Is Home Ownership the Best Path to Wealth

[@normILL]

I love these charts! Can we please get an analysis that factors in a 1-3% rent increase annually decreasing Nancy's investment amount? I think that's an important factor when comparing to owning with a fixed rate.

[@stiddymyboy]

I am also not sure they mentioned that in the case of the two homeowners they no longer have much of a housing expense. Taxes, insurance, and maintenance, sure, but nothing like that ongoing rent must be.

[@abbygator411]

I'm forever greatful I bought a house I love in 2016 when prices and interest rates were low.

[@Melonhome_yt]

Cherish it. It's a nightmare our here trying to buy our first home.

[@gin170]

My husband and his brother inherited a house near Malibu and the cost is incredible. The home insurance alone is 21K. State Farm considers the area a fire risk so they no longer have coverage for the area. My husband had to buy a fire insurance provided by the State of CA (I think in conjunction with Insurance carriers) and it's 8K/year. The house is paid off but the cost to keep it is a lot.

[@brianmurphysn]

While I've found that owning a home and rental properties haven't been the most lucrative investments for me, I still cherish the experience and sense of ownership. However, I've come to realize that the stock market is where I can truly grow my wealth.

[@ChristianJacquet9]

After years of building a rental property portfolio, I finally burned out and decided to sell. Now, I'm sitting on about $5 million and looking for a new opportunity to grow my wealth. I'm considering investing in the stock market, but I want to make sure I'm making a smart decision. I've heard stories about people losing money in the market, but I've also seen how it can be a powerful tool for building wealth over time. I'd love to hear your thoughts - what do you think I should consider as I explore this option?

[@johnketh-n9v]

A cautious investment approach is important. Consider allocating 40-50% of your portfolio to secure investments and consulting with a financial expert to ensure informed decision-making.

[@KevinCollins09]

Absolutely! Most undervalue experts, but their expertise and risk mitigation strategies are invaluable for savvy investors. For those with busy schedules, monitoring the market is challenging, so we delegate to experts. Personally, I've seen significant growth by working with an expert - my portfolio has grown to $1.3M, a 45% increase from last year, with robust diversification and inflation hedging.

[@don_hug]

​ @KevinCollins As someone new to stock investing, I'd greatly appreciate it if you could direct me to this expert. I'm eager to learn and avoid costly mistakes.

[@KevinCollins09]

'Glen Howard Chester' is a renowned figure in the financial sector with over two decades of experience and a consistently exceptional performance record. I'd suggest you research him further on the web.

[@LL-pq5uo]

I highly appreciate that you showed Los Angeles as an example. I live in Southern California and the housing costs here are completely obscene and there's a huge cost difference between renting and buying in this area, no matter how hard anybody tries to make a generic case for buying. To all the commenters favoring buying over renting, I'd love for them to try to do the math to justify them actually being able to afford a home in the range of $1.5 million and above 🙄 Clearly many people don't have a sense of the realities of high cost of living areas.

[@Trix897]

Same applies to Seattle. I was able to time the market well up here and buy my condo for less than $200k at less than 3% interest almost 4 years ago. Even when factoring in the work I’ve had done to my place since I bought it, I was saving $500/month over renting, and it’s grown to $1000/month. Making sure to run the numbers and seeing what the difference was, and also factoring in the length of time I’d be living here made a significant impact on my decision. If I was in the market now, I’d still be renting, because that is the most cost efficient thing I would be able to do.

[@tracyaf6084]

I’m in Southern California too. We bought in 2012. We could never afford it today. We pay less in our mortgage than most people I know pay in rent so it’s worked out well for us. It doesn’t for everyone though

[@richardprice4839]

Move.

[@rayzerot]

​@@richardprice4839That's the laziest answer possible possible when it comes to real estate. Not everyone can move. -some people have family members they need to take care of -some people can't move or they'd lose access to their kids -some people have health conditions that needs specialists only available in bigger, city hospitals -some people genuinely love their job and it's not a job you can find in Hicksville, USA - some people would be in physical danger if they moved because of their politics or lifestyle choices Try to realize that other people have life experiences that aren't yours and some people actually like their communities or need to stay local for various reasons

[@chemquests]

As someone that’s always lived in rural locations, I don’t understand why it is worth it to those who live in these places. Nice to visit but I wouldn’t ever pay those prices.

[@huskiefan06]

Always love the show. However, I don't like the assumptions for the home purchases. First, in your example, Nancy's rent payment never changes. I don't know anyone whose rent payment never changes every year. Can you adjust this at least for inflation? Next, can you use 20% down payments for those people buying homes in order to remove PMI? Secondly, I don't know anyone who completely avoids investing until their home is paid for. Can you have Earl invest 25% of his income, while still paying off his home early? I'd be interested to see what the results are. Thanks guys!

[@emilycozad9933]

Nice case study challenging the status quo. When demonstrating the estimated net worth after the 30-year period, I think you should build on that one step further to include large costs that aren't typical with renting including HOA, appliances, higher insurance, HVAC/roof/etc., renovations, and miscellaneous expenses on an annual basis. I think a direct mortgage vs. rent assumption is a bit simplistic as we know there are so many hidden costs with large purchases like a house.

[@raidanbolt4844]

Having a house paid off gives a peace of mind. Will alsom depend if settling down. If move often for work, then rent

[@jeremyhill-h9e]

I retired at age 53 and am now in my early 60s. Many people resisted me because they couldn't understand the idea of not working if you don't have to. I considered my life to be in phases. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." After I retired, I left the nation and now reside in Latin America. I was able to enjoy my new surroundings and escape from all the bad things that were going on in America. I haven't yet encountered anyone who laments their retirement.

[@irwinsaltzman979]

Also left full time job at 53. Started a second part time career in a field I enjoy doing. Money is not the only reason to live once when has sufficient funds .

