Buying a house is a scam!

[JWelch]

Would like to hear everyone's opinion on owning a home vs. renting. This home being your primary residence vs. purchasing for the sake of renting it out or flipping etc.

Is home ownership really a scam and a complete NO NO for non-wealthy individuals? I'm currently in the process of selling my home right now and am really considering NEVER owning again and only renting. At least until I have a large liquid net worth. One argument for this is that people talk about investing and diversification and realistically most people have 50% or more of their entire net worth tied up in their home, which is not highly liquid. Not to mention the debt load some people take on to get the house they really want.

Furthermore, is purchasing really cheaper for a non-wealthy person considering that there are closing costs and many other fee's associated with the buying and selling process as well as the upkeep or upgrading costs and responsibilities to repair any potential damages that you wouldn't be responsible for if you rented?

Just looking for some differing points of view here.

 

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[Ravens_Shadow]

I personally rent my house. I don't want to be locked into a mortgage and I move around every few years or so. I also don't have to pay for leaky sinks and whatever else comes with having an older home.

If I had the money to buy a house outright, I might just buy land and build a house instead to fit it to my needs and hobbies, but who knows, I'm not there yet.

Whether its a scam or not is bound by your definitions of a scam.

For some non-wealthy individuals buying a house is the way to go. If they're going to live there their entire life and it has a 30 year amortization period to finish paying it off, then the mortgage is probably the way to go. Because if they paid $1250 a month for the 30 year mortgage or or $1200 a month for the duration of their lives (lets just say its 45 years in the home). That's 15 years of extra income that they're paying to keep the house. Not to mention rents could go up based on inflation and increasing market value. If you just want a house for 3-10 years, why go the mortgage route? Save yourself the headache and just rent. Just my 2 cents.

 

[slamrei]

Would like to hear everyone's opinion on owning a home vs. renting. This home being your primary residence vs. purchasing for the sake of renting it out or flipping etc.

Is home ownership really a scam and a complete NO NO for non-wealthy individuals? I'm currently in the process of selling my home right now and am really considering NEVER owning again and only renting. At least until I have a large liquid net worth. One argument for this is that people talk about investing and diversification and realistically most people have 50% or more of their entire net worth tied up in their home, which is not highly liquid. Not to mention the debt load some people take on to get the house they really want.

Furthermore, is purchasing really cheaper for a non-wealthy person considering that there are closing costs and many other fee's associated with the buying and selling process as well as the upkeep or upgrading costs and responsibilities to repair any potential damages that you wouldn't be responsible for if you rented?

Just looking for some differing points of view here.

It probably depends on where you live. Do you see house price appreciating in your area? Do you see rent going up? Are there a lot of migration to your area? Are more jobs coming to your area? Are you planning to move soon?

Take for example a lot of places in California or coastal states where house prices appreciated 100% in the past 10 years. Rent even has doubled in some areas. I would definitely want to own in these areas so I'm not at the mercy of a landlord raising my rent. In my neck of the wood, rent has gone up 50% in the past 10 years. I rather be in control of my life and have a fixed payment for the next 30 years. There's tax benefits you have to consider as well. There's also studies which shows that homeowners's net worth are significantly more then those who rent by the time they retire.

There's a lot of factor, you may live in an area where you see little to no appreciation, and rent has been relatively flat. I don't know your market, so you'll probably know best.

 

[amp0193]

I've been having a mental debate with myself on whether or not to pay cash and buy a house later this year. It may be a bit off-topic from the OP which discussed renting vs. getting a mortgage for non-wealthy people.


