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back per month A Returns Perspective it doesn't make as much sense to buy a home as it does to rent a home and just invest your money into the stock market. If you're looking at it purely from a standpoint of what the average returns are, because I looked it up. Over the last 150 years or so, the housing market in the country has increased by about 3.7% per year. Now obviously this varies widely depending on where in the country that you are, the type of housing that you're in or in A Are you in a coveted community? There's plenty of other external factors, but as a general, like a generic rule of thumb, it's been about 3.7% per year, which is obviously significantly less than what the average stock market of 8 to 10% would be over the same or similar time frame. The difference here is that regardless of if you decide to put money in the stock market or into a house, you still have to pay to live somewhere. Your, your rental expense will never go away, it will never be zero. You will have to pay something. So one of them can help me hedge against inflation and the other of them just makes me lose money for the rest of my life. So I'll talk about like one of the things that I, that is still a strong point for, for renting in my opinion, towards the end of this, but for now, let's get through, get through the rest of these. So first of all, deeper sense of ownership in your community. And then it's a forced savings plan to, to, to force you to put money into basically a bank account that you can never, you can't just go get the money out, right? Like you could, I mean, theoretically go get like a home equity line of credit or something like that, but even that is like, it's sort of a loan against the, the collateral of your home. It's not like just free money that you can take and use for whatever you want. You got to like pay it back, you know, so there's ways to like sort of unlock those funds. But the only way to actually collect the cash is to sell the house, which I have learned over time to never do. If you buy a house, just freaking keep that thing, man. If there's, if it's at all possible or doable for your finances to keep your home, then keep the damn home. Do not sell the home. There's been at least, at least two of the homes that we've bought that we absolutely should have held on to. But I let scarcity mindset take over in that particular situation. Sold the home and like now it would be hundreds of thousands of dollars in additional equity that I could be sitting on, but I made a short term decision at the wrong time and sold a home. So we bought this one. I was like, yeah, we're just, we're never selling this thing, man. Like, like, it doesn't mean that we'll live in it forever, but I'm definitely not going to sell it. So deeper sense of ownership, community for savings plan. And lastly, this is one that I don't really hear talked about very often, but it's frankly one of the best reasons to buy a home still and that is that you lock in your monthly living expense. It's locked in once and this is assuming you don't get some dumb variable rate mortgage, but you get a fixed rate mortgage at a certain interest, at a certain interest rate, you've locked in the price of your monthly living expense for essentially the rest of your life if you decide to stay in that home, of course. So I look at this, I use sort of the, the solar example because this is basically our solar sales pitch. When I, when I was selling solar back in the day was that, look, when we, when we pitch people, it's like, look, you're going to pay utilities regardless, right? You're going to have to pay your electric bill every single month regardless. The difference in, in having solar versus paying your utility company is that your solar here that we're going to talk about in this contract is that we're locking in this rate and you are going to pay this much basically to purchase the power as a power purchase agreement. So you buy the power from the power generated on the solar on your roof. You don't have to pay for it, it's not yours, you don't own it. So you don't, you don't have to worry about upkeep or taking care of any of that stuff. That's basically the solar company is essentially borrowing your roof to place a mini power plant on and then they're going to sell the electricity back to you at a much, at a significantly lower rate than what your utility company currently giving you. But it's not about what you're currently saving because a lot of times I meet with a customer and they're only going to save 50 bucks a month. They're like, I just don't want to go through the hassle. I'm like, great, that's fine. But we're not talking about 50 bucks a month right now. What we're looking at is over the next 20 years of this agreement, in 10 years from now, what do you think your utility rate's going to be? It's going to be way higher, right? It's never, you've never gotten a letter in the mail that says we're going to, everything's great and now we're going to lower your utilities. Never has happened. It always increases. So over the course of the 20 years, it's like in 12 years from now, you're not just saving 50 bucks a month. You're saving 2, 250 bucks a month and then 15 years and now you're saving 350 bucks a month. And over the course of, you know, the entire time that you own or that the solar is on your roof for the entire duration of this power purchase agreement, you're going to be saving like tens of thousands of dollars on your utility bill just by paying a different power company. It's, it's an alternate power company. And so that was always the pitch that we used. And that is the exact same way that I'm looking at it from the perspective of, of your rent payment versus your