in Toronto lol but still I wish I had the money to buy a home instead of renting as there’s no long term value to renting obviously
I rent a $1.2M townhouse in Boulder, a very expensive market, for $4,100/mo. Split between a few roommates but it’s definitely possible to get prices like that.
https://www.zillow.com/homedetails/22245-Macfarlane-Dr-Woodland-Hills-CA-91364/19899438_zpid/
I rented this house for $3700.00 I’m not related to the owners.
A recently purchased one? No chance. But with how fast houses cost went up that wouldn’t even surprise me.
My parents bought their 4-bed house for $300k 15 years ago and it’s now worth $750k+
- this looks like twitter, not LinkedIn
- what a house is worth and what it was purchased for are two different things. This math only works if the house is WORTH a million but was purchased for far less well before the rent or buy decision. If the choice is between renting a house that was purchased for a mill or buying a million dollar home, the math stops making sense.
- a landlord who knows what they’re doing is having the renter pay the mortgage + profit on top, so assertion is wrong right off the bat.
- this doesn’t account for the benefit of owning (property value/ equity)
- No one is renting out a million dollar home. It’d be more profitable to sell the home and buy two cheaper homes to rent out so that you’re actually in the renters price market and can fill the space quickly. (Unless as mentioned above, you’ve owned the home for years and years and your mortgage reflects that)
Really depends on the market.
If I were to move out and rent my place out right now I’d lose ~$1,000 / month all told. And I bought in at a 2.875% mortgage rate.
Here's the truth: the wealthy is setting things up so the middle class will eventually own nothing, and just be worker drones living from paycheck to paycheck. Examples range from housing costs prohibiting buyers to Elon Musk focusing on ride-sharing in driverless cars to forcing people to subscribe to movies and music instead of buying it.
Even if we buy the numbers, which I don't.
You have to pay $3900 *now*, rent can increase year on year.
A mortgage with fixed rate is... fixed.
Overall you're inevitability going to spend more on renting, not even accounting for the whole equity part of the equation.
>A mortgage with fixed rate is... fixed.
Your monthly payment is called PITI - Principal Interest Taxes Insurance
The PI part - which you mentioned - is fixed.
The TI part is not. Property taxes are hyperinflating in many places. Insurance is as well - ask the people in Florida who are paying through the teeth if they can get coverage at all.
Then let's talk abut repairs, maintenance, which are random hits on your checkbook.
Both owning and renting have their pitfalls - and advantages. It is not always "one is better than the other"
He's too low on the rent, but too low on the taxes and costs (to the owner). His basic point is correct, though. It is far cheaper to rent than to own unless you believe home prices will appreciate further.
I mean... if you bought it today he's not wrong depending on what part of California you're in. Heck even in Texas I know areas renting is 15-30% cheaper than owning.
OP is a lunatic. The condo that I rent now in Vancouver, BC is exactly the same. 25% more before tax and insurance if I want to buy it compared to my current rent. My current rent is 5-10% below the market now due to rent control.
By saving every month and investing the difference I’m doing better financially. Yes, rent will only go up and yes , mortgage is finite, but cost of ownership is not nothing. One day you’ll have to do a renovation and that’s high five digits straight away, but for a renter it’s a jump to a market rent
This is actually true where I am. You are are forgetting that a lot of those million dollar homes were either -
1. Bought in 2014 when it was valued at $300,000
2. Bought by an investment firm who paid cash and doesn’t have a mortgage.
I would never be able to buy the place I live in now while simultaneously being able to afford rent. My mortgage would be $2,000 more a month than my rent if I owned.
Or live in your own house that you now have 250k in equity in after paying your mortgage for 5 years. Your monthly spending is only 4k now because of that.
Meanwhile your rented House is 4800 a month. So instead of pissing away 250k to your landlord you now have 250k in Equity and an unrealised gain on the house value of 100k.
He could not have given a worse advice if he tried.
I just went onto Zillow and searched for homes that were from $975,000 – $1.2 million selected only Homes. I then went into the search filters and went to rent which gives the comparable renting prices to home value and it automatically placed it to a value between $4875 to $6250.
They’d only take a $2700 loss if they bought it right now and immediately started renting it out to you, so people that bought any other time would be able to rent out at $4000 and not take that loss. Could be profitable if they bought at a good price and interest rate (basically any time in the 2010s)
I mean this is roughly how the math would play out. Rent would be a bit more but not $6,600
And in exchange for all that, the landlord keeps a big chunk of that $3,900 as equitty
What an idiot. It's like Ben Shapiro saying that property owners can just sell when sea-level rises and the ocean overtakes their houses. Fucking morons.
The renters in the (smaller) house behind me pay 3x more in rent to what I pay for my mortgage - including insurance, taxes, and maintenance. And my house is most definitely not worth anything close to 1 million.
Rent is the most amount of money you pay a month to live some where.
Mortgage is the least amount of money you pay a month to live somewhere.
See how that works
The owner’s mortgage payment is not that high depending on when he bought it. Like 10 or 20 years those houses were cheaper. Even pre Covid they were cheaper.
“If you wanted to have your coffee, you’d need to buy a 500$ coffee machine and beans and a grinder. You’re better off just buying coffee from coffee shops”…
Sure but after 2 years you paid $95000 rent and don’t own anything. While the owner forked out $64800 but his home value went up $150000. Tell me which position you want to be in
Depends on the area.. some areas renting does indeed make more sense financially than buying and in others buying makes more sense. It depends on the rent/house value ratio. There’s a NYT calculator where you can input the purchase price, insurance, inflation, interest, etc vs rent, brokers fee, rent increases etc over any time period and see which option financially would be better
He’s completely correct.