1. While I do plan to travel extensively, I am happy with the city that we live in, and want to stay here all my life and raise my kids.
2. After the sale of my current business, I would be able to pay cash for a house, and have enough leftover to comfortably bankroll the start of the new business.
3. There's something that just seems safe about owning a house. I don't mean "owning" where it's actually the bank who bought it, and you owe the bank money for 30 years. I mean "owning" like, I paid $250,000 and now have a house. No one can ever kick me out if I don't pay something. No matter if my next business crashes and burns... I'll always have that place to live. It seems like there's a huge freedom of just having no debt or required monthly payment to live my life other than utilities, property tax, and food.
4. I also debate if it'd be better to get a mortgage or just rent, and invest $250,000 instead into index funds or something. There is the opportunity cost of lost compound interest income over time.
5. On the other hand, I think that my next business will be the vehicle that reaches my financial goals in it's own right in 5-10 years, so it doesn't really matter what I do with the 250k now. So maybe just buy the house, so that even if my business crashes and burns, I have somewhere to live.
6. I could invest everything I was going to put in stocks or a house, into my new business instead, once the proof of concept was there, and I was ready to scale. This would jumpstart my growth, but I could also potentially lose everything if I make some bad business decisions. I like the idea of just having a house fully paid for, as it gives me the freedom to come to my business every day knowing that I don't *have* to make money to survive.


Just thinking out loud here.

 

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[G-Man]

I've been having a mental debate with myself on whether or not to pay cash and buy a house later this year. It may be a bit off-topic from the OP which discussed renting vs. getting a mortgage for non-wealthy people.


1. While I do plan to travel extensively, I am happy with the city that we live in, and want to stay here all my life and raise my kids.
2. After the sale of my current business, I would be able to pay cash for a house, and have enough leftover to comfortably bankroll the start of the new business.
3. There's something that just seems safe about owning a house. I don't mean "owning" where it's actually the bank who bought it, and you owe the bank money for 30 years. I mean "owning" like, I paid $250,000 and now have a house. No one can ever kick me out if I don't pay something. No matter if my next business crashes and burns... I'll always have that place to live. It seems like there's a huge freedom of just having no debt or required monthly payment to live my life other than utilities, property tax, and food.
4. I also debate if it'd be better to get a mortgage or just rent, and invest $250,000 instead into index funds or something. There is the opportunity cost of lost compound interest income over time.
5. On the other hand, I think that my next business will be the vehicle that reaches my financial goals in it's own right in 5-10 years, so it doesn't really matter what I do with the 250k now. So maybe just buy the house, so that even if my business crashes and burns, I have somewhere to live.
6. I could invest everything I was going to put in stocks or a house, into my new business, once the proof of concept was there, and I was ready to scale. This would jumpstart my growth, but I could also potentially lose everything if I make some bad business decisions. I like the idea of just having a house fully paid for, as it gives me the freedom to come to my business every day knowing that I don't *have* to make money to survive.


Just thinking out loud here.

This makes me think of the video @Vigilante posted.

 

[amp0193]

This makes me think of the video @Vigilante posted.

Yeah, he was echoing my thoughts with "That's your base, that's your fortress of F*ckin' solitude, that puts you for the rest of your life at the level of F*ck you".

Thanks for the vid.

 

[JAJT]

I bought my home. Have a mortgage. Still paying it off. No regrets.

To me a home isn't an investment. It's where I live and where my children are growing up. My worst case scenario right now is the house is paid off and payment free by the time I'm 45. If things go well it will be before 40. Either way it's well ahead of the average and I'm happy with that.

I've considered the opportunity cost of a home vs an investment but IMHO nothing will ever beat owning my home outright eventually. To me that's the pinnacle of financial freedom. The stock market can crash, housing prices can plummet or skyrocket, the next great depression could be kicking into high gear and I can sit back and go "wow, that must suck to be caught up in all that" while I go back to playing with my kids.

 

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[MJ DeMarco]

Older thread has some great comments...

Fastlane - Grant Cardone "Buying a House is for Suckers"

Ill bump.

 

[EvanOkanagan]

Here's something to think about when purchasing, and if you do this you'll mitigate your risk massively:

Know exactly what you can expect to rent it for if/when you move out.

If there's a large enough cashflow buffer (the difference between what you'll be paying after ALL expenses and the rental amount.. ie: total costs $1500/mo but you could rent it for $2200/mo) then it's hard to lose.