mortgage payment. Even if, because obviously I know housing prices are inflated right now. I know interest rates are much higher than they have been in the last few years, although they have not higher than they've been historically for the duration of the time people have been buying homes. But it's a unique situation because prices have never been this high while interest is also the rate that it is currently. So I understand it is more expensive to buy a home and in a lot of senses it's more expensive to buy a home than it is to rent somewhere. Right now though, right now it's more expensive to buy a home than it is to rent somewhere. So what I mean by that is let's say you. Actually I'm just going to pull up some of this. I was doing some math today on with my friend ChatGPT here. I basically was saying like how much money would I pay to rent a home in the similar area, similar size, similar bedroom, bathroom, count all that stuff. How much money would I pay to rent a home right now versus what my mortgage is right now and how much will I pay over a 30 year period of time for this mortgage payment versus if I was renting this home. Now it is important to say that the house that we are currently living in, we got a killer interest rate on it was before interest rates jacked up. And so I, I understand that we are starting from already like it already makes way more sense for me to own this home just because interest rates have like basically doubled. We actually really more than doubled since we, since we bought this home. So I wanted to look at it from, from both of those perspectives. Like if, if my, my interest rate is less than 3% which is really difficult to, I mean it's less than inflation. So I basically essentially getting paid to live here if you look at it that way. But average mortgage now maybe, you know, five and a half, six and a half percent Somewhere in there. So it's, you know, basically double what, what I'm, what I'm currently paying. So over the course of the 30 years though, what I wanted to know is like base, like in, in accounting for the inflation of rent in this area for a similar home. What would it look like over 30 years? How much money will I have have spent on rent versus how much money will I have spent on my mortgage? And right now they're fairly close. And especially if you're looking at it from like, if I was going to buy this house right now, today, my mortgage payment will probably be quite literally a thousand to $1,200 more per month. And most of that would be going into interest. And so that would put it, that would put it at like 3400 bucks a month to like to, to if I bought this house right now, today, 34, 3500 bucks a month is probably what it may be actually a little bit more than that because the, in the, the markets also increased. So obviously that would account for a little bit different. It might be like 36, 30, 700amonth, something like that. Okay. Total interest paid over the 30 years for that type of a loan at the current market rate of interest is, and again this is all estimated stuff, obviously these are projections, but total interest paid over that period would be about 600 to 700 hundred thousand dollars somewhere in there. Plus the price of the home, another 6, 700 thousand dollars. You're paying, you know, total all in outlay over 30 years. You're paying 1.2, 1.3 million for the home. Okay. However, because rent will continue to increase with inflation and the rental market. The, the, if you rented this home right now, it would be cheaper than if you bought it right now. Yes, but only right now. Meaning that you could probably rent this home for 3200 to 3400amonth versus having a $3600 mortgage. So you might be saving 3, 400 bucks a month today, right now, but in 10 years the rental market will be more than it is right now. And your mortgage stays the same. Your mortgage is not affected by inflation. You don't get price increases because inflation is going up in 20 years from now. That's not how your mortgage works. It's a 30 year contract that this is the agreed upon amount that I'm going to pay and this is how much you're going to earn in interest and all those things over the duration of the loan. So, so, so total all in outlay over 30 years, about 1.2, $1.3 million for a home like this in with, you know, Pimi, all, all of the things that you have to pay to own a home. Principal, interest, mortgage, insurance, and then insurance as well. So estimated non equity outlay over 30 years because remember, so I paid 1.3 million. But like, let's subtract the, the actual cost of the home. Let's say that's 600,000, 700,000. That means total non equity outlay. The total amount I've invested that is actually going into the value of the home in interest and taxes and insurance. That stuff is going to be about $750,000 over the course of 30 years. However, the total rent paid, adjusting for inflation over that same period of time is going to be about $1.952 million. So about $2 million that I will have spent in rent to have a similar lifestyle to the one that this house affords me now. So not only have I have I already invested 1.2 1.3 million, or excuse me, let's go with like total all in outlay. So 1.2, 1.2, 1.3 million for total all in if you own the home vs 2 million for total all in if you rent the home. Not only is that already an additional $700,000, but it doesn't, but then we subtract the, the, the, the money that was actually put toward the principal because that is actually going to the value of the home. Now we're at 740, $750,000 in total interest and taxes and all the other stuff that, that is like technically money that I'm not going to see again. But if I did that in rent, that's $2 million. Now we're talking like $1.3 million in additional money that