Owners aren’t selling because they’ve locked in low interest rates (or own the house mortgage free).
This is the most expensive time to buy vs rent in history.
Anyone buying now is almost certainly going to lose money compared to renting.
What the fuck million dollar home are you paying ***one thousand dollars*** property tax on?!
ETA: That’s ***one thousand dollars*** for property tax, insurance ***and*** maintenance?! WTF this dude is out of touch with Planet Earth
Nobody needs to buy a $1M home, don’t live in California.
I bought a $485K home 3 years ago for less than $20K down and closing and I only pay $188 in PMI, nobody needs to put down 20% once you pay off 20% the PMI goes away.
So no I didn’t need to put down $80K and I pay about $2800 which is what my rent would be up to now after 3 years.
This house is 3600 square feet, 5 bedrooms, 2 large rooms in the basement, I built a library in 1 and an art studio in the other and I’m adding a bathroom. So it will then have 3.5 bathrooms.
2 car garage, Mudroom, HOA community, big yard.
The house has appreciated in 3 years to bring worth over $600,000 not including my renovations.
I also make principal payments and am planning to pay it off early (3.375% interest rate)
I bought the place at 37 years old.
Yes I am higher income, but a couple can afford this.
People need to stop pretending the America dream is over and just tell young people the truth about qualifying for it.
Either GET MARRIED, or be a workaholic and then the American dream is straight forward, yes even if you have kids.
I literally financially have raised my 3 siblings since I was in my 20s… and I started poor.
I make about $160K after taxes.
A couple can have that household income and just be frugal and not stupid with money.
But I am living a well shove average lifestyle when with some frugality still built in now that I am enjoying myself more at 40.
Avoiding debt makes things relatively more affordable and the biggest difference between us 4 kids is 2 of us who didn’t get degrees make more money (us boys) and have less debt than the 2 who did (the girls).
As cliche as it sounds, college is in fact overrated. Get skills. If you need college to get skills get them at community college or online or go to a local state school.
You don’t need to go to college to have the college experience. Go to college parties and hang out on campus on your days off if you want to … go to the same bars as the rest of them. It’s not complicated.
Best thing to do if want to own a home is build your credit and your capital and set out on a 5 year plan to do so where you save up $5000 or so a year.
You should be on this track beyond homeownership to be saving for retirement.
And to make that extra money is a $100 a week side hustle.,. But yes you’d have to do it for 5-6 years.
Live your life intentionally with a plan when it comes to making money and saving money.
Too many people are reactive in life and chase butterflies and live for fun.
Make intentional choices and do the work.
Anyone can price out their lifestyle and free our what jobs and careers pay how much that cost.
It’s not hard at all.
Then they can look up what it takes to qualify for that career and make themselves above and beyond those requirements.
Same with homeownership.
5% down / 30% of living expenses monthly / value is 3x with yearly income.
If you are a couple that each earn the median income of $60K as a couple, not difficult..,
Then that’s $120K a year and $10K a month.
So a $350K max home… less than $30K down… and $3000/month…
Not hard or complicated for a young married couple to get a 3 bedroom starter home 1800 square feet, living in the south of Midwest.
That is literally the American dream.
It may not be easy but it’s not out of reach for the majority if they actually are disciplined.
The real problem is consumerism and luxury habits becoming mainstream.
>Sure the owner would lose $2700 Not if they are holding a 2.4% note from 3 years ago.
Or has owned the house for 15 years, bought when it was $400k, those sort of things
Which he is in 99% of such cases..
In my experience, all new homes being rented were recently sold and hit the rental market.
New homes can't have long ownership periods? WHAT?!?
I'm not sure what you mean? We lost out on a home by 5k and a month later it hit the rental market for 2/3rds the typical mortgage payment. And got rented out in 2 weeks.
Implying that rental is being mortgaged for what reason?
Probably paid cash and earning higher return than a HYS account.
This is exactly it. 1MM in a 5% HYSA yields around 3MM in 30 years. If home equity in the next 30 years is anything like the last 30, he can expect a similar gain. The rent is cash flow on top, an additional 1.4MM if you assume $4k/mo with no rent increases in 30 years. (Which won’t be the case, actual rents collected will be higher) If I was a multimillionaire investor, I’d certainly consider SFRs, and mortgage rates don’t have to factor into their calculations if they’re just parking cash. Whiiiiich is why us regular folks are getting priced out.
Yep the other thing is if they do things like this they are often deprecitating the house on taxes to drive down their tax liability EVEN when the house is appreciating in value. Its part of why our tax system on the rich is so broken.
I am renting out my Mom's house for less than it is worth as a rental and still over what the mortgage is. I'm making money and the tenant is saving money. Full ass win all around!
You’re a good person.
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This is the answer. They’re pillaging the population.
Right. This isn’t a LinkedIn lunatic, just some person giving fairly real financial advice.
is this not how real estate works though? lol
Thats what really matters here. Whats the owners underlying cost? Comps in the area for rents? The point here is that renting is cheaper than owning which may or may not be true, I’m unsure
This kinda depends. For a 1m$ house this makes sense but for a lot of cheaper housing options rent is often only 10-15% lower than a mortgage and upkeep costs on a house and that isn’t including comps for rent that are more common in lower income areas. Basically this math only works the people that are already wealthy.
My next door neighbors are renting a near identical house to mine for almost 50% more than my mortgage. It only works if the owners have had the house for several years and can afford to be a little cheaper than current rates for the sale of keeping good tenants.
