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IS IT CHEAPER TO BUY OR RENT A HOME?
DOWN PAYMENT:
In most situations, lenders will require you to deposit 10-20% of the purchase price in order to get approved.
MORTGAGE INTEREST RATE:
The cost of borrowing money the highest it’s been in more than 20 years, at just over 7%.
PROPERTY TAXES:
This ranges from 0.3% if you’re in Hawaii to as high as 2.5% per year if you’re in New Jersey.
INSURANCE:
According to Bankrate, the average home insurance costs $1428 per year for a $250,000 home – but, when 66% of homes are said to be underinsured, expect that you’ll pay more like $2200 for a proper policy.
REPAIRS AND MAINTENANCE:
Over the long term, it’s recommended that you budget 1-2% of the property’s value, every year, for doing these normal repairs.
RENTING A HOME:
This is fairly easy to calculate: The price you pay is the price you pay – there’s really nothing fancy about it. However, according to a new analysis, in all but 4 major US Cities – renting is cheaper than the cost of buying.
After doing the math, here are the overall stats:
If you intend on living in your home for less than 10 years, then renting is likely the cheaper option. If you want to manage your cashflow without coming out of pocket a sizable amount of money, then renting is better. The same also applies if you want the flexibility to move on short notice.
However, if you plan on living in the same home for MORE than 10 years – buying is typically the better choice. If you want to remodel or upgrade your home – buying is better. And if you want to lock in your payments to invest in the area – buying is better.
My personal preference is that – if you’re going to buy something, get something that needs work, fix it up so that it’ll be worth more than what you paid – and then, use that as a buffer so you won’t come out of pocket in the event you need to sell on short notice.
Every situation is different and every area will have slightly different numbers – but, for the most part, this rule of thumb should hold true.
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I’ve seen properties for rent in vegas cheaper than the mortgage payment would be, tempting to get one and be a small scale Hef but I’m finishing up my MBA and I’ll have to think it over.
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At this stage in my life renting is more plausible than owning a home. But I am interested in owning a rental property and having a company manage it as I would like to migrate.
Next time say “What’s up Teddy it’s Graham here”
What’s up with all these Bots?
Your home going up in value is great, but it really doesn’t benefit you unless you’re selling so I don’t see how it would save you money. Tell me If im wrong and why because I’m curious.
I bought my home for $400k in 2019, but it’s worth roughly $600k now, but none of that money goes into my pocket. The only benefit I have is that everyone’s rent went up, but my mortgage stays the same.
@GrahamStephan thankyou! Have been preaching this ever since interest rates are no longer 0. Thought you might have forgotten opportunity cost from downpayment, but you covered that as well. Impressive as always Graham. Though i think with current high prices, renting for 2-3years is safer, with a view to buy later, when higher rates for longer starts to bite
But that down payment is going towards the cost of the house. PMI interest is only if you dont put the 20% down- you can buy it off later
In a rental you are also most likely paying the property tax….in all its cheaper to buy because your build equity.
It makes sense to buy because well your gonna get that back at the end if you move out. Renting make absolutely no sense.
While all of this makes sense in todays unfortunate market, I can’t help but feel like it’s purposely done to justify the inability for younger people to be homeowners today.
My mortgage is $1900 plus I’m house hacking
Has anyone ran the numbers on being homeless? Wondering if it’s cheaper than renting.
Did you read my comment
In the long run, buying a home has major benefits, especially if you can pay it off before you retire. In saying that, stay away from homes with HOA fees and places where severe climate will impact home insurance. Yes repairs add up, but when you rent, landlords don’t usually care when things break.. that annoying leaky tap will not be a top priority to the landlord. Be prepared to move a lot if you’re a renter.
$2200 hot water heater? I’d that what a plumber charges?
Go into skilled trades apprenticeship before or right after high school graduation.
Live with your parents until you’re a fully licensed journeyman. Even if your parents will charge you a symbolic rent, you’ll come out before age 30 with minimum 100k in savings.
You’re welcome
He said “trenches” I’m dying😂
Are you the guy who doesn’t spend $1 for cup of coffee?
I am not an American.
But, how the hell American live..
The country was not made for them..
Everone’s try to benefit of the poor..
I have no problem renting my whole life until i retire and move out of country. No Idea why people would want to own a home. Just throwing money away.
You didn’t mention HOA
As a 18 year old tryna save up for a house right now, this is a very interesting video
The housing prices will not go down. There is a shortage of homes in the millions. It would take multiple millions (or tens of millions) of listings out of thin air for the market to drop. Builders, even with infinite budgets, can’t keep up due to labor shortages. Every seven retirees in the construction business are replaced by one new employee. Most people don’t want to work today, therefore no one to build homes.