I've put out just for renting. The same exact style and quality of a home that I, that I would be able to do if I bought it right now, today. When you, when you look at that over the course of time, this is why I say it's sort of like a forced savings account, right? Because even if I, I put in the 1.3 million, but in 30 years from now, at the 3.7% annual apprec. That we looked at over the last 150 years of real estate in the United States, the estimated home value and of course this, I, I personally believe where I live in this area in Las Vegas is going to be worth more than this. However, let's use the, the bare minimum standard here, 3.7% appreciation annually. That would put the home value after 30 years and the mortgage is paid off at about $1.5 million. So I've put in $1.3 million over the course of 30 years. And then at the end of 30 years, I have $1.5 million. So the total amount now I am. I'm actually. I basically got paid $300,000 to live in this house for 30 years or to own this home for 30 years. I got paid that money. Whereas if I'm renting the same exact place, I'm out $2 million. And at the end of 30 years, I have zero equity and zero money to show for any of the things that I did. Now, let's take that $300,000. Let's assume that I used all of that $300,000 in appreciation that I got over 30 years between, you know, the money I put in and the money that I. That I get. Let's say I used all of that because, you know, the house needs a new roof. We got to fix the. We got to redo the H VAC system. We got to pull up the carpets and redo the flooring and change out the cabinets and the countertops. And let's say we do some remodeling. We do all that. So we repaint the outside, whatever. Let's say I put in crazy number $300,000 into this home over the the same period of time, over 30. That just means that basically I have broken even for all of the money that I've put into this place over the course of the 30 years it took me to pay off the loan. That also assumes that I've stayed in the house the whole time. If I don't, and I want to leave that house, leave this house in 30 years, and I will probably leave it in the next couple of years, but I'm going to keep it. Let's just say I stayed in this house, and then as soon as it's paid off, I move, I retire, and I whatever, go live in Montana or whatever. Well, now I have a house that in 30 years from now will be about five to six thousand dollars a month in rent that will be coming in completely free to me because it's an asset that I now own that actually pays me money. Whereas I rented for 30 years. I have nothing at the end of it. I don't have $1.5 million in equity. I don't have something that can cash flow me a bunch of money. And I still Am out all of the money to rent the place that I rented. So this is probably like the strongest argument for me for this is to say that like, you over the, over the same course of time, like you can lock in the amount of money that you will pay over the course of the time that you are paying or that you are paying to live wherever you're going to live. And if you rent somewhere, you don't lock that in, you will have to continue to raise, your rent will continue to increase over the next 30 years, along with inflation over that same period of time. And at the end of it, you have nothing to show for it, whereas at the end of it, for me, I'll have a bunch of stuff to show for it. So I still believe it's 100% worth buying a home. The only caveat that I would say to this is if you want to maintain flexibility and mobility, that is really the difference maker here. That was always my thing is like, I want to be able to be nimble, I want to be flexible. If I want to move to another state because there's another opportunity in this other city, I want to be able to do that. And if you own a home, you're sort of handcuffing yourself to some degree. Which is why I always say, like, oh, real estate is always worth buying depending on the deal. What does the deal look like? Is it a good deal? Is it a bad deal? Like that is the thing that you should ultimately be looking at and making this decision on is each individual deal that you're, that you're looking at. So if I'm looking at buying a house now, then the question I want to ask myself is if I want to maintain flexibility and mobility, then the mortgage payment that I have should be equal to or less than what I can get in rent for the property. And if I can get rent that is equal to or more than the my total mortgage payment, then it always still makes sense to buy the home because then you can maintain flexibility. You maybe have to have a little bit of reserve account for fixes, or if you go three months without rent or something like that. But again, over the long term, it's always still going to make more sense, in my opinion. So if, if you like the lifestyle of renting, fine, just make sure you're still buying real estate. You know, like some people are like, I don't want to think about my roof, I don't want to think about my plumbing, I don't want to think about any of that stuff. I just want to live and have live in this condo complex or live in this high rise where somebody else takes care of all my stuff. Fine. But still look to buy houses somewhere else. Like do something with your money that's going to get you to own real estate. Because I just think it's a beautiful forced savings that will allow you to lock in your monthly rate over a long period of time versus just being subject to whatever the rental market looks like at that time. So those are the reasons why I still believe it is worth buying a home. If you agree, disagree, please reach out. Let me know. I'd love to hear from you. But that's it for this episode of the show. Catch you guys on the next one. Peace.