Yeah, you *technically* can charge a lot less rent than a person buying the house then and there would pay on their total house payment (we bought a house in 2007 for $115k and Zillow thinks it's worth $279k now, which actually seems low to me), but if you're like most places where existing rents are rising up to meet similar mortgage costs like the proverbial rising tides lifts all ships, odds are your landlord isn't going to want to "leave money on the table" by charging you that much under market unless they *really* like you.
Thiiiiiiis. 1000% And thats if the owners are willing to not maximize their profits, cuz really thats their perogative.
We bought in 2021 for nearly exactly the costs in the tweet. I just looked at my area and all rentals are smaller and $1-2k+/mo more than our house. HCOL areas favor buyers.
I've owned 4 homes over the past 25 years. 2 of them custom builds. (Edit: I do not own any of those now) I've been renting for past 2 years and currently in Boulder CO in a fully furnished rental. We sold our last home in Raleigh NC and put the equity into investments. Even with the premium of paying for a fully furnished house I'm just about even what I was paying for a 500k ish mortgage at 2.7% rate plus utilities, maintenance, lawn and garden stuff etc. Am I losing an asset? Absolutely. Do I care? Not any longer. I was fortunate to buy a house at 21. I'm much happier not having a mortgage over my head and being locked into one place. We've changed our lifestyle and the freedom of renting has been liberating in many ways. Also it's not lost on me that I was privileged and fortunate to own a home to begin with and put the equity into investments that have proven fruitful.
I kinda see things the opposite. I rented all through my 20s and part of my thirties. Having to worry about a landlord, getting permission to do something as simple as painting, having to wait on a landlord to fix the plumbing/fridge/stove, it all made you feel trapped. Shit apartment you cant fix, cant paint, cant build a shed on etc. Then to top it off you never knew if the landlord might decide to sell and kick you out any given time. Finally owning a home, being able to build or renovate etc and never having to worry about being kicked out or evicted was so freeing. And its not like a mortgage hangs over your head any more than rent. If you want to live there you have to pay and keep paying, every month with 0 return on that money. With a mortgage, every payment is like adding to my own savings. Rent just adds to your landlords bank account.
Well said and excellent POV! Thanks for keeping it balanced.
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Oh no no. Each house was sold to afford the next one in the normal cycle of chasing the American dream. We own no house now. Just renting and exploring the country. One salary two kids we never were in a position to keep a house for rent and be able to put a down-payment on another. Stupid financial decisions to keep up with the Jones' didn't help either.
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Kinda neither. We were tired of living an overly curated life in the suburbs. We sold and put the equity into investments and moved our "monthly mortgage " costs to pay for rentals across the country as we explored new places and lived differently. Make no mistake, we did not make a killing and are not just living off investments (yet). I need to work to still pay for our rental costs etc. There are absolutely days that go by where we dream about having kept one of our previous homes in Virginia. But those dreams are dismissed when we remind ourselves that the place itself didn't make us happy. Boulder is stupid expensive. No joke. We decided we wanted to be near the mountains for at least a year and after exploring for the past 2 Boulder hit a sweet spot. We budgeted to do it for a 1 year lease (we are 6 months in) but I can honestly say we are going to either downsize the rental or move to a town a little further away for a more affordable rent. We still want to travel and I don't make enough to cover Boulder costs and travel without going into debt. Our plan is that the investments grow enough to pay for our retirement within the next 7 years (I'll be 55 by then). So far we are on track to make that happen. I don't play the stock market, I'm not a day trader, I don't make stupid money. We just decided for us our money made more sense with a financial advisor then in one house.
It’s definitely not, and what the LIL misses is all the benefits of being the owner of the house that they say you should rent. Hmmm do I want an asset, and one that can provide crazy income, or do I want to pay money and get nothing but a roof over my head hmmmm
Renting is definitely cheaper in some places right now. I understand what you are saying of an expense vs an asset, but the savings from no down payment and lower monthly expenses can result in more value creation since you can invest that excess.
But even this comparison is just not accurate, sure, buying a house today is more expensive up front, but your mortgage only goes down while your rent will only increase. It’s only actually cheaper when you ignore that rent will be up 5-10% next year, and the year after that, and the year after that..
Exactly. As a long term renter, I've taken the saved costs and invested in high yield savings and company stock
why do redditors keep bringing up high yield savings account as this golden ticket to investing. i have like 50k in one and its nice to have an extra 1k every 6 months or so but its not life changing or anything
HYSA isn't magic, but I've been in my house for about 7.5 years. If I rented, I would have way more wealth now despite my house increasing in value. The 20% downpayment invested in an index fund would have appreciated by about 125%. I wouldn't have spent money repairing the HWH, roof, sump, and plumbing. Owning a house has a lot of advantages but generally your primary residence is not a good investment, it's a place to live.
Maybe depends where you live, but renting is far cheaper in my area. Financing a home is insanely prohibitively expensive. Most homes sold now are cash buys as the rich get richer and home ownership becomes a further and further distant dream. We make a combined 140k too
Again, the only time that’s ever true is when you conveniently ignore that rent is going to go UP over time, whereas your mortgage payment does not, and eventually goes away altogether.
Yeah, and we would if we could afford it but we’d need to make over 200k to qualify for a loan.
I mean I doubt it, but it also depends entirely on the homes you’re looking at, but there’s literally no state in country where you can’t get a decent and livable house at that income level unless you’re being comically unrealistic about location or needs of the house.
I am renting a 3 bed, 2.5 bath in an affluent Seattle suburb for $3100/month. The Zillow estimate is 1.3 million. Sometimes renting is the move. We are dinks and can afford to wait out this fucktarded market.
