Why Buying Is Not Always Better Than Renting
ฝัง
- เผยแพร่เมื่อ 14 พ.ค. 2024
- So you've probably heard the phrase "renting is money down the drain" and you've probably been told your whole life, that you should get on the property ladder and buy a home, because once you've bought a home, then you're saving money and it's an investment and stuff, and hey, at least you're not renting anymore and throwing all that money away.
BUT it's actually a lot more complicated than that. BOTH buying and renting have costs, both financial and psychological, and those are the factors we need to take into account which I'll be discussing in this episode of Money Club.
How to Invest for Beginners: • How to Invest for Begi...
I Bought My First Rental Apartments: • I Bought My First Rent...
Buy Vs. Rent Calculator: my.causal.app/models/98
00:00 Intro
01:36 Chapter 1 - The Home buying bias
02:28 Chapter 2 - The SMORES rule
03:15 Chapter 3 - Financial factors
03:27 Sunk Costs
05:43 Maintenance costs
06:39 Opportunity costs
14:18 Chapter 4 - Psychological factors
14:30 Roots vs Wings
15:32 Easiness
17:02 Savings
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One of your best videos till date. Well done Ali. Stay blessed
Working on getting my real estate license at the moment, this is the perspective and the type of content that I need. Thanks!
Hey Ali…😀 your one of my favourite TH-camrs and congratulations for 3M subs🥳
Great video, like how you cover all aspects beside the financial ones !
Also just stumbled upon your channel and subscribed ! Thanks for speeding up the video (or speaking fast) so I don't have to :) !
Love that you have chosen this topic. I am just 21. My situations are different, like all of us. This helps put some clarity in my mind with regards to my future.
Emotional Quotient is one of the most important factors for the majority for having this tangible asset.
The sense of security a house provides is outstanding.
I'd sooner have a widebeem boat, if you dont like your neighbours you can soon move .
Amazing video. It's also really great to see everything written down with all of the factors no one ever thinks about. I used to hate when people would tell me to get a house because it's "equity" and that renting is "throwing money away" when all together it's really not that simple.
Awesome information. Definitely left some things to think about. Thanks!
Thank you so much for this video! I’ve had a long-standing fear of financial topics and avoided them purely because I felt like I couldn’t understand them. Ali is a wizard at explaining complex concepts simply 🧙♂️, this video was so clear and easy to understand- thank you!
Great video to explain a very complicated problem! Other considerations not mentioned are tax implications, e.g. primary residence exemption (capital gains) upon selling of home; in some countries mortgage interest is tax deductible; interest on investment loan is tax deductible if borrowing to invest; leverage in general; interest rate risk; diversification.
Another point in favor of buying. Repairs. When you buy, you are responsible for your own repairs and maintenance, so they actually get done. I used to hate fighting with landlords to take care of basic repair and maintenance.
congratulations Ali
am so happy for you
upon making 3million subscribers.
@cheers to you
My most pressing question would simply be how long will renting remain an economical option long-term? At least in the United States, many people are being priced out of their rentals. Even by using the opportunity cost of not buying a home to invest your income, that doesn’t take into account things like wage stagnation and inflation. You may be forced to move before you ever realize a significant enough profit to stay afloat.
This video only truly applies to individuals with enough wealth to feasibly afford either expense and just want to make a preference.
In germany there are extremely strict regulations on rents. You can only raise rent by 11% every couple of years and only until your rent reaches the average rent in your area. Meanwhile house prices are rising by 10%+ each year. That's why I prefer living in a rental (I also got lucky and pay around 30% less than my neighbours)
@@konradhausmann6359 Very Interesting. Here in my apartment in college the rent increased by 10% every year lol.
it's the same here in Ireland, I can't believe what the world has come to, it's scary!
@Ali Abdaal ㊉①④①④③⑥⑦⑦②⓪⑦ Fake
If you rent long-term, you’re basically forced into using those “wings” by shopping around for better rentals or increasing income with job changes.
This brings up so many emotions for people but honestly, I am so glad you are talking about this, Ali! Fantastic points!!!