People's situations and minds change. Even if the market tanks and you can't sell without losing money, you'll still be able to rent it if there's enough of a buffer (in my example above rental prices would have to go down by 32% to break even). That way you can weather a storm without seeing any damage.

 

[JWelch]

I've been having a mental debate with myself on whether or not to pay cash and buy a house later this year. It may be a bit off-topic from the OP which discussed renting vs. getting a mortgage for non-wealthy people.


1. While I do plan to travel extensively, I am happy with the city that we live in, and want to stay here all my life and raise my kids.
2. After the sale of my current business, I would be able to pay cash for a house, and have enough leftover to comfortably bankroll the start of the new business.
3. There's something that just seems safe about owning a house. I don't mean "owning" where it's actually the bank who bought it, and you owe the bank money for 30 years. I mean "owning" like, I paid $250,000 and now have a house. No one can ever kick me out if I don't pay something. No matter if my next business crashes and burns... I'll always have that place to live. It seems like there's a huge freedom of just having no debt or required monthly payment to live my life other than utilities, property tax, and food.
4. I also debate if it'd be better to get a mortgage or just rent, and invest $250,000 instead into index funds or something. There is the opportunity cost of lost compound interest income over time.
5. On the other hand, I think that my next business will be the vehicle that reaches my financial goals in it's own right in 5-10 years, so it doesn't really matter what I do with the 250k now. So maybe just buy the house, so that even if my business crashes and burns, I have somewhere to live.
6. I could invest everything I was going to put in stocks or a house, into my new business instead, once the proof of concept was there, and I was ready to scale. This would jumpstart my growth, but I could also potentially lose everything if I make some bad business decisions. I like the idea of just having a house fully paid for, as it gives me the freedom to come to my business every day knowing that I don't *have* to make money to survive.


Just thinking out loud here.

There's definitely a huge upside to not owing on a home at all and running a new business. I think it allows you to be aggressive and take risks that maybe you would be a bit more timid if you had to pay the bills in order to keep a roof over your head. Very valid points here. I see that you are from the DFW area. My wife and I were there last month looking for a place because that's where we are moving. A few people also told me that it is probably a better route to build there rather than purchase because 9 times out of 10 you'll get outbid.

 

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[Longinus]

I rent a new house for €720/month. If I would buy the exact same house, I would pay €1320/month.

That's €600/month (excl costs and repairs) less to invest in my business that may buy me a house at once in the future.

 

[JWelch]

It probably depends on where you live. Do you see house price appreciating in your area? Do you see rent going up? Are there a lot of migration to your area? Are more jobs coming to your area? Are you planning to move soon?

Take for example a lot of places in California or coastal states where house prices appreciated 100% in the past 10 years. Rent even has doubled in some areas. I would definitely want to own in these areas so I'm not at the mercy of a landlord raising my rent. In my neck of the wood, rent has gone up 50% in the past 10 years. I rather be in control of my life and have a fixed payment for the next 30 years. There's tax benefits you have to consider as well. There's also studies which shows that homeowners's net worth are significantly more then those who rent by the time they retire.

There's a lot of factor, you may live in an area where you see little to no appreciation, and rent has been relatively flat. I don't know your market, so you'll probably know best.

It definitely depends on the general region and housing market. I think typically California is going to be a place where buying is a better option as long as you planned on staying in the same city for more than 5 years. I think Cali though may be a state where it is the exception to the rule in comparison to other states the cost of living there is astronomical.

 

[Scot]

I've never bought into the idea of buying a house is a scam.

My wife and I have been nomads for years. We had a new address every year. Not out of choice but because she was in school and we lived in a college town. I hated it. I was taking my money I worked for and giving it to someone else.

We just bought our first house a couple of weeks ago. The paradigm shift is amazing. Before, it was pulling teeth to get me to rake leaves. Now, I'm doing housework left and right, happily painting walls, doing yard work, cleaning the pool. Why? Because it's MINE.

I pay a little bit more on mortgage than I did paying rent. But here's the thing. I'd be paying money every month for a roof.

