Grant Cardone "Buying a House is for Suckers"

[MJ DeMarco]

I'd argue you're a sucker when you take advice from gurus who dispense absolute statements of a "one size fits all" variant, totally disrespecting individual values, personalities, and preferences.

 

[MJ DeMarco]

I'm gonna say something here that no one (at least in 3 pages) has touched on, and it is why I own a house (paid cash, no mortgage)...

I don't like how things are progressing in the world...

Between corrupt government, corrupt media, and a worldwide financial system predicated on printed money and trillions in debt, I don't trust "money" -- or in other words, I don't trust "a number on a computer screen" that says you have $X millions, or whatever your personal number might be.

When shit hits the fan in the form of a financial collapse, hyperinflation, or whatever it might be, I DO NOT want to be in cash.

I want to be in hard assets to the best I can be; businesses, houses, tangible things.

For me, owning my home free-and-clear was the best form of insurance because your monthly shelter cost will ALWAYS be your biggest expense over your lifetime. Eradicating this, for the rest of my life, was extremely important to me.

Toss in the fact that I'm not one of these entrepreneurs who likes to vagabond around the globe-- my goal is to have my home be the resort-- a perpetual vacation -- so owning my home is VERY IMPORTANT. And this is why the statement is ridiculous because it ignores what an individual values.

Someone like @biophase who travels 6 months out of the year, then yea, I can see him possibly renting and being perfectly happy with it.



Anyhow, when the dollar collapses and is replaced with some globalized BS at 2 cents on the dollar with a new "Ameridollar", my home will retain its intrinsic value.

A number on a computer screen?

Cashing sitting in a bank that could be confiscated in the name of some government initiative?

I'm not interested in playing that game.

In this day and age, I'm interested in being as self-sufficient as possible.

While home ownership doesn't escape property taxes, neither does renting-- it's simply passed onto the renter.

PS: No, that is not a photo of my backyard, but it does appeal to me as (once again) I've been house shopping.

 

[Andy Black]

We like owning (with the help of a mortgage).

It's our home.

Each year we do a bit more to it. New kitchen. New bathroom. Decking out the back. Redecorating regularly (that's my wife).

We'll get the smallish back garden landscaped when the boys are older and the slides and trampolines are gone.

Maybe we'll get an extension and an extra bedroom (office?).

Maybe one day we'll get a wee office built out back for yours truly? It would be nice to have video kit setup permanently. Until then, I'm quite happy for my office to double as the playroom. When they're home I shouldn't be working anyway.

The kids will be able to walk to school when they're a bit older. They're within 5 minutes walk of at least 10 cousins.

We're 5 minutes walk from the sports centre, swimming pool, playground, and skateboard park.

We're within 5 mins drive of the kids kick-boxing classes in the next village.



It wouldn't feel like home if we were renting.

Neither would we invest time and money into it if we didn't own.

I don't care if we could rent cheaper (we can't actually, but that's due to getting "lucky" when we bought at a good price 5 years ago).

Some things aren't decided by maths.

Just my 2c.

 

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[Lucid Tech]

I bought my first condo shortly after college using the first time homebuyer tax credit on April 30, 2010. Literally the last day you could receive the $8,000 tax credit. The bank also made a mistake with my offer (short sale so multiple parties were involved) and they counter offered $3000 LESS than my original offer. With the 8k given back to me at tax time, it was great. I just made $11k. Who would ever rent? Buying is the best!

One year later the identical unit right next to mine sold for 20% less than I paid. My furnace dies on the coldest day of the year. Repairs left and right. I no longer like the place and I'm stuck for a minimum of 3 years unless I want to repay the tax credit. Wow, buying is terrible. Who would ever buy? Renting is the best.

Two years later my location has suddenly become the latest hotspot. Not only has my place completely recovered in value, I'm listing for 60% more than I originally paid. 72 hours later I've got an all-cash offer for more than asking price. Who would ever rent? Buying is the best!

Oh, wait. This type of "all-or-nothing" attitude has gotten me into trouble before.

All told, after appreciation and tax benefits less repairs/maintenance, I pocketed around 80k after the sale. Tax free since it was primary residence.

Who would ever rent after that? Me, and I plan to continue renting for the foreseeable future.

If anyone claims there is a 100% right or wrong answer for all people in all situations for this rent/buy decision, that is laughable.