I really feel like I’m growing up along with this channel. I first discovered Ali as I searched for tips on how to effectively study while in college, and now I’m learning information I could use as I prepare myself for purchasing a house.
Loving the content great explanation. The videos are on point.
Great video! Finding your channel is one of the best things to ever happen to me, it motivated me to change careers, join the tech industry and start my own Tech TH-cam channel. That's it ,just thank you!
Everyone needs an extra cash flow apart from a daily job, anything that can help get a little extra dough each month is important to be beat the tide. I’m mainly focused in channeling funds into investments that yield returns without constant intervention.
Some passive income ideas like investing in stocks sure take some work to get up and running, but has eventually earn me money while asleep
The reason why rich people are still rich today is because they buy assets, invest their income in other to generate more
@@carmatatom8546 indeed this is right on target, I have put a couple of resources into stocks, got some altcoins, and I and seeing myself making my initial million. the market is progressively recuperating.
I have two account - one for trading and one for investing. The one mistake I make in BOTH accounts is going all in because my conviction is so high. Now with the recent market crash, I had to sit on the sidelines instead of being able to buy some of my favorite stocks at a discount.
@@silvaconceicao7130 The market has been killing me so much lately. Too much FUD going around, buying at the top and selling at the bottom. I can't afford to be on the losing side any more. I need a professional who will be my eyes and guide my hands in this market.
One thing you didn't mention was with renting a furnished place, psychologically you don't feel like the place is yours because you don't own much of the stuff in the place you're living. So if you don't like the couch/bed at the rental property, it's normally really hard to change it but with your own place/unfurnished rental property then it's a lot easier to change
yes. i feel the same.
That’s why I rent unfurnished
If you don’t like the furniture don’t rent it…? You’re not forced
@@7oeseven793 yes but then if you love and have some furniture you have to always think about it when renting. You have to find the space to put it. What if you don't find the space? Where will you store it?
And is it good for the furniture to be carried so much when you have to move? It's not that simple. I don't know how old you are, but some people are really attached to the things they own(I'm not saying they have a clutter. You cand still have few things and deeply appreciate them). Not having them feels like you don't belong there. It's not that easy to stay in rent. That's why everyone after they have enough money buys a place. Let's be real. If it's a family the kids will have to always change their bedroom, their studying place and you cannot negate they will feel unfulfilld. You can't explain to a child that they have to move because the prices are too high.
@@7oeseven793 maybe some people have always rented a furnished house and cannot afford to rent an unfurnished house and buy all new furniture to be able to live normally in it.
Damnn Ali you gonna hit 3 mill man … super proud and inspiring 💯 much love ❤️🔥💯
This is such a good reference video! The psychological aspect of buying vs renting is no joke! We moved across the country to buy a home because the mortgage was substantially less than rent where we were previously living. 1 year into the experience I've discovered I much prefer my wings, and the stress of dealing with home repair coordination was actually so bad that I ended up with a horrible case of shingles lol Now we're just waiting for that 2 year mark to decide if we want to sell or just keep the house as a rental and move along LOL
Such a good point -there is so much psychology and emotion in home buying!
You make really good points but I think you miss out the massive uncertainty that comes with renting (especially if you don't want to move every 2 years). Our landlord has just upped the rent by 11% because the market is crazy at the moment and they can. We live on a yearly contract so I don't know if I can afford to live here next year if the landlords increase rent again. The UK doesn't offer much security to renters so it's more predictable to calculate your mortgage versus rent actually
And banks can increase interest rates which also cause uncertainty since they were at a record low
Some can't afford the payments
Exactly
"The UK doesn't offer much security to renters" reading that i am sure you either dont live in the uk or you dont know the laws
@@DR-M-K or I live in the UK but come from a country where there are actual laws to protect tenants.
I think the same, I live in Sydney, luckily we bought our house 4 years ago, with 2 kids I prefer buy rather than rent, I have more peace of mind knowing that no one can kick me out , specially when you live in a city that keeps changing.
Really good analysis. It's such a complex equation!
This format is way better for you, so much more engaging!