Do I want to pay a land lord or pay for something that will be mine?

We plan on staying in this house until we turn old and grey, raising our family there.

I'm not kidding myself and calling my house an asset or an investment. But it's my home. Worth it.

 

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[LucasJames]

I've been having a mental debate with myself on whether or not to pay cash and buy a house later this year. It may be a bit off-topic from the OP which discussed renting vs. getting a mortgage for non-wealthy people.


1. While I do plan to travel extensively, I am happy with the city that we live in, and want to stay here all my life and raise my kids.
2. After the sale of my current business, I would be able to pay cash for a house, and have enough leftover to comfortably bankroll the start of the new business.
3. There's something that just seems safe about owning a house. I don't mean "owning" where it's actually the bank who bought it, and you owe the bank money for 30 years. I mean "owning" like, I paid $250,000 and now have a house. No one can ever kick me out if I don't pay something. No matter if my next business crashes and burns... I'll always have that place to live. It seems like there's a huge freedom of just having no debt or required monthly payment to live my life other than utilities, property tax, and food.
4. I also debate if it'd be better to get a mortgage or just rent, and invest $250,000 instead into index funds or something. There is the opportunity cost of lost compound interest income over time.
5. On the other hand, I think that my next business will be the vehicle that reaches my financial goals in it's own right in 5-10 years, so it doesn't really matter what I do with the 250k now. So maybe just buy the house, so that even if my business crashes and burns, I have somewhere to live.
6. I could invest everything I was going to put in stocks or a house, into my new business instead, once the proof of concept was there, and I was ready to scale. This would jumpstart my growth, but I could also potentially lose everything if I make some bad business decisions. I like the idea of just having a house fully paid for, as it gives me the freedom to come to my business every day knowing that I don't *have* to make money to survive.


Just thinking out loud here.

If I had enough money to buy one house outright. Id sooner take that money and use it to buy serveral properties with buy to let mortgages and either still rent or get a residential mortgage on a small flat (apartment.) . Obviously id do due diligence on all properties but my reasons would be...

1) Id rent them out increasing monthly cash flow.
2) I like the idea of using leverage to make it easier to grow wealth.
3) Regardless if housing prices crash we know they'll always go back up and because of reason 1 I wouldn't be planning on selling anyway.
4) If interests rate go up I can always be fairly confident rent will cover and the increase will only eat into profit.
5) I can remortgage and take any equity out and buy more property to again increase cash flow.
6) If my business failed or I lost my job I'd still have monthly income.
7)A mortgage is debt, you can't be taxed on debt.

I think they're my main reasons for not being too fond of buying a property in cash. I'm young so I have a lot to learn so open to any reasons why I'm wrong.


Edit: this is based on my location in that rental demand is very high and it's a strong area for house prices. Your area may differ but you can always look further afield.

 

[amp0193]

My wife and I were there last month looking for a place because that's where we are moving. A few people also told me that it is probably a better route to build there rather than purchase because 9 times out of 10 you'll get outbid.

Yeah, the market is hot here for sure. I'm open to doing a new build. I haven't been looking seriously yet... that'll be later this year or next year if/when I decide to buy.

 

[amp0193]

6) If my business failed or I lost my job I'd still have monthly income.

But if you own your house, you don't need income. I mean, a hundred bucks here or there... but you can scrounge that up easily, or just get a temp job or something.


Buying several properties and being way leveraged doesn't make me feel all that comfortable. Probably because I don't know enough about buying real estate for cash flow.

 

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[G-Man]

Yeah, the market is hot here for sure. I'm open to doing a new build. I haven't been looking seriously yet... that'll be later this year or next year if/when I decide to buy.

I feel like the market in DFW has to be overbought, but I'm new to the area, so I really don't have an idea. We've decided to wait at least another year regardless.

I want my fortress of solitude... and a garage. You can't work on shit in an apartment. I have power tool withdrawal.

 

[amp0193]

I feel like the market in DFW has to be overbought, but I'm new to the area, so I really don't have an idea. We've decided to wait at least another year regardless.