[@kerrydavila5858]

born and raised in a state with a decent cost of living. I am so glad I bought a house here already. So many people from all over America are flooding in and I have been watching those rates rise!

[@RubyOliverm5l]

I think investors should always put their cash to work, especially In 2025, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2025

[@ChristopherJeffreynx8]

Since risk is at an all-time high right now, perhaps you should be a little more patient and return when it has decreased. Alternatively, you can consult a trained financial expert for strategy.

[@SofiaJames9H]

Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.

[@JulianBenjamin3d]

I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?

[@SofiaJames9H]

My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..

[@JulianBenjamin3d]

I searched for her full name online, found her page, and sent an email to schedule a meeting. Hopefully, she responds soon. Thank you

[@KaiSosceles]

-Nancys rent will go up over time and she will forego any fractional ability to control those increases. -Property taxes and maintenance/repair costs will go up over time on the house, but the homeowner has at least fractionally locked in the rest of their housing cost.

[@admiralmurat2777]

But I can live in a tent.

[@ST-iv9dv]

You're either locked in or not. Renters have the mobility to choose somewhere else to rent if they don't like their rent. Homeowners have to sell their entire home and in states like mine (Texas) where property tax is 3% you can get f'ed pretty quickly

[@dog7881]

@@ST-iv9dvthe problem is you can move to a lower rent area so many times before there are none that desirable to live in

[@mjiles85]

Fixed-rate mortgages also increase due to property tax, PMI etc. So the same applies to the homebuyers also they may not have much money to invest if they have home repairs have to put money away for an emergency fund or a number of other reasons.

[@ST-iv9dv]

@@dog7881 sure but at the same time mortgages are going up and so is income

[@christian6911]

I'm about to buy a house. There's something to be said about having your own home that you don't have to worry about a landlord, maintenance on someone else's terms and just being able to do whatever you want to your home.

[@GillerHeston]

I’m closing in on my retirement and I’d like to move from Minnesota to a warmer climate, but the prices on homes are stupidly ridiculous and Mortgage prices has been skyrocketing on a roll(currently over 7%) do I just invest my spare cash into stock and wait for a housing crash or should I go ahead to buy a home anyways?

[@jcurdrayeric243]

If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.

[@rogerwheelers4322]

Considering the present situation, diversifying by shifting investments from real estate to financial markets or gold is recommended, despite potential future home price drops. Given prevailing mortgage rates and economic uncertainty, this move is prudent, particularly due to stricter mortgage regulations. Seeking advice from a knowledgeable independent financial advisor is advisable for those seeking guidance.

[@joshbarney114]

This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.

[@FabioOdelega876]

I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?

[@joshbarney114]

‘’Marisa Michelle Litwinsky’’ is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.

[@damienbates]

People always forget to add in the cost of repairs and maintenance of a house. The mortgage is the minimum you pay. Once you add in the other costs it skyrockets and you end up paying more than renting. At the lower interest rates it’s doable, but at today’s rates it’s very debatable and location can really make the difference.

[@stevenbrady440]

Annually 1.5 percent for maintenance and 1% for depreciation completely omitted. And 15% transactions costs (buying and selling) on sales omitted. And people move. So more transaction costs. Huge omissions on buying.

[@stevenporter863]

Stanford University did a study of single family homes appreciation from 1920 to 2015. After inflation and sunken costs, that most people forget to factor in (mortgage interest, extra taxes, extra utilities, extra furniture, extra insurance, maintenance, repairs, renovations, lawn equipment, HOA dues, etc.) the annual appreciation was about 0.5%. Results for the UK and Europe were quite similar.

[@B_More30]

Take a look at graham stephen’s rent vs buy. He goes into good detail about the things you mention

[@Ellis1127]

💯💯💯

[@Schoonai]

⁠@@stevenbrady440and property tax, and insurance and optionally HOA …

[@AnshMeta-j7r]

Asking a real estate agent whether you should buy a home right now is like to asking an alcoholic whether they think you should have a drink lol. Homes in my neighborhood that cost around $450k in sales in 2019 are now going for $800 to $950k. Every seller in my neighborhood is currently making a $350k profit. Simply unreal. In all honesty, deflation is what we require. The only other option is for many people to go bankrupt, which would also be bad for the economy. That is the only way to return to normal.

[@jonathanolulu1948]

The increasing prices have impacted my plan to retire at 62, work part-time, and save for the future. I'm concerned about whether those who navigated the 2008 financial crisis had an easier time than I am currently experiencing. The combination of stock market volatility and a decrease in income is causing anxiety about whether I'll have sufficient funds for retirement.

[@Fahima9Tazin]

This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.

[@SteveKalfman-yv7co]

How can I reach this person?

[@Fahima9Tazin]

Finding financial advisors like Vivian Jean Wilhelm who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.

[@SteveKalfman-yv7co]

Thanks for the lead

[@KaiSosceles]

Hopefully people understand that their primary home shouldnt be considered an "investment." That being said, its nice that owning gives you the option to be an investor, using househscking or landlording to have other people help you pay your mortgage. Will you come out ahead by paying for your own home versus renting? Maybe not. Will you come out ahead when other people are paying for your home? Much more likely.

[@tannerdriscoll6699]

That implies you suck and are hoarding limited housing from families

[@seminolekilla]

Until Covid happens and the government decides no one has to pay their rent anymore

[@priscilla7538]

Interestingly, in my current area, mortgage, insurance and taxes are cheaper than a rent payment for an equal space, if you can manage to get your offer through.

[@jonathanhayhurst3928]

Did you adjust for any rent increases for Nancy? That's a huge difference by the end.

[@Rech10]

Need to factor in costs of the house and expenses in maintenance.

[@jerrystpierreofficial]

Hahaha😂. I could not help but bust out laughing at the..."if I could whistle I would..."

[@LexMouse]

We are foreigners living and working in Singapore. Buying is not an option. Rent is super high, but the best choice for now. When we lived in rural Wales, UK renting was much more expensive than buying (not many rental properties). So I think housing always depends. You really do need to run all the numbers and not assume one or the other based on public opinion.