For most people that had to start from 0 (as in their parents never owned a thing and never saved money) renting should be only a short term thing but at least in my area (Spain) rent is usually at least 50% more expensive than mortgage payments, the problem lies with getting the down-payment to be able to get a mortgage after paying rent since rent is so high that it can be more than 50% of your monthly salary since wages stagnated since early 2000 and we haven't kept up with the rest of Europe so we end up in the cycle of having to rent because we have to live paycheck to paycheck without being able to save money for small investments so for most people (usually millenials and in the future gen z) owning is unattainable unless sudden luck appears in their life.
Time for revolution.
Ali you've taught me so much as always and you break it down so well! Love your videos, sooo much value!!!! Best Teacher Ever!
Rent a house to live, buy houses to have. The best of the two worlds.
Lol so u can afford 2 houses now
Subtle, to the point and just accurate, these kinda videos need to be published every week. For me, I reckon renting could be a better financing option for most people nowadays just because there's tons of investment opportunities which weren't available in the first place.
Ya'll tripping or lying on purpose at this point cause you want to rent out your homes. Most of the time Mortgages are lower than rent, so you rent it out and keep the difference with the bonus of OWNING THE HOUSE, while the renter pays more than the owner and gets NOTHING
No you forget house appreciates. The mortgage will stay the same for 30 years while the house value keeps increasing. Rent could be double 10 years from now and who know what
Renting is always more expensive, all things being equal. The only exception is if you buy a money pit of a home.
Excellent video mate!! Great information, appreciate it!!
I rent at a crazy prices in Munich where whilst a potential mortgage would be similar monthly outlay (not accounting for property price appreciation which cannot be realised until sale), the actual cost initial cost of purchase is just CRAZY!! And the total costs for 20yrs is more if I purchase (again not accounting for equity gained). BUT, the stress of being locked into a huge mortgage, the costs of maintaining etc is just going to leave me with empty pockets and stressed mind.
I guess one frustrating thing about UK renting is how the BTL market essentially sets the price of renting. If you buy, you're paying upkeep fees like Service charges and ground rent (for leasehold), but those costs are absolutely factored straight into the rent price. A £1200 PCM property can have a mortgage of £400 a month for the owner, but they are getting so much yield because they can get away with passing all the additional costs onto the tenant.
That's why I don't want to rent. The rental market just isn't priced sensibly for as long as UK homeowners see their property as an investment opportunity outside of it's property value.
I do agree that's a complicated question but for average joes including myself, I tell everyone to buy as soon as they can. There is a reason real estate is called a real estate in my view. Plus the psychological burden of renting is huge in long term. Once you pay off a good portion of your mortgage and you have a much higher income since you started, you find a pleasant peace of mind in truly owning a living place and not being owned by it. Renting is easier, and you can rent a nicer place with the same monthly payment with no long-term commitment, but buying is always better in my view.
'buying is always better' is far too simplistic
'buying is always better' isn't just simplistic, it is a very ignorant thing to say. Every person has different circumstances and preferences. You can't say buying is better for every single person.
Unpopular opinion but this culture of prospering for a property portfolio is ruining the market
Amen!
Retweet, Canada’s housing market is ruined from investors
Yep 100%. I resent the obsession with buy-to-let’s in the UK. But that’s poorer people just doing what the wealthy class do.
I'm in Vancouver Canada, and this buy vs rent topic has swung so hard to the rent side by force. This is because of the huge housing bubble that exists. Sadly, I know many that have bought and took on a huge mortgage for FOMO. I think Ali covered the topic really well. The psychological aspect of buying vs renting is a factor everyone really needs to consider. Life is more than just wealth.
Not unpopular at all! Housing should never be a commodity and if it is, should be regulated l
Ali I miss your old content (2020-late 2021) so much 😭 Please bring those back!!!
thank you! i bought my home at age 28. i moved away and i now rent it out while i rent someone else's home in my current city. i miss living in the home i own but not the city it's in.