Situations change. Projections can be missed.

Terrible things can happen. Great things can happen.

Only you can make the right choice based on your current situation.

 

[MJ DeMarco]

Unless you've owned property for at least 7 years, I am not really interested in continuing the conversation. Have you owned property, investment or otherwise, for longer than 7 years?

Yes, I have.

1 - costs go up every year.

To suggest they don't increase for renters is being intellectually dishonest -- landlords pass the costs down to renters.

2 - you are bound to one place.

LOL, I'm not bound to any place just because I have a $250 electric bill and a yearly tax payment.

To suggest that someone who values living in their resort style home is a SUCKER vs someone who'd rather vagabond around the planet is disingenuous douchebaggery.

Again, absolutes assume absolute personalities.

I could say flamboyant Instagram playboys are suckers but I don't because I'm sure it's just a reflection of their values, their personality, and what's important to them. What's good for me isn't good for someone else, and vice versa.

And this is exactly why someone who loves the Slowlane is not better or worse than the rest of us.

 

[MJ DeMarco]

Buying a house was one of the best things I've done.

Buying a house is the dumbest thing I've done.

And this is why absolute statements are almost always destined to be wrong for some, right for others.

 

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[CPisHere]

Saw this video, thought I'd get people here's opinions.

Here's some of his points -

Unless you have 20 million in the bank, in cash, you have no business buying a house.

A house is the worst investment you will ever make. If there is no income don't invest in it. Sell your house and buy rental property. I know this sounds crazy, but rent where you live and own what you can rent to others. This will create amazing wealth for you and your family over your lifetime.

 

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[RisingStars]

It's just like MJ wrote in TMF . The problem is that people see their houses as an asset, which is wrong. An asset PRODUCES money for you. A house just BURNS money.
The house itself isn't the problem if you are aware of this fact. A lot of people think of their house as an investment which is wrong, but not everyone wants 20 million and travel the world.

By no means someone is a "sucker" who knows that his house will only COST him money but still pursues it because it's the lifestyle he wants for his family and himself.

 

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[ScottT]

I bought 2 multi families 16 years ago...i took everything out of the stock market pre-crash...I did this as I wanted a safety net for life...I make 53k a year free and clear on these 2 properties...I did this so as to forever eliminate any anxieties about my basic needs for the rest of my life ( im not out one months rent btw in all these years) Now sitting here on the a$$ end of a divorce, and as well having quit my day job of 100k yr....cuz why not throw it all away at once !...hated that job....I am forever gratefull that I secured my future back then with these 2 properties...one of which I now live in...I found early on that the only thing preventing me from venturing my own road was the fear of being homeless should i fail...So now im benefitting from that decision as I can take my time recovering from this divorce and as well deciding what I want to do next...so to my point...buying these 2 properties ( and placing them in a trust of course) Has enabled me the required level of freedom....to fail...and still live to fight another day....If i did nothing else the rest of my life...I will always have this roof, 53k to live on, which will turn into 75k once social security kicks in...Im 50....I forever thank my 34yr old self...Cant wait to start my next venture ~

 

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[G-Man]

What's especially interesting here, in light of having read UnScripted , is the social scripting and reinforcement these folks get for terrible decisions. The above mentioned family with one grad student and one assistant prof that just bought a house and added a mortgage to 10 years worth of school loans?... about 20 comments in the effect of "Congratulations!" followed by varying combos of emojis.

Here we have a young, intelligent couple with a toddler, and tons of promise for the future, and the crowd is cheering them on as they literally mortgage their future.

Thanks @MJ DeMarco for making me more self-aware of my own scripting. It is indeed strong. Even now, when someone my age gets a big house, a new car, or a new job, I feel a momentary tinge of "Oh my God, I'm falling behind everyone I went to school with." I still have to consciously calm myself down and say:

• That house: It takes up 50% of his monthly income to pay the mortgage.
• That car: It's depreciating by the moment, and he'll still be paying for it 4 years from now, long after the shine wears off.
• That job: He hates it. He just stages excitement on social media because everyone has to put up a public image now. And worse he can't quit, because after all, he has that house and that car.