[@noelrutherford6321]

You also need to subtract home maintenance, property taxes and homeowners insurance for the folks buying a home. When you those annual costs, they would not be able to invest as much each year and that would lower their net worth tremendously. Not a fair comparison.

[@elmateo77]

It's all fun and games until you need to fork out $10k for a new AC unit and $20k for a roof replacement in the same year...

[@christophe_atx]

Discount the home values in the net worth calculation by ~$150k. If your home value is $1M, you'll have to give up 15% to get your hands on it in agent fees, title fees, sales prep and moving expenses.

[@nelsonskinner3644]

While there are variables. ( like I bought at a great time and could sell for insane profits) ignoring the outliers, if the average person breaks even or better it's great. It's generally a good hedge against inflation. For example we have had a lot of inflation over the last few years, my house is worth 50 percent more, our household income has also increased around 40 percent and the original mortgage we took out is now worth much less accounting for inflation so jokes on the banks for that one. Long story short, unfortunately, many Americans are horrible at saving for anything. And even if they do the average American drains their retirement funds and all of there savings down to almost nothing before they even retire. For some people ( I'm think about most of my older relatives here) I'm so happy they had a home because they spent everything else so at least selling the home helped pay for the care they needed, it can be a place where people might actually have some equity when they have nothing else to their name because of bad spending happits/culture.

[@vaderwashere365]

There are details missing for sure... but then they would have to discount the brokerage account by 20% and the person's tax rate on investments less than 1 year to factor into capital gains taxes, while the home would have up to $500K capital gains excused for a married couple. It gets really messy quickly, so the "personal" finance caveat they always mention. So $1M in the brokerage is really less than $800K and a home that is $1M purchased for $500K, is $850K. Again, that is a very specific example, but that is why it gets so complicated... it is different for everyone.

[@noveltyrobot]

Comments section is definitely lively on this topic. All kinds of accusations flying.

[@user-me2gy5km6q]

With the Renter you left out one key variable, in that their rent would have risen all throughout that time period. Meaning that their Savings Rate would also be shrinking in comparison to the Home Buyers savings rate. Additionally, the Home Buyers will have lower future costs if they no longer have a Mortgage Payment. While the Renter still has an ever increasing rent payments to look forward to, or will have to liquidate a part of their savings to buy at higher future home prices.

[@ryang1195]

I’m a little concerned that nobody has made him shave that damn mustache off yet.😂

[@andrewt406]

I basically always agree with the Money Guys but I think y’all missed on this one. Assuming that a mortgage payment costs more than rent over 30 years by not increasing rent AT ALL is ludicrous. If you assume even a modest 3% rent increase per year, rent has more than doubled at the end of 30 years while the mortgage payment stays the same. Edit: I don’t disagree with a lot of y’all’s responses, I am just pointing out what I believe is a glaring issue with the first case study. By mortgage staying the same I’m referring to the principle and interest payment. Taxes and insurance are built in costs to both renting and owning, but when done right owning stabilizes your liabilities over the long term. I agree that the differences are nuanced, but I think the case study paints a bit of a false picture.

[@sho7x898]

Mortgage payments don’t stay the same. Property taxes increase every year and so does insurance. Plus factor in all the phantom costs of owning a home. It depends on the city also if you live in a big city like ny, la, boston etc you’re better off renting and investing the rest.

[@DeportillegalAliens]

Yeah, but the stock market can be a scam

[@problematicpolarbear6065]

Rent is the maximum you will pay. A mortgage us the LEAST you will pay. There is more cost associated with property than just the mortgage. Many people chose to ignore that. Greetings from a homeowner.

[@bigbird6451]

​@@sho7x898 the net worth shows proof. And nancy will have that payment until she dies. He will make his maintenance monwy back with the lack of house payments.

[@anniealexander9616]

Exactly! 💯 I paid $25k for my daughter's home in 1991. It's now worth around $350k. I paid off the home in 5 years. I've replaced the roof, heating and air, and hot water heater, twice. My kids give me a tough time saying how cheap things were back then. They are grateful I chose buying over renting.

[@johnotay6655]

Complicated, highly personal decision for sure, but to Brian's point on the need to create a margin to invest with, I've noticed that people buying a home can often buy more than they need to future proof while almost no one rents more than they need. Having that room to easily grow the family can certainly bring peace of mind, but until you're actually using the extra space it should be recognized that it's a cost premium you're paying over renting a space that simply meets your current need.

[@xaldath4265]

Absolutely love the discussion of rent versus own and how to "do it right" and I have something to add/disagree with what I hear *all the time*. "Owning a home provides consistency in payments."(paraphrased) In the long term, it does generally favor ownership, but that favor comes at a cost...consistency. Remember, rent is your largest payment and is actually relatively stable throughout a lifetime, with *typically* predictable increases over time. A renter will never be saddled with a sudden 5-figure repair bill. A renter is likely not responsible for maintenance costs, which fluctuate almost constantly. We also can't forget about the fact that even though the mortgage stays the same for the life of the loan, taxes are still a thing and may not increase as predictably as rent, but *do* increase over time. I generally like the base rule of thumb that if you don't *plan* to stay long-term, just rent until you figure it out. The opportunity cost of buying without a plan is life-changing.

[@JesusLeee-i9r]

Things are getting worse! Low-paying jobs, inflation, and insane rental rates prevent many from saving. Home ownership, a traditional retirement asset, is now out of reach for middle-class Americans.

[@winifred-k9e]

I'm 62, and rising prices have derailed my retirement plans . I worry that today's economic conditions are more challenging than ever. The stock market's unpredictability, coupled with reduced income and soaring inflation, makes me anxious about having enough for retirement.

[@JacobsErick-u8r]

Can i get a recommendation on who you are working with?