I'm a real estate appraiser and I can't tell you how many horror stories I've heard about people spending $10k+ in one-off maintenance (roof, foundation, siding, etc) just because something broke down. Not even for expensive houses, either. Some of them sell for $150-250k and demand $15-40k of maintenance over 30 years. When calculating the opportunity cost of renting vs. buying, think about it like this: the S&P 500 does its own maintenance. The businesses that underperform are removed and replaced with businesses that are growing. Your house does not.
Truth! People underestimate the holding costs. Also, rents can reduce in times of recession.
@@method341 rents can reduce???? are you serious
@@richardnorth1881 of course. Rents are subject to supply & demand. When there is excessive housing supply relative to demand, the price will fall.
Yes, buying is an investment, but don't forget that if it's your primary home, you cannot just sell and use that money. You will need to buy another place, which will have also gone up in value.
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Not necessarily, plenty of people keep their home until retirement and then sell it off while traveling or renting in a restricted community for seniors (much much cheaper than normal renting). And even more so you definitely can just sell your home and use a portion of that on a new downpayment and use the rest for something else.
That is why that most important reason to buy instead of rent is: you're generating equity. Not just relying on appreciation in value as an investment. Even if your house's value goes down you are still benefiting immensely from owning your home instead of renting. This is because every mortgage payment you make is basically just paying yourself in the future, rather than rent which is just lost forever.
Great vid mate thanks love the money club
It was pretty knowledgeable thanks for the video
Congrats on reaching 3 million❤❤
Agree its about the opportunity costs involved and also more importantly everyones situation is unique and we have to get used to thinking for ourselves based around our lifestyle, choices wishes and wants.
High quality video. Thanks!
Such a well made video 👏🏻
This really cleared my doubt on which side of shelter should I invest on!
perfect timing! Thanks, Ali, for demystifying the process.
I was thinking about this recently, and your video came up. You’re reading my mind 😂
This video pops up at the perfect time I've been thinking about whether to buy it rent because I'm moving to a new city. The psychological benefits definitely make me lean towards renting. And the opportunity costs! Didn't even think about that.
Great video this, really nice insight!
Is the depth of field like super shallow… or have you used a green screen? Really nice video visually but something seems different
As someone still navigating financial literacy videos like this are beyond helpful I used to thinking buying was better but I’m definitely open to new ideas so thank you! 🙏🏽
Tbh in my experience, and my friends experiences, buying would always be better. At least where I live, most landlords are terrible terrible people. Myself and my friends have had several very dangerous problems with our apartments, and the landlords have just sat around and took their time to sort them out.
For example, I had a leak above my electric heater for 6 weeks. I messaged the maintenance team and the landlord several times over that period, and it took 6 weeks for them to bother to get a builder to show up. Several other issues like this occurred, and that’s just in one of the apartments I rented.
I would do quite literally anything to avoid renting ever again. It’s never worth it. When I moved out, I got charged 230 out of my deposit for damage that was already there when I moved in. I had to threaten legal action for them to drop the charges, which they eventually did.
That being said, I’m sure there are a few good ones. But overwhelmingly, in my experiences and my friends, they’ve almost always been horrible.
Theeesse topics you discuss should be mandatory to learn about in school.
Another problem with renting is that rent also increases yearly so i just bought my house and save money to invest in stocks at the same time.
@Pinned Ali Abdaal i don't wanna, one subscriber lost.
Honestly you still have to pay interests when you take out a loan,
no need to glorify it or justify it, just because you want to
@@tedlovejesus yeah you pay interest for the loan but at least money will come back to you when you sell the property and gain more due to the property’s appreciation unlike renting where money is just lost.
@@tedlovejesus The fuck are you talking about? The interest paid on a mortgage is peanuts compared to the equity and appreciation value.
@@tedlovejesus interest in much less than the rent during 60 years that I still have to live
Thank u for the great video!! 😊❤
Hey Abdaal,
That's a nice way to have your self in a box whilst the broll is running in the background. How or what did you use to be able to do that?
Great video BTW!