 

[hughjasle]

Man, I'm sad to see a good thread get destroyed like this. Some really good dialog was taking place between guys ACTUALLY in the space. thnx for the mind opening questions and comments. I don't remember all of them but @JScott and his full on break down was cool to see as well as @biophase with the numbers break down on buying multiple units vs 1 large home was neat and mind opening as well.

I have always rented myself as I have moved a lot. Personally I'm sick of it. I have a wife and two kids and are a lot like @MJ DeMarco in that we want a home base. We want to make our 'resort' our home and our everyday life. I have no idea if that is financially smarter or not, but at some point it becomes a want. And we can afford it without issues, so maybe that's the difference? Like buying a nicer car vs a beater. A beater does the job and saves you the most money in the long run, much like renting can do. Yet, I see very few people staying in beaters for the sake of saving that money.

Anyways, thanks again to all those who provided clear insights and commentary on this topic. Very cool hearing both sides and seeing some of the outside the box thinking.

 

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[MJ DeMarco]

The problem with an algorithm is that it is only as good as the inputs.

This discussion goes beyond numbers and algorithms.

Personalities, likes/dislikes, and family values cannot be quantified.

If you told me I could buy a five year supply of tampons for ten bucks, your algorithm and inputs by which you judge say "that's a good buy!"

The problem is, I DO NOT WANT a five year supply of tampons, nor am I interested in pawning them off on Amazon.

 

[ravenspear]

I disagree. Buying a house you cannot afford is for suckers, I would agree with, and this is what most people do. Also, putting a huge percentage of your net worth into one house is also stupid, which is again what most people do.

But buying a cheap house is a better deal than renting, assuming the down payment is not all or a huge percentage of your net worth.

I'm buying my first house this year and I ran the numbers in detail. I'm currently spending $1200/mo on rent. If I buy a small condo or house in my area, I will be spending around $500/mo in mortgage interest, around $250/mo in property taxes, and around $75 on insurance. That's $825 monthly outflow. (Mortgage principal is simply an investment in real estate so its not calculated as an expense). But I will be getting around $300 in additional income from tax deductions on mortgage interest and property taxes, AND around $500/mo in home value appreciation assuming a conservative 2% rate of appreciation (most houses in my area are appreciating faster). Add those and I will be getting $800/mo in new net inflow. So essentially that's breaking even. My net worth will neither increase nor decrease (~$825 out/~$800 in) from having a mortgage on a small house, due to buying within my means (keeping mortgage interest low), getting the tax advantages from home ownership, and factoring in a conservative rate of home appreciation. This is a MUCH better deal than losing $1200/mo in net worth through renting.

Obviously I'm not factoring in maintenance here but that will be nowhere near $1200/mo so it's still a much better deal than renting. I'm also aware that the closing costs are a net worth hit but they will be paid for within 6 months by my calculations.

Many people forget that home ownership is tax incentivized (at least in the US) and proper tax planning is one of the critical components to creating wealth.

 

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[G-Man]

This is exactly the case in Canada too.. You have young families of 2 (two newborns, husband + wife), where the husband is only working, and they're buying $600k+ new construction homes in the middle of nowhere thinking the price will go up by $200k in 2-3 years and they'll make a nice profit... Canada's real estate bubble is in for a very bad burst very soon..

It's a shame there's no examples in history of what happens when you combine blind speculation with easy credit.

 

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[biophase]

Just so I get this straight about this thread, we are talking about the home that you LIVE in. We are not talking about real estate investments. I thought I posted this math before somewhere, but couldn't find it so here it is again.

Let's say I had $1,000,000 cash and I needed to find a place to live.

I could buy a $1m home in a nice neighborhood. Done.

or

I could buy 7, $130,000 one bedroom condos (and have $90,000 left over). I can rent them all out and cashflow $600/mo each. This brings my incoming cashflow to $4200/mo.

Then I go and rent a $1m home for $5000/mo. So I have to come out with $800 out of pocket vs. my cashflow.

Now, if I owned the $1m home, my taxes would be say $500/mo, plus HOA, etc... so for simplicity let's just say that my owning home expenses were also $800/mo.

so let's say that everything balances out. You could argue that the maintenance on 7 condos would cost more than the maintenance on a $1m home. I don't know, but I would probably believe you.

Now let's pretend the housing market or the economy collapses. The $1m house is worth $850k. The $130k condos are worth $100k.