[@HoskinsShanellNicole]

I looked up her full name online and found her page. I emailed and made an appointment to talk with her.

[@maxomo1]

I am so lucky to have bought a cottage property close enough to a major city that we can live in and it is paid off. Unfortunately it is only 1 bedroom but we will have the ability to renovate to add bedroom for our kids.

[@martywilliard]

Beau - you got that D’artagnan look going on! Just need a cape and a sword ! 😊

[@martywilliard]

Dude - IT’s BO ! HAA HAA - sorry

[@mjiles85]

Even with a fixed-rate mortgage, your monthly payment can increase over time due to changes in property taxes, homeowners insurance premiums, and potentially Private Mortgage Insurance (PMI)

[@legendary_soup4454]

Everyone forgets to add maintenance to home ownership. That makes it worse than renting.

[@ImaAHol]

Yeah calling out poor assumptions here. You can’t compare inflation adjusted equity returns of 8% to nominal house price increases. That is completely unfair. Stay consistent. The renter would far outpace the homeowners using historical rates of return. It’s disingenuous to suggest otherwise.

[@stevenporter863]

Stanford University did a study of single family homes appreciation from 1920 to 2015. After inflation and sunken costs, that most people forget to factor in (mortgage interest, extra taxes, extra utilities, extra furniture, extra insurance, maintenance, repairs, renovations, lawn equipment, HOA dues, etc.) the annual appreciation was about 0.5%. Results for the UK and Europe were quite similar.

[@ImaAHol]

@ I’m not even factoring that in. Just use consistent inflation methodologies. If they want to say we’re predicting 5-6% real returns for equities in the future and 2-3% inflation ok but say that. I would highly recommend they also provide a scenario with historical returns so everyone can be the judge if they want to rely on their projections vs what has happened historically. The renter wins hands down

[@jamiljoyner7785]

True, however it’s also not a good assumption that rental prices would not increase significantly over that same time frame.

[@elmateo77]

@@jamiljoyner7785 Rental prices would generally increase with inflation, as would income, so it evens out. (Of course in some cities housing/rent may far outpace inflation).

[@J.FamGuy.M]

I ❤ some of the points of this video. POINT #1: If you save, you make money regardless whether you rent or buy. POINT #2: There is a tool to help you figure out approximately how long you will have to stay somewhere before the breakeven point. Point #3: If you buy, you have some decisions to make. I know a fair number of people who prefer to be renters. It gives the flexibility and puts the pressure on someone else. I also know renters who wish they were owners but don't have the financial base to make the jump yet. Lastly, most of the families I know own their own home. Homes in our area have a 30 year avg price increase of 6%. At a 3% rate, we were "renting" money from the bank and earning 3.5% on every dollar. That means in the first 5 years the bank paid for all moving fees and renos and for the last 7 years they have been giving me unrealized profit. They don't care though because their money is secured by my home and earning them "safe" money.

[@TartarianTopG]

Does the home go up in value in those 5 years? Probably.

[@J.FamGuy.M]

@TartarianTopG You are right by saying, "Probably." Just because the housing 30 year avg has been 6% per year, it doesn't mean a guaranteed rate of return. Our real estate market spiked 22% in 2022 and then stagnated, dropped 15%, and is just starting back up now. The 5 year avg is magically back to a 6% avg, but some people are over 20% in the hole.

[@Ethernet480]

Earl had some stress free years ahead of his retirement years and both John and Earl won’t have to come out of pocket(portfolio) for housing in retirement other than property tax and maintenance. Just depends on what premium you’re willing to pay for those attributes

[@elmateo77]

I personally found renting less stressful than owning, there's a lot less to worry about knowing that if something goes wrong it's somebody else's problem plus if you need to relocate for a better job opportunity it's much easier to move when you don't need to wait on the house selling process.

[@oswaldorazo6279]

I wish they should have included the hidden costs of having a house, and the TIME spent maintaining

[@mizark2029]

Where can I get Bo's pullover?

[@justthebrttrk]

Lots of mathematical errors in this video... Too many for one comment. 1. You used nominal ROR for the house but inflation-adjusted ROR for investments in your calculations in other areas in the video. Why be inconsistent? It made the math unfair in favor of buying in your calculations. 2. Case study comparison at 11:54 looks wildly inaccurate. I might be missing something huge here, but it looks to me like you didn't include opportunity cost of investing in the LA comparison which makes it looks like buying is a lot better than it actually is in that scenario. The renter in LA would have far higher net worth by renting and investing the difference, with NO breakeven point. In JUST year 1, the renter would have been able to invest an exta $124,776 ($84,000 down payment + $40,776 difference in rent compared to the mortgage, which would be $6198/month on a 30 year 6.7% fixed rate mortgage). At a 10.5% (historical s&p500) compounding rate, that is $2,494,591 by year 30. And that's JUST the resulting sum of money for the dollars deployed in year 1 (!!!!!). That doesn't include investing the difference all the way up until the rent becomes equal to the mortgage payment. Even with 10% annual rent increases, and selling off your assets to cover the cost difference between renting and owning once you hit the monthly cost breakeven point, you'd end up with close to 8 figures of entirely liquid assets by year 30. You can rent a pretty nice property FOREVER with an 8 figure portfolio and have the flexibility of moving wherever you want and not deal with any maintenance if that's your thing. Also, none of my calculations above include anything about maintenance costs, home insurance, property taxes, or lost time spent on home upkeep, further skewing the math in favor of renting. OH and the fact that most people MOVE after 6-7 years and don't actually stay in the same place for 24, let alone 30 or 40. Buying makes absolutely no sense, ever, in most cities, unless you are able to rent it out for cash flow. Or unless, you know, you want a house. That too. Edit: Just ran the numbers for investing the difference for the first 10 years only, as that is about when a $2800 rent payment will catch up to a mortgage payment of $6198. Assuming rent increases by 10% each year (which is very unlikely), and of course no property tax or insurance increase to make the numbers as bad as possible for renting.... $6,735,000 portfolio by the end of the 30 years. I'm in Boston with a very similar RE market to LA. I think I'll keep renting.