I'm going to try and convince my landlord to sell me the house I'm currently renting, and avoid all the market shenanigans altogether.

 

[JAJT]

I totally didn't say that. You mis-quoting mis-quoter!

 

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[LucasJames]

But if you own your house, you don't need income. I mean, a hundred bucks here or there... but you can scrounge that up easily, or just get a temp job or something.


Buying several properties and being way leveraged doesn't make me feel all that comfortable. Probably because I don't know enough about buying real estate for cash flow.

Fair point, it's definitely not for everyone.

I understand the desire to have your own home though. As soon as I have several rental properties I'm finding myself a nice small/medium size apartment to keep long term as my base, just until I can afford a small house and a few garages.

 

[DrkSide]

I rent a new house for €720/month. If I would buy the exact same house, I would pay €1320/month.

That's €600/month (excl costs and repairs) less to invest in my business that may buy me a house at once in the future.

We bought a house and our payment is $1200 a month including taxes & insurance. Renting a comparable house (if you could find one) would be $2000+.

Every situation is different. Along with just the money aspect is the personal aspect as well. As for me I'll buy if I can.

 

[safff]

as long as it is within my control, I will never rent a home or lease a car. For me it is MUCH more than the bottom line, these are things I enjoy, take pride in, grow to love want to modify at a whim. you can rent a house not a home in my humble opinion. Lost time in inspections, control (landlord deciding to sell? better start looking for a new temp home. Can't conduct business here.? that will mean looking for a larger business premises. Want to build an extension? No chance, better find a bigger house. It all makes it not worth my time to rent. Every dollar saved by not having to par for a repair is lost in time waiting for inspections, waiting for things to get done on the landlord's convenience, time and cost spent rectifying minor things that you'd otherwise leave for years etc.

But there are many variables and even more circumstances.. To rent a house the size of my current home I'd be spending less than the $3000 it costs me a month but I've seen a sizeable increase in the valuation whilst passively building equity. I plan to purchase a few properties for rental purposes but I will always have a home that sits outside of the need to be a fiscally advantageous arrangement compared to alternatives. It provides storage for one of my businesses, so the benefits outwiegh the cons.

 

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[G-Man]

View attachment 14490

I totally didn't say that. You mis-quoting mis-quoter!

Ahhhhh! I'm confused by what you mean! Why do you sound like a movie villain instead of a jigsaw genius?!

 

[minivanman]

There's definitely a huge upside to not owing on a home at all and running a new business. I think it allows you to be aggressive and take risks that maybe you would be a bit more timid if you had to pay the bills in order to keep a roof over your head. Very valid points here. I see that you are from the DFW area. My wife and I were there last month looking for a place because that's where we are moving. A few people also told me that it is probably a better route to build there rather than purchase because 9 times out of 10 you'll get outbid.

Yes, we have been looking for an older home just north of Fort Worth and they are selling within hours. We've been looking since last October. We've even offered over list price cash today and still got out-bid!

Personally, I don't think buying a house if you are not financially set, debt free, can pay 25% down on a 15 year loan and have a substantial savings is right. It always has the chance to turn wrong. Back in 2007 when my ex & I split we locked the doors for the last time to the house September 7 @ $709,000. December 21, 2007 the price dropped to $221,000. Whew! I'm not sure how I would have handled that one if we were still living there. So be wise when dealing with real estate. Put your thoughts on hold and look deep inside, I don't care if you are married and have been for 10 years.... look inside and see if things in your life actually are as smooth as you think they are. Talk about it openly with him/her. Don't let house fever get the best of you. It is a huge risk... but then again... so is life....

 

[Deleted20833]

Probably better to rent...the way things are changing..who knows if you have a big opportunity in another state and have to move [emoji125] [emoji125] [emoji125]

 

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[Rickchise23]

Let me jump in here as this is my area of expertise.

I own a real estate business active in 5 states, I've bought properties to live in, as rentals and as flips, so I've had experience personally in owning real estate in a few different ways.