Easier to charge EV at a home you own
Renting will cost me 200k less in the next 30 years.
rent almost always goes up every year.
A fixed rate mortgage is a life hack. You can also refinance later to lower your payment
I bought a house and AC broke day I moved in…
Taxes went up after the first year ($700 month)..so it’s now more than I’m comfortable spending per month. I can’t rent it out because the mortgage is higher than what things rent for.. mind you my rate is 3.9%. Also haven’t owned it long enough to come out positive if I sell it. Home ownership is wack af
How does on rent with out the rent increasing every year?
graham, do you rent or own?
$2200 average for home insurance? Wow. Clearly not for Florida and also, insurance has gone off the rockers in FL. My parents now pay $9k a yr in FL for property insurance and they are are least 15 miles from the coast. 😵💫
How many homes
Do you own Graham Vs rent? Renting maybe cheaper but doesn’t afford you establish credit like owning does
Wow! What a great breakdown of buying vs renting in today’s market. You rock guys!
@Graham Stephan appreciate you and your content Graham aka Guys! 😆
In order to buy cheaply, I’m waiting for a housing crisis after selling a few houses in 2020. I’ve been considering buying stocks as a fallback. Do you have any advice on when is the greatest time to make a purchase? On one hand, I continue to see and read about traders making more than $$$k per week. On the other hand, I constantly hear that the market is crazy and in the midst of a dead cat bounce. What causes this?
Most people are used to a bull market and can’t manage a crash, but if you know how to navigate and where to look, you’ll make a killing. It relies on your exit and entry plan.
It is true that the US stock market had been on its longest bull run ever, thus the widespread panic and frenzy is reasonable given that we are not used to such unstable markets. However, as you pointed out, there are possibilities accessible if you know where to search; in the past 10 months, I’ve made over $$$k, and it wasn’t a difficult plan of action. Because I understood I needed a solid and reliable strategy to navigate better in these times, I hired a portfolio counsel.
@Dale Horne I tried researching new strategies to benefit in the current market because my portfolio has been in the sewer for the entire year, but whatever I tried to do just missed the point. Would you mind letting us know who your investment advisor is by name?
Firms can be unscrupulous as they prioritize their own commission over your profitability. On the other hand, I prefer working with individual investors like Dawn Maureen Humphrey, who only take a share from your profits, not your initial capital. I must say, my experience with her has been exceptional thus far.
@Dale Horne Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
New regulations coming to require PMI on ALL loans. The rate will be reduces depending on downpayment. This is to counter the increase in defaults and foreclosures. Buy now before this happens. Get a 50 year loan if you have to
Hey Graham – love your videos. Sorry, confused here. Didn’t you include appreciation in your total monthly of 2825 as well as address inflation? That would mean you have already accounted for these things when you sell – that is your 2825 is always netting 0 at sale. I believe you double counted when you addressed cash back after sale. If I’m wrong it would be great for more content on this cause you made ownership look more attractive than I expected. Thanks and please putting out your great content! Cheers.
Despite all of this information, I still want to buy a house!
What about school taxes?
Keep in mind that landlords don’t always keep their investment properties forever. If you’re renting month to month (not locked into a lease), and they decide to rent to someone else, sell (or lose the property to foreclosure), you’ve got 60 days to move. And if you don’t have savings, or your income hasn’t kept pace with inflation, you may not be in a position to rent the next house. Sadly, that’s how a lot of people wind up on the streets. Sure, renting is cheaper in this current market. But the piece of mind that comes with homeownership (when done right) truly is priceless.
In long term, Buying a home is better. Think about your next generations. If my father wouldn’t have bought own home, then I had to live in rented home. Thank god my father bought own home. Now I have also bought second home for my future generation.
Are you going to talk about the war??
House payments have forced savings built into the payment…building nice equity over time. A Renter has to have the will power to save on their own.
Your not factoring in all the costs of renting down payments, fees, renters insurance. Most land lords try and keep anything they claim is refundable also. Then threaten legal actions. Renting is the worst.
Love the summary in video description
U did not mention with buying a home, you have to pay the utilities, gas, electricity, water, and internet… with renting, u did not mention, u have to come with double the rent…. deposit plus 1st months…
it sounds like with home buying, you will get your money back in the end. but you won’t get back the time you spent on maintenance and upkeep or whatever. so what about the opportunity cost of time?
400k home with 40k down (10%) if youre paying PMI you’re getting fucked,
Graham is a landlord and wanting to give horror stories to make renting be the “logical option no matter what”
he gives good financial advice but this is clearly an ad for “you should rent”
FTX
The landlord pays the rising cost of insurance and taxes by raising your rent.