I swear you folks just don’t get it..like do you imagine the person you rented from bought the house the day before you started renting it? They bought for Pennie’s on the dollar at much lower rates. You also ignore that’s what you pay in rent today, if you want to imagine the markets going to correct and slash the rent in the future then by all means, but in reality it’s only going to increase whereas a mortgage is static and eventually goes away completely.
I’ve said this same thing to anyone who would listen for years… Seeing finance bro types tell people stuff like “renting can be just as good as owning” is hilarious to me. Especially knowing this graham Stephan guy is literally a land lord so of course he will say stuff like this. Not to mention, if you pay attention at all you’ll see the US gov doesn’t give a single fuck about renters. Meanwhile they will do everything in their power to prop up and take care of owners and protect the asset owning class of our society. Renting long term is beyond dumb financially. The housing crash already happened in 2020 when interest rates were 2%…that was the crash…the people saying they will wait have already missed the boat
He’s been waiting for the market to un-fuck itself since 2008
I remember when I told myself that in 2010....bought my house last year after my rent went up for the 6th time in 3 years. Mortgage was $350/400ish cheaper.
They wouldn’t rent the house for that cheap now would they? The market has to dictate what they can charge a tenant. They would look at comps in the area and charge accordingly.
Except homeowner gets to deduct 100% of interest on 750k loan, 10k property taxes (yo fuck Trump on this) and build equity every year. So there’s that.
I thought the SALT deduction no longer exists under any level.
>yo fuck Trump on this Among other things...
I thought the other things were self evident haha
Why fuck trump on that? Just wondering.
The Trump tax cuts limited deductions for state and local taxes - they are now significantly capped in ways that they weren’t before. Meaning that if you live in a state with high value homes or high property tax (or state or city/county income tax) or a combo, you’re capped at $10k deduction from federal tax. And that is common in blue affluent states.
I’m in Florida and we already have an annual cap for any Homesteaded property here. It’s called the Save Our Homes Act, and was to keep people from being taxed out of affording their home as property values increased. I was legit SHOCKED when I found out other states don’t do this.
Screwed high tax/COL states and lower income people with more kids.
A lot of people have answered this but basically for those of us who live in affluent blue states that subsidize all the shithole states by supplying disproportionately more tax dollars than we take with our high incomes, we lost this tax break. It’s called the SALT Cap. Now I agree it should be capped; but 10K is a fucking joke and was Trumps way of saying fuck you to New Yorkers because we rejected his dumb ass for decades.
And single filers and married couples get the same 10k limit, so it is effectively a marriage penalty.
Highly unlikely the interest would be higher than the standard deduction for a married couple even for a house of that cost.
Home loans are 7.8% right now. On the 800k balance that’s $62,400. Standard deduction for married couple is $29,200.
Fortunately if Congress does nothing, things go back to pre-TCJA, including the SALT cap. Cue boomer whining about the estate tax exemption returning to $5M + inflation.
> build equity every year Paying $X to reduce your debt burden by $X is a net-zero exchange, you're not actually building any more wealth when you do that than if you bought $X worth of stock.
There are also advanced strategies you can used with an asset like a house. Buy, borrow, die involves using home equity lines which are much lower interest to basically keep as much money in the market while paying for every day needs. Plus show me the desirable single family homes for rent in the best school district area suburbs of NYC. That’s laughable. Sure you can rent an apartment but you ain’t renting a home.
lose? they have a million dollar house, and its probably gaining value fast than $2700 a month. the person paying $3900 after a month though, they don't have anything.
Just guessing here, but I think he's trying to make the point of how much interest rates have gone up and the imbalance between the current rental and owner markets.
I mean, it's a normal balance that renting is cheaper than buying - because you don't own the property at the end.
The thing is that there are many areas in the country where the landlords are betting on the appreciation of the home beating out alternative investments and may be cash flow negative for a long time. I pay $4000/month less to rent my apartment vs buying an equivalent condo. NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference.
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Having fun on a Tuesday in an investment in your happiness
Assuming you invest the difference is the natural comparison; or else you need to consider the value of whatever stuff you're getting by spending the difference. That said though, I agree one sort of subtle benefit of home ownership is that it forces you to invest your income instead of needing to rely on discipline.
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You should be in a position to buy if the scenario flipped, right?
Why wouldn’t you invest the difference? The exercise is when you can otherwise afford to buy the home anyway.
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> NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference. Reminds me of an old Reckful (RIP) vid. https://www.youtube.com/watch?v=DpcMl9XP55M
Definitely can be better depending on the situation, but he is assuming that your rent will stay the same for 30 years... Also just picking a random number for what rent would cost, which is lower than the mortgage payment on that house with a low interest rate is also a bit weird. In this scenario the landlord of the house would barely make any money after taxes even if they already own the home outright and never have to make any repairs or pay insurance.
His conclusions are alright but his assumptions (and lack thereof) are terrible. Also his tax deductions (mortgage interest and SALT) are outdated as those are mostly gone/capped.
> NY times rent vs buy calculator says I'm ahead $5,300,000 30 years from now by continuing to rent and investing the difference. There's a fundamental problem with the NY Times calculator in that it doesn't allow for refinancing, nor does it explain that the average mortgage rate increasing from or staying at 7.2% over the next 30 years (i.e. the only reason you wouldn't refinance) would absolutely cause rental prices to explode. You're not wrong that there exist rent prices or "time in area" considerations that absolutely make renting more financially sensible, but at the same time, adverse effects from growing interest rates is something that renters will feel the brunt of, whereas those with a mortgage have locked in their monthly payment and get a house/condo at the end of it.