When this happens, people will go from buying to renting. The rent on your 1br condos will increase. The person owning the $1m home you are living in will need to lower rents. So you can actually go from -$800 to +$800.

Your business/work income dries up. You break the lease, or stay until the leash ends. Move into something smaller, say $2500/mo. You are still doing OK. You got your living expenses covered. You have many many options.

If you own the $1m home, you are very limited. You can just wait out the market until it comes back. If you lose your job or business, you may have trouble maintaining the home and making tax and HOA payments.

Let's say a biz opportunity comes along. You can sell 1 condo to get an influx of cash, vs. selling your $1m home or getting an LOC.

My point is that you have alot more options if you rent the home you live in and own the homes you invest in.

I get that people want a stable and long term home for their family. That may make it worth it to buy. But, I've seen so many homes for rent in every neighborhood that I've lived in that I can't believe that you wouldn't be able to find another home in the same neighborhood if you got kicked out by your landlord.

 

[SteveO]

Some people's business IS cutting grass. Ask @SteveO

130 acres of it...

I have stayed out of this conversation for a reason. Many people have already stated that there are MANY variables here. Blanket statements don't apply.

 

[MJ DeMarco]

homeownership bullcrap that's given out by banks and mortgage companies.

I don't have a mortgage because I'm a sucker and paid cash for both my houses ...

Nonetheless, I agree here -- most retail buyers have no clue how a 30-year mortgage is amortized and how it is top loaded with interest and very little principal payment. It borders on scammery.

 

[MoneyDoc]

A lot of people in my age group (20-25) have this absurd idea that if you buy a condo/house, the price will go up $100k-200k in 2-3 years and you'll be rich. This is literally the reasoning behind their purchase.

My friend the other day, young guy, bought a condo with his GF. I asked him why he didn't rent and use that down payment towards starting a business. He told me, verbatim, "this condo will go up by at least $100k in 2 years. We'll sell it, buy another property, and repeat. What business can we start with $10,000? There's nothing. Everything is saturated and you need a lot of money to start a business. Besides, businesses are risky, this is a safe investment." - I kid you not guys... I was shaking my head the whole time.. haven't talked to him since.

Safe investment? Once he gets the bill for the maintenance fees, monthly tax fees, water/hydro, once he can't start paying the mortgage, then we'll see how safe of an investment it was.

 

[biophase]

I disagree. Buying a house you cannot afford is for suckers, I would agree with, and this is what most people do. Also, putting a huge percentage of your net worth into one house is also stupid, which is again what most people do.

But buying a cheap house is a better deal than renting, assuming the down payment is not all or a huge percentage of your net worth.

I'm buying my first house this year and I ran the numbers in detail. I'm currently spending $1200/mo on rent. If I buy a small condo or house in my area, I will be spending around $500/mo in mortgage interest, around $250/mo in property taxes, and around $75 on insurance. That's $825 monthly outflow. (Mortgage principal is simply an investment in real estate so its not calculated as an expense). But I will be getting around $300 in additional income from tax deductions on mortgage interest and property taxes, AND around $500/mo in home value appreciation assuming a conservative 2% rate of appreciation (most houses in my area are appreciating faster). Add those and I will be getting $800/mo in new net inflow. So essentially that's breaking even. My net worth will neither increase nor decrease (~$825 out/~$800 in) from having a mortgage on a small house, due to buying within my means (keeping mortgage interest low), getting the tax advantages from home ownership, and factoring in a conservative rate of home appreciation. This is a MUCH better deal than losing $1200/mo in net worth through renting.

Obviously I'm not factoring in maintenance here but that will be nowhere near $1200/mo so it's still a much better deal than renting. I'm also aware that the closing costs are a net worth hit but they will be paid for within 6 months by my calculations.

Many people forget that home ownership is tax incentivized (at least in the US) and proper tax planning is one of the critical components to creating wealth.

So you are saying that in your area a $1200/mo rent gets you a $300k house. I am basing this on your 2% appreciation equating to $6,000/yr. In this scenario, you should not be buying a $300k house.

You say that you will spend $500/mo in interest, again $6000/yr. At current interest rate of 3%, you are getting a $200k loan and putting $100k down.

I know you say that this is your first home, so you don't have experience as a homeowner yet. But there is a reason that older and more financial successful people are telling others not to buy a home.