[@mahsanassi]

I would love to see you and @ramitsethi discuss this!

[@ST-iv9dv]

Ramit is in LA so they'd be agreed based on their discussion

[@DericAnslum]

...Ramit will just cry about being an immigrant and that listening to Joe Rogan makes you a right wing extremist... ...sad...

[@Ellis1127]

Our investments by far out paced the growth over 20 years when looking at the gain on the sale of our home! 401k, 457b, Roth and savings. 👏👏👏

[@sdwags]

Absolutely loved Brian's comment..."you can't eat your house"...LOL!!! Would one of you two Please tell Dave Ramsey that fact? I get tired of hearing Dave and his crew say to pay off your mortgage early or only get a 15yr mortgage (for 60-70% higher payment at best...assuming slightly lower rate). I have a 2.375%/30yr fixed mortgage, bought late in life at 45 due to military service/moves. Anyone who tries to convince me to pay that off early and sacrifice investing to do so, will have to beat me senseless with their "stupid-stick". It's like Dave gets completely lost in his anti-debt crusade and totally ignores the time value of money working for you during that 15yrs you're the putting the extra into a Roth at the lofty 12% return he swears by.

[@myfinancialjourney1]

Calling buying a house giving you "Stable Housing Costs" is very VERY loose. My rent has increased FAR less than some of my friends tax and or insurance bills for their homes. I have a co worker who spends more on taxes and insurance than I do on rent and utilities combined. Have fun with that stable housing cost

[@TheBIGJake111]

I promise you that a Whole Foods is closer to the median home reference in Cali than Atlanta. I think COL metrics should control for educational attainment, income, and retail options. Somewhere like Greenville SC where retail is great and homes are still cheap if you buy median then it’s a world different than driving an hour from the low income side of Atlanta to a high income job over an hour away

[@idkmybffjill9682]

In 2018 I bought a condo cash for $31k (foreclosure) it rented for $650 at the time. Now it rents for $1050 and is worth $80 and I lived there for free for 3 years before I rented it out. Just 3 years of $1050 a month pays for the condo Absolutely nothing is better than owning a home

[@idkmybffjill9682]

To anyone struggling to stay under 25% of ur gross for housing. I feel you. I hear gunshots every night

[@MillsapsFan]

@@idkmybffjill9682 can you consider moving somewhere more affordable?

[@tooeasy4217]

Why not upgrade the marriot card to the ritz? 450 fee i believe but it gives you access to chase linges

[@LiamRappaport]

My rent is still (barely) under $1000, and a reasonable house is more than the example here. I think I’ll stick to renting for now.

[@SeekingVirtueA]

Ben Felix does a very detailed dive on this on the Rational Reminder podcast

[@louispetitjean1652]

So many problems on this calculation. FIRST: Shadow costs of Home Ownership: Where I live, that house would have ~2% property tax ($7,483/year, 623/month), the house would need to be maintained at 1% of the value of the house ($3,741/year, 312/month), Home Insurance (~$1,800/year, $150/month), and PMI (~$166/month for the first 8 years). So for the first 8 years that's an additional $1251/month, and then $1085 when PMI Drops off. So they're investing 2500-1251=$1249 for the first 8 years and then $1415 for the subsequent 22 years. At the end of the 30 years with 8% interest, that's a $1,808,000 investment Balance. It's even less if there's HOA... SECOND: Home Value Growth rate. For the stock growth they used the Inflation adjusted 8%. However, for the home price growth they used ~3% growth. An inflation adjusted growth rate for housing is probably better (generously) around 1-2%. At the high end of 2%, the house is worth $678,000 For the case of making minimum home payments: John's total net worth at the end of the 30 year period is ~2.4-2.5million. For the case of making maximum payments, The home is paid off in 11 years (contributing $3,900/month (due to aforementioned additional home costs) with $11,224 down). Then they have 19 years where they contribute 3.9k/month. This results in an end balance of $678,000+$1,940,000 = $2,618,000. The case of renting with 11,225 starting balance and $2,950/month and 8% interest leads to an ending balance of $4,123,000. (Not sure why there is a discrepancy). Three: Home Quality All this assumes that house bought and rent are of the same quality. The average is about 6%, so a $250,000 house would rent for ~$1,500 in the US overall. this means that the $374,000 house would rent for about $2250/month. This is higher than the assumption, of $2050. Nevertheless, even if she rented the equivalent rental price and invested $2750, Nancy would finish with 3.85Million. Moreover, in many metro areas this ratio is even better for renters (meaning the $2050 rent would get you a house worth >>$374,000). So Nancy got to live in the same house and her net worth is 1.5-2M more. They added all this for examples later in the video, not sure why they didn't at the beginning.

[@gregszczygiel814]

Does anyone know if it’s possible to do a 1hr consultation with any of the money guys ?

[@leenichols5669]

I live in Honolulu, HI. I make about $140k annually. I pay $2900/month for a one bed one bath apartment and my electric bill is consistently +$400/month. Despite the high cost of renting, buying would be out of reach. I’m keeping my money in investments and am hoping I can retire without moving to the mainland.

[@ivanpetrushin8427]

My rent in LA is 7k. I’m thinking to move and buy a house in Dallas with lower total payment than my rent.

[@Pandefly]

I think home ownership decisions should be based on more than just the money aspect. Having secure housing can be extremely important for multiple things not just financial security. Like my grandmother used to say winning a million dollars wouldn’t do anything because “all you could do is get a house” as if having a fully paid off house is nothing. (Also she lives in an area where the average house price is more like 300k she just hasn’t bought a house in so long she’s out of touch with reality)

[@i_like_beer-o2f]

A million dollars is worth $40k in passive income without drawing down the principle, you can retire on that in many places

[@JB-bx6zl]

I didnt hear yall say that after he/she paid the house off the mortgage was added to investments. My wife and I paid our house off in 8 years while putting 15 Percent in retirement and now invest 50 percent of our income into investments. I think there are some things yall left out.