You can't compare linear rent growth to a percentage of asset growth - over time the percent returns will compound exponentially. In my area of the US, rent typically increases by 5-6.5% per year historically. The relation of rent to mortgage prices is inverse where at the beginning of the mortgage it is very 'expensive' compared to rent, but in 20 years that mortgage is still the same (outside of taxes) in dollar amount whereas the rent has compounded to a dollar amount far more 'expensive' than the mortgage.
Well done. I’ve debated with peers about this very topic. The most important counter argument for “renting is money down the drain” is … having a roof over your head is never a waste of money.
And what you covered are additional points that people fail to consider. Living in nyc, a lot of my peers have bought homes in the out skirts of the city. So now they own a home, but they commute upto 2 hours ONE WAY to get to work. That’s a total of 20 hours lost to commuting and most likely a miserable 820hours to spend per week.
I personally think it makes sense to continue saving until you have the funds to purchase a more expensive home because of location. The alternative is to purchase an apartment for the time being before upgrading to a home that’s in a good location.
The only time you should be waiting on buying a home is in that very specific situation of not being able to afford one that is reasonable to live in. Those situations are extremely rare though, almost everyone should be buying instead of renting. Buying a house is literally the first step of buying your next house because leveraging the equity of your first property for your next one and continuing that climb is literally the first rule of generating wealth without even trying.
Was the older footage of you when you were a doctor? You really had a glow up 😂 💯🔥
Great video although there is one big point of error on the rental estimate, you are putting an interval range for stock market returns annually that goes from -2% to just 8%(the average). If you are using an interval you would need to put a much higher percentage as the stock market consistantly has years that return well over the average! Other solution would be just to use the average annual return of 7% and don't provide a lower range. Hope that helps!
It doesn't hurt to be conservative.
These CLUB series, be it books or money... is superb.
Yess!
@Pinned Ali Abdaal Stop spamming, I am an aware user.
I bought my house during the recession when the housing value was significantly declining. At the time I bought it for $210000 and sold it a few months ago for $670000. I recently moved back to the condo I bought 6 years ago. I am planning to buy a house when the price drops and I will definitely will sell it when the housing market is on a fast-paced upward trajectory. We are know amid rising inflation and geopolitical uncertainty that will probably throw the economy back into recession.
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Someone buying a million dollar home would not be paying $2k in rent for that same area. Just not possible. I live in Hawaii and buying saves me a massive amount of money as rent is way higher than my mortgage and all taxes and fees.
I always use to watch your videos
Amazing knowledge 🙂
MaSHAALlAH ❤️
Sending so much love from Bangladesh!
Thanks Ali, with the estimated numbers simulation is easier. Nice shirt btw
LYDIA MARKET IS NOW OPEN !
I have always been in favour of buying a home, especially in my country Ghana where rent is so so expensive. But I am beginning to understand and appreciate why sometimes, renting could be a better option. Thanks for the informative video Ali!
Your brother's company needs to add a few variables to their equation. Primarily, if the cost of a monthly mortgage payment is cheaper and only lasts 15 years, how much excess money could you invest at the same [-2 to 8%] rate over the same timeframe. It changes the outcome dramatically.
The psychological stress is real! I became a homeowner at 22 and no one was honest about the stress it comes with. Then there’s such pressure not to sell along with the sunk cost fallacy that keeps you from being flexible about where you’ll live.
To me buying will be better because even if you are buying the house and you have to be paying small small you will eventually finish paying one day and you will became a house owner. But if you pay rent it is not easy because rent might likely increase every year or there about. Great content Ali.
Would be interesting to see the comparison with investing included in the buying equation.
Amazing video Ali, thank you for being such an inspiration for so many people on this world. :)
I love these episodes!
Living in France I bought a house later last year and I am happy with it. It is my investement in my future. And I can do whatever I want with it. Sell, change, renovate, rent, etc. Yes, in the begining you pay a lot of charges and taxes but it is "yours" and in the far future you will be free from the credit payments. Rent a house for the whole life... well it is also a choice but you invest in someone's pocket. I have a lot of friends living in rental houses and they are happy with that. But also I know families that bought their house in 80s and now they are free from credits and they are living their happy life.