I now do not own my personal residence, however I do own rental properties. Owning property can be an amazing way to make money but don't expect to strike it rich on your personal residence. The mortgage interest deduction and capital gains exemption your personal residence makes it very tempting to buy a home and it does make sense for many people depending on your lifestyle. I do feel however for me personally I mush prefer renting my residence not worrying about anything that goes wrong or any maintenance and also not being tied to any one place for too long. Buying a home for me influenced my lifestyle too much and so I've decided to rent my own personal residence.

Investment real estate is entirely different. I bought and flipped a home a few years ago in Seattle and made a $67,500 net profit in 3 months. I don't think I will ever put myself through that again though. It was a full time job even with my general contractor on site and when I broke down the numbers I made less doing this flip than I would have just putting a bit more work in on my business. Flipping can be great but you have to have some runway, know the market and how to run a construction site the right way. In the end for me it just wasn't something I enjoyed doing.

Now lastly buying property as long term rentals is something I highly recommend. Purchasing real estate that rents and cash flows and pays for itself is great. It's funny when I see people putting 10k a year away tax free in their 3% earning IRA account when rental property is a far better savings account. Buying rental property and constantly paying down the principal until the property is paid off will give you an income for the rest of your life. Buy these properties with no plan of ever selling. These are there only to give you 100% passive income in your retirement and selling shouldn't be a consideration unless you can buy something you can pay off that produces more monthly income.

 

[MJ DeMarco]

I think I mentioned in the other thread that ultimately this is a personal decision, based on lifestyle choices and comfort preferences.

However no matter what you decide, putting a roof over your head will ALWAYS be your biggest expense in your life. If you can eliminate this expense, or get it down to just a few hundred bucks per month (property taxes) your levels of freedom and autonomy explode. This is why the "tiny house" trend has become so popular. People are waking up to the imperils of housing expenses. Without a house payment, you can start taking more risks and you can go months without earning a dime.

I live in a fairly large house and paid cash for it. My living cost (all expenses, insurance, electric, taxes) is less than $1000/mo, or $12K per year. Think about that -- that income level is considered poverty here in the states. If I didn't buy my home and instead rented it, my total nut would probably be about $6K/mo. Big difference.

On the flip side, my ability to wash my hands of the home is limited to people who want to buy it on the open market. So in that respect, autonomy is blunted as I can't just walk away.

If you find a place and see your family there for a long, long time, I recommend buying it and getting it paid as fast as your can. If you're transitioning, renting is probably better.

 

[biophase]

We bought a house and our payment is $1200 a month including taxes & insurance. Renting a comparable house (if you could find one) would be $2000+.

Sounds like a good place to invest. But another one and rent your current house out.

 

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[biophase]

The argument about the house prices rising to me is almost the same as owning stock. You have alot of value stored away, but as soon as you tap into it, it is gone.

It's like have $500,000 in stock, but you don't sell because it keeps going up. So you let it ride till it hits $600,000. And you don't sell. The same goes for your home appreciating. Yes, you can take out a HELOC to access it, but then you go into debt.

This is why investment properties are more attractive. The home may be worth $200,000 but at least it puts out $1000/mo. My take has always been, but investment properties and use their cashflow to rent the home that you are living in. But should you decide to buy, use the cashflow to pay the mortgage of your primary home.

BUT... with that said. I just bought a vacation home that I've always wanted. Of course it was a horrible investment. If I rent it out my cash on cash return is 1.5%. I could do so much better. But sometimes, it's not all about the money.

 

[slamrei]

There are so many variables, and I don't think there's a wrong answer to this.
But for me personally, with FHA loans, you can put down very little of your own money to buy a primary residence. If your mortgage is similar to cost of rent or less, it makes sense to own your own house and pay it down every month vs helping a landlord pay down their rental. I don't like having landlords telling me you can't do this, or you can't have a dog, or calling references and running a credit check on me to decide whether I qualify to rent their house. I like to be the boss of my own home!