[@stevenjumper5781]

Money guys coming after Ramsey with this one

[@ericolens3]

certain things I'd love to question i want to know where a home used to cost 300k is now just shy of a million. I honestly dont doubt the plausibility, but I'm just curious about which neighborhoods and zip codes that would be in?

[@blairkinsman3477]

Guys .. question .. what happens 20 years later to each scenario .. when I retire and have to continue in rent?

[@kjkjkjkjkjkj1719]

Did we assume for Nancy that her rent increased over that time, possibly by a lot, while her salary may not have increased as fast, thus slowing down her ability to invest that much?

[@amfdfireinside]

No because that complicates the maths and doesn’t let them push their point. I’d argue that for the majority of people buying a home makes the most sense. However factors such as having a significant other or children complicate that

[@kjkjkjkjkjkj1719]

@amfdfireinside I feel like to have the math work out in favor of the renter in this situation is like picking a successful single stock each year for 30 years. Technically it could happen, but chances are things are going to happen along the way, and one simple change can mess everything up. Landlord wants to sell, cost of packing up, relocating, fees of moving and starting at a new place, rent rising and sometimes by a lot, and income not increasing super fast because let's be real most people who make a good income just aren't renting.

[@kjkjkjkjkjkj1719]

Plus if renter ever has kids, they're not investing the rest into stocks. Some maybe but not all

[@SossiBB]

A lot of normal assumptions were avoided in these scenarios. Nancy's rent increasing, the home buyers having at SOME repairs over 30 years which should in theory eat into the investing total, property taxes and insurance increases, possible refinancing?

[@Lolatyou332]

It ultimately doesn't matter, anyway. rent on a 900k house would likely be close to 108k / year so Nancy would be in the worse scenario as she'd have to make over 10% returns on the extra million just to break even with the others who own their house and no longer have a mortgage payment. Mathematically, if you stay in the same house for 10 years+, you're pretty much going to come out ahead if you buy instead of rent. Rent should really be for

[@joinkervinson4133]

You did not factor the maintenance cost for owning a home roof repair, water heater at lease three replacement yard maintenance.

[@diydarth]

Lots of additional expenses, unknown tax risk for home ownership. Plus that asset only grows 2% per historic norms. So that networth doesnt have same growth potential.

[@stevenporter863]

Less than 2%. Stanford University did a study of single family homes appreciation from 1920 to 2015. After inflation and sunken costs, that most people forget to factor in the annual appreciation was about 0.5%. Results for the UK and Europe were quite similar.

[@patricksimon8943]

This is why Dave Ramsey isn’t for money savvy people. I’d rather the green between my toes be cash.

[@vaderwashere365]

You do have to live somewhere (90%+ of the time). No - owning a home doesn't automatically make you wealthy and no - you don't have to own a home to be wealthy. However, the numbers prove that homeowners are far more likely to be wealthy than those who don't own a home. It could be a result of different habits and approaches to wealth in life, and/or it could be home ownership by itself. I get that the example says every one is disciplined and always investing, but that doesn't match reality. There are outliers and people that beat the odds for sure, but doesn't it make the most sense to play by the odds most of the time? It also helps if you bought a home at 3-4%... as landlords keep raising rent - especially in expensive cities where I live. I do think interest rates make it extremely difficult right now, but they are closer to historical norms than 3-4% record low rates from before. Our 1st and 2nd homes we were definitely house rich, cash poor. However, I would totally buy a home early when being house rich, cash poor is totally doable and easier to navigate than when you are older and doing the same thing. Doing it at 23 and 25 is far better than when we had kids. Again, it isn't right for everyone, but I definitely don't know a single wealthy person ($2M+ net worth) who doesn't own a home... even the ones that rent their "primary" residence, have rental/income/vacation properties. Edit: I guess I didn't mention location... around the cities I have lived, homes appreciate much higher than inflation over the past 80 years. Rural areas and undesirable areas - like Atlanta (it is coming up, but very cheap for a reason) are often no to low appreciation homes. Also, you can eat your home in a sense... they fail to mention that many people (I wouldn't do it) cash out refinance their homes. So if you have equity in your home that you really need to tap into for some reason... you can and people do. Another thing I wouldn't do, but people do are reverse mortgages when they are older. Again, you can eat your home (equity) in these examples while avoiding capital gains taxes and even increased interest deductions under specific circumstances - unlike someone tapping into their brokerage account.

[@JordanSheppard-fi4po]

You get 4 paychecks a month, the interest of my mortgage takes 1 of them, yes I’m trying to pay my house off. Cheap means a very comfortable lifestyle.

[@WealthyChronicle]

Can we talk about how home prices are soaring while people are barely able to save enough for a down payment?

[@lonz0_0]

THIS LEFT OUT ALL THE OTHER COSTS OF OWNING A HOUSE!!!!!! So also add to the renter to invest all the money not spent on HOA, house insurance, maintenance, PMI, property insurance. Renters wins by FAR

[@Melonhome_yt]

This right here is the correct answer. We pay about $1750 in DFW to rent. No PMI, no individual property tax, no home insurance, no HOA, no additional maintenance costs. We just quit house searching because to purchase a modest 3 bed, 2 bath at around $400K was going to cost us roughly $4000 per month if you include utilities and not even including maintenance. We just couldn't bring ourselves to do it and have since stopped searching for the time being. On the bright side our investment portfolio is thriving.

[@elmateo77]

They also adjusted down the portfolio growth for inflation but didn't do the same for the house value. If you factor out inflation, taxes, and maintenance costs, the average return on a house is like 0.5% per year.