You're sooo right, this 'own nothing and be happy' strategy is suspicious since all the rich guys buy a lot of property and land.
Agree on this and also with fed increasing the interest rates, it might just make mortgage repayment more expensive
Except inflation is also increasing by 10% this year so overall your mortgage just got cheaper even with increasing interest rates
The difficult thing for me with renting is that renters pay the mortgage of the landlord on the property and they give the landlord profit too. There's a reason why property is a good business lol.
If the rent you pay came from dividends of your stocks, you are essentially living for free. While you are paying the rent, the landlord are not living in your room, so you are practically owning the place for the duration.
@@kaydens6964 love this comment, this is EXACTLY how I see it
Plenty of landlords actually lose money. Its not as simplistic as 'you're just paying off someone elses mortgage'
But that's offset by economies of scale. I only have one wall and the floor facing outside in the winter that I have to heat, if I owned a house I would have four walls and a roof all leaking heat. Same with property taxes--yes, some of my rent payment is undoubtedly paying for the landlord's property taxes, but I have like 10 other people splitting that cost whereas if I had a house I'd be responsible for all of it myself.
Nice video, could you do a video on the comparison between buying and an apartment or house
Cool analysis, but I do think it’s important to consider that when you rent out the property you own the difference basically doubles in home owning’s favor.
@AliAbdaal : You are my Guru when it comes to productivity and learning anything new which I myself cant figure out😇 great videos!
I am looking for couple of videos from you regarding the below topics if it interests you.
1. How to switch career's and what's your thought process
2. Any book recommendations for a creative person to enhance their creativity and also find a career, how does one go about the search.
3.On how to create Blog and earn from them. Does it make sense to create a blog at the early stages of being a youtuber.
For now, that's all 🥰
If there is video/content related to it already, can you please point me to those.
Thanks a mil 💕
I think the only thing Ali missed is that Governments in almost every country wants people to buy their first house, thus why it is the cheapest loan you can get for periods up to 30 years. In the US for example, you having a decent credit you can get a mortgage for 5% down. The opportunity cost is really mortgage vs other loans (cars, personnal, etc) and in that matter the interest on the mortgage repayment is not really 'money down the drain' as Ali is saying, it is actually the cost you have in order to get access to the equity gains overtime.
In your first simulation, assuming a 1-2% increase in basically a 'bad buy', and for sure would never be a good decision... something a good realtor can help finding a house in a somewhat ok location, that is not falling apart, etc.
I previously rented an apartment in a small city in England for work. Had I owned the apartment I’d have never jumped at a new opportunity in London, from which I’m now making a lot more money.
Great content as per usual!
Fantastic explanation
I really appreciate all your videos on personal finance Ali! This one is a very interesting one. Thanks 😊 Actually, your videos have had a decent influence on some decisions I’ve made -> so far, I’ve created a website (blogging/creative projects), and got into investing based on you talking about your experiences with both. Please make more finance related content. Which books and other resources do you use to gain your financial knowledge?
Excellent video, Ali👌🏻 Greetings from Scotland 😊 Have a great day everyone 🌻
you havent seen it yet mate XD
@@J4NOObs I'm continuing to watch it mate😅 and his content is awesome no doubt
@@DrBrunoRecipes lol
Great video. The causal tip was perfect. What's your opinion on having a property manager if you want to move out of the city where your property is?
Wow your skin is glowing these days. Is it the camera or your skin care routine?
Important caveat about stock investments mentioned around the 9:50 mark: That 7% return average on S&P 500 is over the lifetime of the stock market. One year the S&P can be down by 30% and the next year up by 37%. Your return on stocks is dependent on when you need to withdraw money. While housing markets can crash, they tend to swing less than the Stockmarket. For example, if you invested in the S&P last year on this date, you would have lost 15% of your investment.
Great point
Our boy Ali is getting smarter with his looks!❤️🔥
I'm confused. The underlying assumption here is that mortgage payment is higher than rental, and the surplus in renting over buying is used to invest in the stock market. What happens if the mortgage is lower than rent? Is it a no brainer to buy then?
