The math of renting vs. buying a home. Challenging the notion that it is always better to buy.
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Great video! However, if you are going to calculate the taxes you’d pay on income per year on buying a house, why would you not calculate them into the equation when renting? If you add the $30K you pay in taxes to the $26K out of pocket for renting per year, you’re actually paying $56K as opposed to the $41.5K for buying. Every instance is circumstatial though and I realize there are a number of other factors to consider. Very thought provoking…
Sensible video – but only to an extent. If you’re actually renting for that much per month and not investing say, in real estate, then you’re not very smart. Consider buying that same property as an investment, say a rental property, you may well be paying off your mortgage at someone else expense, not your own. So lets hope that you are really not renting for that much each month for the rest of your life and you are actually investing your money somehow – else that would be unwise:(
Question: If you make 500000 a year and you want to live in a house worth 2 million, isn’t the best option (over borrowing and renting) to actually save the money for the house on a savings account while you live in a very cheaply rented home during that time and then when you saved enough buy the home? Because then you eliminated all the costs of rent on mortgage, but you can still reap of potential benefits like house prices going up? (when you sell it)
@KevinSlasHr
You were right u guessed that housing prices would revert ! I think the best time to have brought the house was during the recession when real estate prices were bottom low..(Provided one’s wages are the same etc.) lol
Thank you SAL for your wonderful videos !
The +10 k will be taxed along with the 100000 at 30% leaving -33,000 k as liability/annum of rent….
BUT if you take the opportunity cost (what ur missing) you add -13.5 k(tax benefit lost) = -46500
So if you actually own a house you save -5000 k p.a.
……and in the long run you own a house (Shelter is a human necessity not a luxury)
Regarding wether or not house prices revert; they’ll come back – its an economic cycle.
good video, but i love how u predicted house prices would revert and they did. you rock
Buying your own house is also not the ONLY way to invest in real estate. My 403b earned 29% last year, all from a real estate fund.
Hey Khan,
What do you think about buying a house now around 400~500k in the Silicon Valley now (August 2011) vs renting? Thanks
@azfarmb He was talking about the very hard to rent area of Ventura
CA and a 1million dollar home would rent for $3,000. I live in WA state where a $25o,ooo
home in a little town would rent for 12,000. The mortgage at less than 6% with no money
down is $2,ooo a month. Then there is property taxes, plus neighborhood community fees,
must keep your yard looking good-costs more money. Plus as the years go buy you replace
the roof, furnace, hot water heater, duct cleaning expenses. He is right on.
lol i cant even get a percent on my cd i want to know where your going
@killaking22 tax is a lot less than rent hun 🙂 buying and selling homes (flipping) is one of the most profitable way of investing.
@P01029 but you pay taxes forever that is still rent…
Actually, buying is better. If you buy a house, you may pay interest but you don’t have the fear of losing your property if you pay it off. You can fix it up and sell it when the value goes up and you make profit.
@primeNUMBAZZZ 🙂 yes but the interests for the bank is a lot less than ur monthly rent 🙂 I rather pay the interest for a while and then own my own house at the end and not have to pay ANYONE anymore than to rent forever on and on.
@P01029 He uses an interest only loan in the example, so your statement should be rephrased from “in a way you were only paying yourself.” to “in a way you were only paying THE BANK.” Banks are not charities – they issue mortgages to make money off you, like credit card companies.
@UnidentifiedUserID The example that he uses is an interest only loan. This means that at the end of 30 years the “homeowner” will still have a $750K loan outstanding. If he used a conventional loan in the example (one for interest and principal), then the mortgage payments would have been much higher.
too bad when u rent, at the end of the day, u still have to keep renting = u own no property so that money you pay is forever someone else’s. but if you buy a home, yea you are paying, but after a few years, it’s all urs; in a way you were only paying yourself.
The renter starts with 250k that doesn’t go for a down payment on a home. The 15k savings (1250/mo.) is added to the 250k for 30 years. Plug in 6% annual return compounded monthly, and you get 2.8 million +.
In his example the renter saves $15,000 a year. So in 30 years he’ll save 450,000. He’ll have that 450,000 to show for himself. What will the home owner have? A house that now is worth 1 million and in 30 years should be worth much more. Is there somthing I’m missing?
@MrMamini Iraqis marry their own cousins. I have witnessed it. And her reason was ” the kids will be better looking this way”.
@azfarmb
I live in Albuquerque, NM and a 1 million dollar house actually goes for around 2k to 3k for rent. He’s pretty spot on. Well, for me, at least.
@h1g97
There is no religion titled “Muslim”, rather it’s called “Islam”. “Muslim” is one who follows “Islam”. Marrying your cousins is a cultural practice primarily practiced by the European monarchy to keep the crown within the bloodline. In a sense, my friend, you have exposed your own ignorance.
@suckafreeG Im Canadian all the way man. Im smarter than you since I don’t follow any stupid, ignorant teachings of any religion, especially Muslim. Marry your cousins, have 4 wives, pray and waste time, then starve yourselves and become skinny malnurished weaklings.
@h1g97 so please next time keep religion and keep out of it because ppl like you make fools of them selves, plus ahahaha BIG Bang “did you try that part where it says in the book you can imagine that you can get anything, anyyythinggg” okay now imagine or wish that you get a brain and dont worry no one will blow your house up cause it stinks shit any theirs hairy all over the place you hindu cow worshipper and tell your bhangi indian government to stop slathering Kashmeries
@h1g97 you indians are traitor your telling me that when your indian mother raised you without giving you any religious values, yea right see this the thing i hate about indian like “you” come to north america or born her first generation fix their accents ditch their religious values they grew up with start to amuse like dave chappel that they are white like he does in his blind kkk script lol this is the issue after all when a white person looks at you he knows that you are not on of them so