I am telling you that renting a $300k house for $1200/mo is a steal. I would rent forever and never buy this house.

Now, if you tell me that a $1200/mo rent gets you a $150k home, then I may tell you to buy. This is because when your life changes you will have a cashflowing asset when you rent it out.

Do me a favor and run out some real numbers on real property in your area out 5 years and see how or if owning is better.

 

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[Greg R]

We like owning (with the help of a mortgage).

It's our home.

Each year we do a bit more to it. New kitchen. New bathroom. Decking out the back. Redecorating regularly (that's my wife).

We'll get the smallish back garden landscaped when the boys are older and the slides and trampolines are gone.

Maybe we'll get an extension and an extra bedroom (office?).

Maybe one day we'll get a wee office built out back for yours truly? It would be nice to have video kit setup permanently...

The kids will be able to walk to school when they're a bit older. They're within 5 minutes walk of at least 10 cousins.

We're 5 minutes walk from the sports centre, swimming pool, playground, and skateboard park. We're within 5 mins drive of the kids kick-boxing classes in the next village.

It wouldn't feel like home if we were renting.

Neither would we invest time and money into it if we didn't own.

I don't care if we could rent cheaper (we can't actually, but that's due to use getting "lucky" when we bought at a good price 5 years ago).

Some things aren't decided by maths.

Just my 2c.

Being a homeowner and a landlord, I could not agree more.

I recently was in a situation where renting would have made more rational sense when you ran the numbers.

However, we opted to purchase anyway.

When you rent, you have no control over that property.

We like control. We like to remodel and decorate and paint things the colors we feel are best for the space.

A lot of people don't factor in the time it takes to constantly be moving year to year (or the expense).

Our recent move consumed about all of my free time for a week and a half. That took time away from leisure and working on my business.

Most people don't realize that a landlord can sell the property while you still live there (check your lease).

We don't like unanticipated changes. And being a landlord myself, I know what renting is like.

Lastly, we do not like to comprise on our place of residence.

We have worked very hard to get to where we are and the way we live is a direct reflection of what we have achieved.

We DON'T over do it.

BUT,

Stuffing our mattress and the Millionaire Next Door lifestyle is not our thing.

A lot of people don't figure in how much time is wasted driving to the gym, work, grocery store, and going to entertainment when they live in class B, C, and D neighborhoods that are further removed from everything.

Most people also don't factor in the difference in appreciation between a class A vs B, C, or D neighborhoods.

Yes a class C neighborhood is cheaper. But how much time are you wasting and how much appreciation are you missing out on?

Of course this is all framed in the context of affordability.

So what I am getting at (regardless of income), if you can afford to live in a B class neighborhood don't opt to live in a C or D.

But if all you can afford is a D... well you can only go up from there

If your personal preference is to live like a hermit, then feel free to do so.

I'm not here to dictate personal preference.

I'm only offering my perspective and opinion being a homeowner and a landlord.

Whether it is good or bad, right or wrong.

Makes no difference to me.

Good luck.

 

[MJ DeMarco]

Cardone has a point of view that needs to be considered.

Absolutely, especially for those who aren't homebodies and love to travel and be mobile.

But using a blanket statement that home buyers are suckers is NOT asking for a point of view to be "considered" -- it's an absolute statement of fact just waiting to be shredded by someone like me who doesn't like to travel and considers his home a permanent hotel and resort.

 

[Kak]

I used to think buying was for idiots until rents went through the roof in my area and I bought a house twice the size, on the golf course, in a gated community for $100 less per month.

It needed work, but it got the work shortly after my wife and I moved in. Have we made the house more valuable? Yes definitely. Have we turned a profit on the work we did? I guarantee it. We were careful to buy everything right including the house. Did we buy a house to make money? Hell no, we bought it to live in.

We've lived here for 6 months and could move at the drop of a hat and throw an extra 50 grand in the bank.

Bottom line. You need a place to live. There is a stupid way and a smart way to do everything. I don't care how rich you are, it's always smart to buy things right.

 

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[MTF]

I went to a meeting accompanied by a real estate agent to see a few apartments in a multi-family house. The owner greeted us at the door and led us to the second floor.

I thought that all of the apartments were empty, so it caught me by surprise when he knocked on one of the doors and a 70-80+ retiree opened the door. The owner told the man that we're potential buyers and asked if we could see the apartment. The elderly tenant slightly nodded - after all, what else could he do? - his face a mix of confusion, shock, resignation, and something that I would later identify as crushed male ego.