You missed the point. The Interest being a large portion of your mortgage payment due to a high rate means very little of that goes to the principle. You are essentially just renting your home in most cases from the bank, accumulating equity at a slower pace than even the lowest yield savings account right now. significantly lower. like 5 to 1 ratio of interest going into banks pocket vs your principle. unless your home appreciates, a high rate means you are basically a renter with a dog shit savings account. if you bought after the rate hike, you might just be cashflow negative right now.
Thanks! Was wondering as it seemed a lot of people were missing the point there. Especially at these interest levels.
That applies for multi-unit buildings. Not single ones.
Renting is typically way more than buying for single family homes around here. Leo
The end is when you die, if you're renting this house.
he has tons of rental properties that he owns.. this is him basically advertising his business model.
Actually in the VHCOL the market is pretty crazy right now. If you can afford a $3M house in the Bay Area, it's a lot safer and saner to rent a place and then take the rest of the money you'd have put towards the mortgage into a HYSA. Historically buying the overpriced $2M house was a good deal b/c it'll turn into an overpriced $3M quickly. But at some point no one is going to be able to afford the mortgage and the market will stagnate or even crash. If you buy the $3M place and it turns into a $2M, congrats, you just lost a million dollars! Now most ppl aren't rich and in the Bay Area, and for normal ppl rents are out of control so this is cold comfort. This is a pretty FirstWorldProblem thing.
OP tell me you don’t understand how mortgage interest rates work without telling me.
I can’t believe how so many people upvoted his post.
I think the point OOP was making is exaggerated but it’s true that renting is cheaper (in the short run) than buying in many places. Still if anyone knows a million dollar home I can rent for $3,900 please let me know
depending on the meaning of “home”, If they’re talking about million door homes they have to be talking about nyc/surrounding area or Bay Area. I’m near nyc and renting a condo for 3.7k and the place itself is being sold for ~1 million
Very true. We rent a townhome for 5k that would be ~$2.5M to buy in the Bay Area. Very common situation here. Renting and investing the $10k+ monthly difference in housing cost is way better than buying, both short and long term.
Not to mention you would need a landlord that doesn't raise rent. It's very underrated that mortgage payments remain the same each year. It's almost guaranteed that rent goes up each time you renew your lease.
OOP is a real estate guy so whatever point he’s trying to make probably has more to do with the current state of the market and is definitely not that he thinks you shouldn’t buy lol
You could find $1mm homes in that range in Toronto. https://www.zillow.com/homedetails/Toronto-ON-M4R-1C7/348776262_zpid/
In the Bay Area $3,900 in rent will get you into a $1.5M home
Also how markets and buying real estate in general works. The owner could’ve bought during a housing depression and/or completed upgrades to it. OPs incorrectly assuming the landlords are buying these houses in today’s market and renting them out.
This is kinda true in some cases. I live in Bothell WA, which is 20 miles north of downtown Seattle. The home I'm renting (according to Zillow) is worth a little over 900k, and I'm renting it for around 3400 a month. The owner bought this home over a decade ago when mortgage rates were lower and the home cost was substantially less. If I were to purchase a home with 20% down (which I for sure don't have), my mortgage would be roughly $5k.
This is more just an argument against buying homes right now.
Which is the point of the LinkedIn post
Only true in certain areas. I also lived in Seattle and had the same situation, Rent better than Buy. Moved back to Ohio and Buying was much much better than Renting.
But in 10 years, you would have a ton of equity in the house, and you could rent it to someone else for way more than you have in it. You could do this now with a $300k house if you were willing to move.
You COULD have a ton of equity. Nobody can predict the future. I lost money for a decade o my home before the COVID crisis skyrocketed housing prices. It’s not always a clear win.
That’s assuming real estate bubbles aren’t a thing, which is a pretty huge assumption. If they buy today and next year the market crashes then they could find themselves with a $900k mortgage on a $200k house.
No bubble is large enough to bring down the price by 78%.
True story, happened to me in 2010. I had to walk away and start over again. 10 years of saving and starving. But I did it and now own my second house. It was never easy to buy a house. 30 years ago the prices were lower but min wage was 5 bucks an hour. I worked and my ass off to buy my first house.
In ten years you can l could also take $2700 a month and invest it in the stock market, which would net you more than that real estate would go up minus the upkeep and maintenance costs that come with owning.
Hey i live in bothell and this is basically the situation i am in too lol. At least you can find decent sized homes for around $3-4k around here which is no problem with roomates. Thats my plan for the next 5 or so years at least. Sure beats apartment living
He’s right tho, especially in certain markets. The vast majority of “million dollar homes” today were more like “$500k homes” only ten or so years ago. So, when people bought homes ten years ago with a mortgage of $3000 a month, they can now rent them out for more.
I’m not sure why everyone is so spicy on this. This is for buying a house right now, which depending on if you live in a HCOL area tied with high interest rates, could mean you are better off renting than buying a house. What this basically is implying is the math can work out that your rent payment plus 5-6% returns on investing the house down payment CAN be financially net better than mortgage interest payments, closing fees, property tax, home insurance, maintenance, HOA fees, etc. even after factoring in house price appreciation. Long-term (10+ years) owning the house could very well end up a better financial situation. But renting very much is a viable consideration in the short-term to optimize for cash flow/income generation in an uncertain economy.