[@longterminvestmentsonly4817]

I brought my first home at 21 for 170k in 2008, and at 37 that home is worth 540 and only owing 56k on the home. But i brought in texas and left California in 2020 and brought and built a home for 427k and a 2.75% rate and 4 years later my home is now worth 745k and owing 269k on the home because of the down payment i put down and regular payments for 4years. I almost have 1 million dollars in just home networth due to equity, and i have been investing faithfully in the stock market and 401k for about 13years. I feel if you are intentional and take advantage of home ownership early and hold for the long term and stay out of debt, you will be extremely happy in 12-15 years. A multi million dollar portfolio is not hard for a regular blue colar individual if you stay out of debt and hold for a long term and buy a home and contribute to a retirement account as soon as possible.

[@Broprotato]

Quite easy indeed. But I prefer having my main wealth in liquid investments. I don't even have to factor in my equity to calculate my wealth as I don't plan to sell anytime soon.

[@longterminvestmentsonly4817]

@ its still your networth, basically the story line in the video was if home ownership the best path to wealth and they used investing as a counter. I have almost a million in both categories by 37. Liquid and equity. So basically it can be done simultaneously if you are intentional. So im giving my personal experience as a blue collar employee.

[@NuritLeemow]

Thanks for the forecast! Could you help me with something unrelated: I have a SafePal wallet with USDT, and I have the seed phrase. (alarm fetch churn bridge exercise tape speak race clerk couch crater letter). How can I transfer them to Binance?

[@tysonkrehnke2835]

I think of it kind of like this in the words of Warren Buffet,"If there are periods of inflation, the best investment is consumable items". I dont really need to see a bunch of 30 year hypotheticals that have decision trees that blow out after 5 years. The truth is that housing building permits are too low, the only permits being granted to mega developers who make expensive townhomes and 5 bedroom super houses, state legislatures pretend like it's a complicated issue but we all know the problem, any rent "savings" that appear to exist are being baked in the rent increase the following year. The only real solution you can avail yourself of would be to move to medium wage city with medium home prices. Save up your down payment there and get into a home as fast as possible to start beating the inflationary nonsense coming from federal and state gov. Do not live in a city where it's impossible to buy a home (even if you have to take a 10% salary cut to live somewhere else). Repair costs are way overblown and are manageable in a normal year.

[@jaredgates4310]

Not sure why PMI is on a chart for down payments from 20-40% down.

[@merriegiles5922]

I don't see it as wealth, I see it as security. I am now retired and have no house payment or rent to pay. Not wealthy but I do have a level of security that wouldn't be possible if I were still having to pay for a place to live in the current economy

[@elmateo77]

I mean if you have close to $5 million in invested assets you can always just buy a house for cash if you really want to.

[@Sfbaytech]

Owning a home is best if you know you won’t move often

[@40pinions]

Gentlemen, This is ALMOST the exact video I've been looking for! Can you do an analysis with the same inputs, but that assumes no extra funds beyond the cost of the Mortgage? In other words, take Nancy and don't add 25% on (she only invests the difference between her rent and John's mortgage amount), and take John and don't have him invest? Then just compare net worth after 30 years, accounting for the Capital Gains deduction for a house sale?

[@batitsogtsaikhan469]

I hope you're not actually waiting for a response to your questions 😂

[@elmateo77]

Here you go. Assumptions: Nancy takes the same $11,200 down payment John made for the house and invests it. ROI on investments is 10% (they inflation adjusted the investment returns but not the home value growth, which massively skews the results, so we'll fix that). John pays $2500 per month on the mortgage over 30 years, Nancy pays $2050 per month on rent and invests the other $450. At the end John has a house worth $908k, while Nancy has $1,123k ($1.1 million) in investments. Of course there are a ton of factors that influence how much cash they'll each end up with. Here are the main ones. -Is John married? This determines whether he gets a $250k or $500k deduction -What type of account did Nancy invest in? If it's a Roth and she's age 60 she can pull the entire amount out tax free. -What will it cost John to sell the house. Generally the total costs are 10-15% of the sale price, if there isn't any major maintenance needed. Assuming John is married, he'd avoid capital gains taxes on the house (his profit is under $500k after deducting sale costs). So he's looking at around $750-800k in cash after the sale. If Nancy is also married, didn't invest in a Roth account, and sells her investments over 2 years rather than 1 to stay below the $583k capital gains tax bracket, she'd pay a 15% tax rate. That means she'd end up with $950k in cash. I'll point out this assumes no rent increases for Nancy, and no maintenance costs or tax increases for John.

[@kendarcie6613]

You really need to provide a better analysis of the cost of home ownership vs renting. There are additional costs to owning a home over time, that decrease the actual profit.

[@stevenporter863]

Housing appreciation is way over rated, probably due to the large numbers, many factors and the large timeframe involved. Stanford University did a study of single family homes appreciation from 1920 to 2015. After inflation and unrecoverable costs: about 0.5% annually. Results for the UK and Europe were quite similar.

[@kendarcie6613]

@@stevenporter863 Houses are like stocks, buy on the crashes. Our economy is not sustainable. There is a crash coming.

[@MillenniumInterests]

Mortgage locking in the cost while rent continues to increase is maybe THE biggest benefit. I feel like the Guys should at least acknowledge.

[@elmateo77]

"Locking in the cost" until you have to fork out $20k+ to replace a leaking roof...

[@idkmybffjill9682]

Nobody should care about pmi. The total cost of pmi would be 6 months of renting. Just buy

[@matthewharrigan3568]

My takeaway is that a 50% savings rate over decades results in a large net worth.

[@jack073]

Thank you Einstein, any other huge insights you care to share with the group?

[@matthewharrigan3568]

@jack073 you missed my sarcasm

[@Zenmartian]

I’ll be paying about 50% of take home pay to my mortgage. Is either that or move and get paid half somewhere else

[@untouchable360x]

We have to choose between the pain of discipline or the pain of regret. Which of the two is more painful?