The retiree's wife sat in the living room paralyzed, horror written on her face, as if she were mere seconds away from an execution.

The agent wanted me to inspect the apartment, but I left as soon as I could. I just couldn't walk through their home as if I were a heartless liquidator.

I don't think I'll ever forget their expressions. They were powerless. If the owner decided to sell the apartment and kick them out, they would have to go and look for another place, elderly retirees or not.

That's why I'd never rent my principal residence. Control and peace of mind is more important to me than some additional cash I could theoretically save by renting.

 

[Envision]

buy a multi family - live in part - rent out the other units ????? live for free Profit?

 

[MoneyDoc]

This is one of the reasons I'm not buying our first house right now. Everyone thinks this, and it leads me to believe the market is overbought. I have 3 FB friends roughly my age (31) that have been posting their new constructions houses they just bought in the last couple weeks. Obviously you never really know how much money people have, but here are the 30 year olds buying brand new homes:

• Husband, car salesman, wife in school
• Husband in school, wife assistant professor
• Husband exterminator, wife teacher.

When these people are all able to access the credit necessary to buy 250k+ homes (which is a nice home in the South), that shit has to tank at some point in the near future.

This is exactly the case in Canada too.. You have young families of 2 (two newborns, husband + wife), where the husband is only working, and they're buying $600k+ new construction homes in the middle of nowhere thinking the price will go up by $200k in 2-3 years and they'll make a nice profit... Canada's real estate bubble is in for a very bad burst very soon..

 

[JDx]

If owning rental properties is such a good revenue stream for so many folks here....why would I want to become one of their customers???

Replace "rental properties" with ANY other product or business and surprise yourself with the naivety of this sentence.
Like you wouldn't get a Netflix account because the owners have a good revenue stream.. Or you wouldn't buy a smartphone because (..) yada.
Wall-mart makes billions! I better stop shopping there
Seriously? Lol

 

[Vigilante]

My house in Minnesota is $150,000 upside down as we bought it literally on the peak of the market before the housing crash in 2008.

I have been in litigation on it for 2 years and spent so far over $20,000 on the litigation trying to get a clear title. As is, I can't sell it.

Wish I would have rented.

 

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[MidwestLandlord]

Safe investment? Once he gets the bill for the maintenance fees, monthly tax fees, water/hydro, once he can't start paying the mortgage, then we'll see how safe of an investment it was.

Just wait until he gets an HOA assessment bill for a water main, siding, roof, parking lot, foundation issue, windows, government required sprinkler system updates/install, or new amenity lol

 

[Yoda]

My house didn't cost me a dollar down payment.

My house payment is 30% cheaper than rent around here because I got the lowest possible interest rate.

My house isn't paying me monthly cash flow, but it is paying my future self in the form of equity, and currently through tax deductions (split decision, moot).

My house is in a top notch school district.

When I move, I'll rent it out and re-decide using current market conditions and life style desires to determine whether I rent or buy the next.

Your point of view is right, no matter the side of the fence you're on. ***
​

***As long as you know what the F*ck you're doing.

 

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[jon.a]

I've done the math and I've seen the math done by other, very intelligent people. In general, the total cost of renting and ownership are going to be about the same over the long-term, assuming you normalize for market fluctuations and amortize the closing costs over a reasonable period of time (at least 10 years).

The reason the two are about equivalent isn't coincidence -- the cost of ownership for a landlord is about the same as the cost of ownership for an owner occupant, so tenants will get passed on the real costs of ownership as part of their rent. In addition, renters are going to be paying a premium over that cost of ownership (the profit the landlord makes) -- this premium is in return for being able to transition from location to location without the overhead of transaction costs.

So, typically speaking, renters will be paying a little more, and that extra cost is the price for freedom of change. Renters can also amortize the cost over longer period of time, as they don't pay upfront transaction costs. Given the time value of money, this is a benefit to renters that *could* outweigh the extra cost of renting. Additionally, if someone is going to be staying put for 10+ years, it generally gets a little bit cheaper to own because those transaction costs are amortized for ownership as well.

Long story short, the financials are about the same...it's the non-financial aspects that people need to weigh...

Well said.

 

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