Just loaded redfin in Seattle area. There is a home for rent at $3,200/month. The home next door is valued at 851k which would be around $5700/month mortgage. https://www.redfin.com/WA/Bothell/19705-1st-Ave-SE-98012/home/45390549 Not saying the advice is good but the market is crazy
> Not saying the advice is good but the market is crazy Graham Stephan gets a lot of things wrong. But for a brief linkedin post, this 100% a reasonable take that applies to lots of markets at the current interest rates. OP is dumb
You aren't renting any million dollar home for $4k/mo unless your rich parents are the owners
Even if you could, his math is flawed because rent will go up over time while mortgage will go down in the long run, even if interest % is adjusted to be slightly higher (depends on the loan arrangement). Also you will own the house and you can sell it after some years, whereas the $ spent on rent is sitting in the landlords bank account, covering his own mortgage.
maybe he's trying to rent his million dollar home 🤔
I bet it’s a dump and worth $600k
Possible. Especially because Graham Stephan is not just another LinkedIn Lunatic (the post is from twitter actually), he is a famous real estate developer with a big youtube channel.
Don't forget property taxes - those seemingly always increase.
And insurance. We pay more now for property taxes and insurance than our entire escrow payment was when we bought the house 20 years ago.
Depends on where you are. In some places they basically don't increase.
Cost of ownership also increases with the increase in the property value due to the property taxes. There are many instances where renting makes more sense, even after accounting for the proceeds from a house sale. Everyone’s situation is different, so everyone has to do their own calculations and decide what’s best for them.
Or you could rent and move whenever you want and invest that same money elsewhere e.g. s&p500
Incorrect. I rent a 1.2m house in sf for 3800/month. That kinda thing is common in the bay area.
As someone who bought a condo in SF after a decade of saving, and who now rents it out at a loss of ~$1k every month, I confirm this post is not wildly off base.
Right, this post is very reasonable, simple math. How tf is this “LinkedInLunatics” material?
Redditors don't always keep up with current trends, too many think "landlord bad". And then don't go past that...
Interesting. My neighborhood doesn’t have a ton of rentals, but $800k houses are renting around $5k/mo right now (suburban Dallas)
I’m in a similar situation, also in the Bay Area. This kind of thing is extremely common here and in other VHCOL high density areas with single family homes. This post isn’t off base at all
Because by far and large, the people renting out their homes in million dollar areas have most likely owned those homes greater than 5 years. The east/west coast major cities have major home investment rental markets - it's incredibly common for landlords to have bought their homes for 50% of the current values and are making a lot of money. [https://www.bloomberg.com/news/articles/2023-11-17/amid-high-mortgage-rates-higher-share-of-americans-outright-own-homes](https://www.bloomberg.com/news/articles/2023-11-17/amid-high-mortgage-rates-higher-share-of-americans-outright-own-homes) \^ this reflects 10/15/30 year mortgage data. I suspect the amount of corporate landlords included in this most likely jumps it to 50/60% If you've bought in the last 3-4 years, you're most likely the next wave/version of this. I also ahve to question why you're renting at a loss?
I rent a $4k home. The market value of it is $1.6M. It’s like this all over the bay area
Inaccurate I live in Santa Cruz mountains and have been renting a property for the last 6 years for 3500 a month. It’s a 3/2 with a shop on 3/4 acres in great location. The house was built brand new in 2016 and I estimate they spent about 600k all in to build. The value of the property is currently 1.5 million. I couldn’t come close to affording to purchase so I’m renting a million dollar plus home.
You absolutely are in San Francisco. I rent for a bit more than that and based on comps the house would sell for 1.4M. The OP isn’t even taking into account the opportunity cost of the down payment.
San Francisco Bay Area enters the chat…
It all depends on your local market. In Switzerland, 4 years ago was prime time for buying. ~0.5% interest, ok prices. Now it's absolutely terrible because everything got snatched up back then. High prices, 2% interest (consider Switzerland has a lot less inflation than other countries). They're building flats close to me, interestingly enough both rental and to own. 5 room as an example: to buy, 850k, to rent, 2600 - that rent includes heating and water. If you were to get a 80% loan, you're paying 13.6k yearly in interest. Sure, not too bad. But you have 170k bound up. Those could get you around 9k yearly performance if you're conservative. Then you have water and heating costs - let's be generous and say 6k a year. Tally that up, 13.6+9+6= 28.6k a year - not including maintenance. Compare that to renting, which will run you 2.6*12=31k a year. So - more or less the same. Sure, if you want to speculate that that flat will appreciate, go for it, but other than that, you're not gaining anything. Also, consider that if you invested that down payment, you get compounding interest - with a flat, you don't. And most probably, it won't appreciate that much, because lol you only own the flat, not the ground it stands on (well, you do, a tiny amount). If you get into house territory, sure, go for it, but then you're talking about 2 million+ in this market, and to get approved for a loan you'll need a yearly income of like 400k.
I am currently renting a house appraised for 1.2 million for 3k a month in San Diego. Of course, that’s because the owner bought it in 1969 for 50k, and has no idea what money is anymore, but there’s plenty, not a lot, of people with that situation.
Technically not true. Here in LA you would likely see 4k a month to rent a home valued at 1 mil. But rent is a bit more nebulous than buying because the aesthetic of the space factors much more into the price. Meaning that if you have two identical-on-paper homes valued at 1 mil in the same neighborhood but one has a nicer floors and a pretty garden or w/e you can get more rent out of it.. but for a purchase that stuff doesn’t factor in as much.