[@last9up]

There is a nice middle ground where you plan ahead and get to enjoy life guilt free by using a budget. Sure you won't be flying first class all over the world multiple times a year, but you get to retire at a reasonable age. I'm ok with that.

[@untouchable360x]

@ That is discipline so you won’t have any regrets.

[@TartarianTopG]

Very very good video

[@t.l.5755]

I remember when homes in Atlanta were $100, 000.

[@gracelandenterprises2536]

Absolutely…..

[@williamstratton1935]

Got a mortgage in 21 payments are 880 with taxes. If the wife and I both work minimum wage jobs full time we still come in below 25%. That’s minimum wage for our state not fed.

[@MillsapsFan]

My friend pays rent $1500 for a 1BR/1BA. I pay myself in equity $1785 for a 4BR/2BA. Whats the better value?

[@Ninjax2000]

Is there anything that Bo isn't excited by?

[@adv_skarr5362]

House vs rent is now a lifestyle choice. If you want to spend your weekends maintaining a home, do it. If you want to live a flexible and free life, rent.

[@spencergambrell7819]

I think what they missed is that there is no way that rent will be the same in 30 years as it is now

[@stevenporter863]

They forgot one more thing (though it is more of symantics, but still noteable): it is not really home ownership until the mortgage is paid off. It is more of renting to own and being responsible for the maintenance and property taxes for a property the bank owns, plus the mortgage interest.

[@Helena-ou8ry]

You don’t pay tax on paying off a loan but you do on investments

[@andrewscott5548]

What about Scenario 4: Jacob bought a rental property instead of a personal house using the extra cashflow to invest- he would come out on top.

[@Rech10]

Couldn’t think of anything worse than living in same house for 30 years.

[@hardlife507]

Just got a payraise and we live in a 1400sqft. Nothing glamourous but also not boujie. Just turned 30 and we can save 4k a month since our mortgage is only 1300 and mother law helps with the kids. It's is so tempting to go from our 300k to 550k home, buy a corvette or remodel the house. I still got more pay rasises in my career growth but man it's so hard to avoid lifestyle creep.

[@elmateo77]

You can buy a used corvette for under $30k if you really want one, I'd try renting first though so you can see how impractical it is (the lack of space gets old real quick). I'd also look into home renovations you can mostly do yourself, I know ripping out walls and replacing cabinets seems scary but it's really not that bad, just look up some tutorials on youtube first. I reno'd my kitchen and a bathroom on my own over the course of about 3 weeks, cost like $8k in materials but probably added $20-30k to the value of the house.

[@RyrytheRy]

I did that, I bought at the highest interest rate to have a property that was low. Give two or three years I can refinance. *Intrest rate is 7%, being nice here* What are you talking about?

[@gordonfreemanlaw]

Great video but team you need to run the case study accounting for the phantom costs of being a home owner. Also it was touched in passing about HOA costs, they are very high in many areas. Re-running the case study with these in mind especially phantom costs of home ownership will paint a different picture.

[@raquelg.4850]

Yeah, but also, rent will continue to increase every year, which they did not calculate. Also, once the house is paid off after 30 years, the owner will be paying significantly less for housing than the renter. And there's so much more. Most people do house buying wrong. I don't agree with Dave Ramsey when it comes to doing a 15-year mortgage, nor that you necessarily have to pay off your house quickly, but a lot of the other stuff that he says, is spot on. Like being debt free BEFORE buying a house, having a 6 month emergency fund saved up (personally, I am aiming for 12 months as a homeowner), keeping your monthly mortgage payment at no more than 25% of your take-home pay. If you follow all of this, home ownership will always be the better option in the long run.

[@tempesttube]

If you're inflating your living expenses just for the purpose of owning a home, I agree. However, if you compare renting a house vs buying a house, you'll generally find that the cost of renting a home is approximately the cost of buying a house + maintenance (no profit). If that is the case, the you will likely come out way ahead even if you calculate the opportunity cost of the initial down payment, closing costs, and initial repairs. (I'm not talking about unnecessary renovations.) The question should really be whether or not you need a whole house/condo/whatever. For my own home, I come out about $150k ahead after 15 years even considering sales expenses. That's AFTER factoring the opportunity costs and IGNORING the monthly savings vs. renting, which at this point is about $1450/mo.

[@SurefireMa156]

Nothing funnier than somebody with a 1200 dollar mortgage telling young people they are better off renting “because home ownership is work”. Yea and 2000 dollar rent is great. Rent constantly goes up, your mortgage won’t.

[@pandafox12]

In LA. Own houses elsewhere, but the math to buy here just doesn't make sense

[@chipper6729]

You can make about five short clips from this video. So then I can send them to my family and friends. Haha

[@kingshomes8546]

Yeah but you forgot the fact that Nancy’s rent over the years will rise from 2k to 6k in 10 years

[@Policyparagon]

Facts. There's no guarantee her income can keep up with rental price increases. Our area has seen 10%> YOY rent increases for the last 4 years.

[@zoeyth4003]

did you account for nancy rent going up over the years

[@stevenporter863]

A house to live in should be bought with wealth, not to build wealth. Mortgage literally translated is 'death pledge'.

[@stevenbrady440]

Annually 1.5 percent for maintenance and 1% for depreciation completely omitted. And 15% transactions costs (6% buying and 9% selling) on sales omitted. And people move about every 8 years (for another 15% in transaction costs each time). So more transaction costs. Huge omissions on buying. Cherry picking . . .Statistically homes keep pace with inflation on average (Case Shiller Index). So ironically because of opportunity costs, paying off your home is probably the worst financial decision to make.

[@Trix897]

@@stevenbrady440 I realized that before I got too deep into it, especially since my interest rate is as low as it is (bought during the pandemic). I’m now seeing the fruits of my labor by being able to put over $1k per month away in savings and investments on top of my retirement investing.