That was exactly what I was thinking
@@rainebolton6495 100%
Depends how much equity you have in the house. Little equity: you must have either found an amazing undervalued property, or the places to rent you're looking at are actually higher end than the property to buy. If you have a lot of equity on the house then of course the morgage payment can be lower, you're also borring way less money. But the opportunity cost is also then significantly higher.
I think the assumption is a comparable house. You could in theory buy a cheaper house outside of London. But now you live outside of London and deal with that.
So if you’re willing to down size on your living for a house you then could also down size on your rent and it’s a moot point.
@@d-32 makes sense thanks for the reply!
Interesting breakdown, I'm still on the "renting is throwing money down the drain" train, especially in a city like London
Buy and cash out refinance is the best move. Slowly build a portfolio to rent out to others
Such an amazing video
Great points to consider! For me "not being able to get kicked out of my home" is the number one reason to buy an apartment as soon as I can (as a foreigner living in Stockholm I can only get second-hand rentals and have lived in 6 places within the past 3 years lol)
Ah, a fellow Stockholmer!
I'd be heartbroken if the Stockholm situation wasn't voiced in a video such as this.
It's "Rent after 10 years of homelessness in a queue" vs "Buy risking capital in an over inflated market"
@@SathishkumarJagadeesan you sum it up perfectly 🤣
Idk personality as someone who has 0 financial stability having property might bring me a piece of mind, especially in my country owning property is very easy. Not so many rules as in other countries. My living condition makes me have to work constantly since I need to pay rent. If I had a house that I paid for already I could afford vacations
Thank for the great video !! Another interesting factor (on the buying side) in some countries is that if you can benefit from tax exemption on (a part of) your mortgage, therefore reducing borrowing costs. But really depending on the country you live and buy-in
Great video, thank you
I’m in the U.K. An 80 year old in my area has just been made homeless because the owner wanted to sell the house. Her husband, herself and little dog ended up living in a car and it was too much for him (along with other problems)so he took his own life. All she has is her little dog and she can’t find accommodation that will take them both. The rental market has gone stupid with people renting houses as Air b n B so finding something she can afford is not on the cards. The local paper published her story in the hope someone might step forward to help her out.....if you rent it’s not good if you have to move in old age.
He could just have rented another place. A lot of bad and lazy decisions lead someone in the UK to end up like that. Probably immoral people.
Damn! This video is exactly my thoughts I was trying to explain to my parents! My parents have been breathing down my neck to buy a place for 5 years, but I'd rather spend money on stocks than tying myself down to a place when I still want to move around. They didn't get it as their values are different from mine.
Good thoughts and good to start this debate. I do feel this video doesn't tackle the idea that the Landlord has every right to remove you from the property at anytime should they want to reclaim the house / flat - it is alluded to here but it quickly brushed away without pointing it out as a significant factor. This video is also kind of making the assumption (in the financial section) that the opportunity costs are going to always be positive with other investments - this is subject to so many factors and the appreciation of property assets is so much more stable that those of stocks, bitcoin etc. It also assumes the locations of the properties or the level of property you can afford are preferable in the case of renting. Usually you are paying a landlord's rent, property fees and giving a top up within your payments to make it profitable for them which makes the incremental financials beyond the initial payments more expensive.
There is another point which is not for the individual but more of a societal impact which is that, the more people rent, the more attractive this prospect is for the older and more established generations who will then retain their smaller properties when up-sizing or purchase additional properties with the intention of buying to let. This in tern (especially in the UK), reduces the supply of available houses and drives up the value of houses, making it harder for subsequent people to buy houses - thus making it a vicious cycle where it tips the balance into renting being the only option for prospective 1st time buyers.
Ali - what is the causal model calculating for renters, is it calculating the difference (house purchase monthly expense - rent expense) ie what you save renting, and then investing that at in the stock market at your theoretical return?
I put in some numbers that match my house search, added a reasonable London property growth rate (3% to 5% ann.), the only way I could make the rental option trump the buyer option was by having rent
Thank you for the information Ali. 🙏