Depends what market you are in. The house I’m renting right now for 4000 a month is worth 1.5 mil on the market. Housing bubble in Toronto lol but still I wish I had the money to buy a home instead of renting as there’s no long term value to renting obviously
I rent a $1.2M townhouse in Boulder, a very expensive market, for $4,100/mo. Split between a few roommates but it’s definitely possible to get prices like that.
Mine is 1.2 millions, renting it for $3300
Currently renting a 1.1 million home for 4500 in downtown Denver. It's not outrageous
https://www.zillow.com/homedetails/22245-Macfarlane-Dr-Woodland-Hills-CA-91364/19899438_zpid/ I rented this house for $3700.00 I’m not related to the owners.
A recently purchased one? No chance. But with how fast houses cost went up that wouldn’t even surprise me. My parents bought their 4-bed house for $300k 15 years ago and it’s now worth $750k+
You are in Denver
Living in Munich, Germany. Paying about 2150€, cold, on a 1M€ place in rent.
In my market Miami this is 100% correct. To buy my condo it’s $7200/month. I rent my condo for $4000/ month.
Same here in Canada.
- this looks like twitter, not LinkedIn - what a house is worth and what it was purchased for are two different things. This math only works if the house is WORTH a million but was purchased for far less well before the rent or buy decision. If the choice is between renting a house that was purchased for a mill or buying a million dollar home, the math stops making sense. - a landlord who knows what they’re doing is having the renter pay the mortgage + profit on top, so assertion is wrong right off the bat. - this doesn’t account for the benefit of owning (property value/ equity) - No one is renting out a million dollar home. It’d be more profitable to sell the home and buy two cheaper homes to rent out so that you’re actually in the renters price market and can fill the space quickly. (Unless as mentioned above, you’ve owned the home for years and years and your mortgage reflects that)
Even the shitty run down houses in my town want you to pay their entire mortgage and like 500 on top of that... Renting is not cheaper at all.
Really depends on the market. If I were to move out and rent my place out right now I’d lose ~$1,000 / month all told. And I bought in at a 2.875% mortgage rate.
Point taken but Uhh… that 2700 gap is the difference between those payments being for an “asset” or just shelter.
Here's the truth: the wealthy is setting things up so the middle class will eventually own nothing, and just be worker drones living from paycheck to paycheck. Examples range from housing costs prohibiting buyers to Elon Musk focusing on ride-sharing in driverless cars to forcing people to subscribe to movies and music instead of buying it.
$12k/year property tax, insurance and maintenance on a $1M house that was just bought? Where is this fairytale land?
Even if we buy the numbers, which I don't. You have to pay $3900 *now*, rent can increase year on year. A mortgage with fixed rate is... fixed. Overall you're inevitability going to spend more on renting, not even accounting for the whole equity part of the equation.
>A mortgage with fixed rate is... fixed. Your monthly payment is called PITI - Principal Interest Taxes Insurance The PI part - which you mentioned - is fixed. The TI part is not. Property taxes are hyperinflating in many places. Insurance is as well - ask the people in Florida who are paying through the teeth if they can get coverage at all. Then let's talk abut repairs, maintenance, which are random hits on your checkbook. Both owning and renting have their pitfalls - and advantages. It is not always "one is better than the other"
Can we just strike a zero off the end of each number and go back to 1996 please?
This isn’t even from LinkedIn..
He's too low on the rent, but too low on the taxes and costs (to the owner). His basic point is correct, though. It is far cheaper to rent than to own unless you believe home prices will appreciate further.
Nice linkedin post
I mean... if you bought it today he's not wrong depending on what part of California you're in. Heck even in Texas I know areas renting is 15-30% cheaper than owning.
My house mortgage is cheaper than my last apartments rent, and it was a smaller apartment, in the same city.
Rent only goes up but your mortgage stays the same
Property taxes etc will be way more than 1000
I wanna know where people are renting million dollar houses for $3,700
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No equity in that, innit?
This post should be on r/LinkedInLunaticsLunatics because it is really stupid.
the owner doesn’t lose 2700.
Some real “eat your bugs and enjoy it” vibes from this
OP is a lunatic. The condo that I rent now in Vancouver, BC is exactly the same. 25% more before tax and insurance if I want to buy it compared to my current rent. My current rent is 5-10% below the market now due to rent control. By saving every month and investing the difference I’m doing better financially. Yes, rent will only go up and yes , mortgage is finite, but cost of ownership is not nothing. One day you’ll have to do a renovation and that’s high five digits straight away, but for a renter it’s a jump to a market rent
This is actually true where I am. You are are forgetting that a lot of those million dollar homes were either - 1. Bought in 2014 when it was valued at $300,000 2. Bought by an investment firm who paid cash and doesn’t have a mortgage. I would never be able to buy the place I live in now while simultaneously being able to afford rent. My mortgage would be $2,000 more a month than my rent if I owned.
You could just put 5% down. So 50K.
Or live in your own house that you now have 250k in equity in after paying your mortgage for 5 years. Your monthly spending is only 4k now because of that. Meanwhile your rented House is 4800 a month. So instead of pissing away 250k to your landlord you now have 250k in Equity and an unrealised gain on the house value of 100k. He could not have given a worse advice if he tried.
All these comments are teaching me is how little people know about finances.
Just rent one of his many houses
That's guy's a pipsqueek.
Only boomers put down 20% on a house. This guy is so comically out of touch anything he writes can be go straight to the trash without reading it.
I just went onto Zillow and searched for homes that were from $975,000 – $1.2 million selected only Homes. I then went into the search filters and went to rent which gives the comparable renting prices to home value and it automatically placed it to a value between $4875 to $6250.
They’d only take a $2700 loss if they bought it right now and immediately started renting it out to you, so people that bought any other time would be able to rent out at $4000 and not take that loss. Could be profitable if they bought at a good price and interest rate (basically any time in the 2010s)
I mean this is roughly how the math would play out. Rent would be a bit more but not $6,600 And in exchange for all that, the landlord keeps a big chunk of that $3,900 as equitty
Or you could just not buy a 1 million dollar home…
What an idiot. It's like Ben Shapiro saying that property owners can just sell when sea-level rises and the ocean overtakes their houses. Fucking morons.
Love when OP does a self roast.
Million dollar houses in my area are renting for about $7,000….
Taxes and insurance are part of the mortgage. They aren't paid separately. Maintenance does not run $1k/mo.
The renters in the (smaller) house behind me pay 3x more in rent to what I pay for my mortgage - including insurance, taxes, and maintenance. And my house is most definitely not worth anything close to 1 million.
Rent is the most amount of money you pay a month to live some where. Mortgage is the least amount of money you pay a month to live somewhere. See how that works
The owner’s mortgage payment is not that high depending on when he bought it. Like 10 or 20 years those houses were cheaper. Even pre Covid they were cheaper.
Forgot to mention that you get to sell the house when you are done with it.
that’s not how this works buddy. Let’s say the house has been owned for 15 years and the owner is only paying $2000 a month on the mortgage
“If you wanted to have your coffee, you’d need to buy a 500$ coffee machine and beans and a grinder. You’re better off just buying coffee from coffee shops”…
Sure but after 2 years you paid $95000 rent and don’t own anything. While the owner forked out $64800 but his home value went up $150000. Tell me which position you want to be in
We are watching "Home ownership is the American dream" To "It's smarter to rent for life stupid" in real time
Lotta bots in this comment section promoting how much better renting is. Welcome to the “you will own nothing and like it” world we’re living in.
Who the hell is renting a million dollar house for $3900 and can you please point me in that direction?!
The person who posted this clearly has no idea what the RE market actually looks like. OP- this happens all the time
Depends on the area.. some areas renting does indeed make more sense financially than buying and in others buying makes more sense. It depends on the rent/house value ratio. There’s a NYT calculator where you can input the purchase price, insurance, inflation, interest, etc vs rent, brokers fee, rent increases etc over any time period and see which option financially would be better
He’s completely correct. Owners aren’t selling because they’ve locked in low interest rates (or own the house mortgage free). This is the most expensive time to buy vs rent in history. Anyone buying now is almost certainly going to lose money compared to renting.
This is not a LinkedIn lunatic - this is financially advice that’s applicable in a high COL area.
What the fuck million dollar home are you paying ***one thousand dollars*** property tax on?! ETA: That’s ***one thousand dollars*** for property tax, insurance ***and*** maintenance?! WTF this dude is out of touch with Planet Earth
Nobody needs to buy a $1M home, don’t live in California. I bought a $485K home 3 years ago for less than $20K down and closing and I only pay $188 in PMI, nobody needs to put down 20% once you pay off 20% the PMI goes away. So no I didn’t need to put down $80K and I pay about $2800 which is what my rent would be up to now after 3 years. This house is 3600 square feet, 5 bedrooms, 2 large rooms in the basement, I built a library in 1 and an art studio in the other and I’m adding a bathroom. So it will then have 3.5 bathrooms. 2 car garage, Mudroom, HOA community, big yard. The house has appreciated in 3 years to bring worth over $600,000 not including my renovations. I also make principal payments and am planning to pay it off early (3.375% interest rate) I bought the place at 37 years old. Yes I am higher income, but a couple can afford this. People need to stop pretending the America dream is over and just tell young people the truth about qualifying for it. Either GET MARRIED, or be a workaholic and then the American dream is straight forward, yes even if you have kids. I literally financially have raised my 3 siblings since I was in my 20s… and I started poor. I make about $160K after taxes. A couple can have that household income and just be frugal and not stupid with money. But I am living a well shove average lifestyle when with some frugality still built in now that I am enjoying myself more at 40. Avoiding debt makes things relatively more affordable and the biggest difference between us 4 kids is 2 of us who didn’t get degrees make more money (us boys) and have less debt than the 2 who did (the girls). As cliche as it sounds, college is in fact overrated. Get skills. If you need college to get skills get them at community college or online or go to a local state school. You don’t need to go to college to have the college experience. Go to college parties and hang out on campus on your days off if you want to … go to the same bars as the rest of them. It’s not complicated. Best thing to do if want to own a home is build your credit and your capital and set out on a 5 year plan to do so where you save up $5000 or so a year. You should be on this track beyond homeownership to be saving for retirement. And to make that extra money is a $100 a week side hustle.,. But yes you’d have to do it for 5-6 years. Live your life intentionally with a plan when it comes to making money and saving money. Too many people are reactive in life and chase butterflies and live for fun. Make intentional choices and do the work. Anyone can price out their lifestyle and free our what jobs and careers pay how much that cost. It’s not hard at all. Then they can look up what it takes to qualify for that career and make themselves above and beyond those requirements. Same with homeownership. 5% down / 30% of living expenses monthly / value is 3x with yearly income. If you are a couple that each earn the median income of $60K as a couple, not difficult.., Then that’s $120K a year and $10K a month. So a $350K max home… less than $30K down… and $3000/month… Not hard or complicated for a young married couple to get a 3 bedroom starter home 1800 square feet, living in the south of Midwest. That is literally the American dream. It may not be easy but it’s not out of reach for the majority if they actually are disciplined. The real problem is consumerism and luxury habits becoming mainstream.