Renting vs Buying a Home: How to Decide

Meet with PWL Capital: calendly.com/d/3vm-t2j-h3p
Making the housing decision requires careful consideration of both the financial and non-financial impacts, and the way that they interact with each other. There is no universally right way to approach housing. In many cases, contrary to conventional wisdom and societal pressure, renting is a better option than owning, both financially and from the perspective of subjective well-being.
Referenced in this video:
Extrinsic Value Orientation and Affective Forecasting: Overestimating the Rewards, Underestimating the Costs sdtheory.s3.amazonaws.com/SDT...
Does the Dream of Home Ownership Rest Upon Biased Beliefs? A Test Based on Predicted and Realized Life Satisfaction papers.ssrn.com/sol3/papers.c...
The American Dream or the American Delusion? The Private and External Benefits of Homeownership for Women papers.ssrn.com/sol3/papers.c...
Homeownership and Happiness: Evidence for Switzerland digitalcollection.zhaw.ch/bit...
The relationship between homeownership and life satisfaction in Germany www.econstor.eu/bitstream/104...
Is a Fixer-Upper Actually a Downer? www.tandfonline.com/doi/full/...
If Money Doesn't Make You Happy Then You Probably Aren't Spending It Right scholar.harvard.edu/files/dan...
The relative relativity of material and experiential purchases pubmed.ncbi.nlm.nih.gov/20053...
The McMansion Effect: Top House Size and Positional Externalities in U.S. Suburbs papers.ssrn.com/sol3/papers.c...
Book: Happy Money dunn.psych.ubc.ca/book-happy-...
Shelter in the Canadian CPI: An overview www150.statcan.gc.ca/n1/pub/6...
Theory of Homes and Jobs warwick.ac.uk/fac/soc/economi...
------------------
Follow Ben Felix on
- Twitter: / benjaminwfelix
- LinkedIn: / benjaminwfelix
Visit Rational Reminder: www.rationalreminder.ca/
Follow the Rational Reminder on:
- Twitter: / rationalremind
Visit PWL Capital: www.pwlcapital.com/teams/pass...
Follow PWL Capital on:
- Twitter: / pwlcapital
- Facebook: / pwlcapital
- LinkedIn: / pwl-capital
You can find the Rational Reminder podcast on
Google Podcasts:
www.google.com/podcasts?feed=...
Apple Podcasts:
itunes.apple.com/ca/podcast/t...
Spotify Podcasts:
open.spotify.com/show/6RHWTH9...
------------------

[@sronis]

That last sentence is the most important one IMO: the best advice here is not what's better financially, but what works best for your lifestyle. Thanks!

[@lanceareadbhar]

Exactly

[@clarajoe4052]

I will contact her later

[@michaeljackson9057]

I just contacted her and she attends to me nicely

[@lorraine3424]

She's just right

[@petergreg704]

I think she is the best because I have been hearing many things about her

[@AdamPflug]

I think the biggest thing missing from this analysis are the transaction costs for home ownership - average homeowners sell well before paying their home off, and when you account for closing costs it's very hard to come out ahead in the housing market (even ignoring the opportunity costs and maintenance costs) unless you hold the asset for longer than most home buyers will.

[@ficc666]

Unless you buy an acient home, maintenance is not a huge amount and with great additions you can make your house worth more. Not even talking about your rent being increased by an unknown amount, how nice that is! Renting is convenient for a few but making it as a winner^^ How about buying a home, stuffing every penny you would spend on overpayment into stocks and pay off a huge chunk when your fixed rate contract expires. That's what reasonable people do.

[@alankoslowski9473]

@@ficc666 Many homes are older and there are significant maintenance costs. Home improvement projects costs are usually higher than how much they increase home value so aren't worthwhile. Rents don't necessarily increase unexpectedly. That's largely locally dependent. Some areas have legal limits on rent increases. Your last 2-3 sentences are incoherent.

[@ficc666]

​@@alankoslowski9473If it's an old home, the value will be considerably lower as you have to spend money on renovation. And I disagree with other points as well, nice additions do add value. Also, you have no control over the landlord's will. This might make sense in the USA where people get fired out of nowhere and there are huge distances. Not so much in Europe.

[@alankoslowski9473]

@@ficc666 Renovation can cost as much or more than how much it increases the home value. Did you actually watch this video? He explains how the flexibility of renting is usually beneficial if you lose your job. If that happens you might not be able to afford the house anymore. If you can't afford it anymore you will have to sell it which is expensive and time consuming.

[@User-op3nr]

Im 100x happier after purchasing a home. Hanging a picture on a wall you own vs a wall someone else owns brings a certain satisfaction that is hard to describe.

[@kaganzikenbert8580]

Extrinsically motivated goal or Intrinsically motivated goal?? 🤔

[@mikesirilla9240]

I do not comment on videos often but this was absolutely brilliant. Some of the best and most thought-provoking content I've seen on KZbin! Great job, Ben!

[@daniellalinde578]

Absolutely agree 👌

[@jnjpascale1]

Agree!!

[@AuthorAlanRogerCurrie]

*Agreed!!*

[@DefundTheFringes]

Yes, it's good to see this type of analysis vs. typical (simplistic) money-only talk. This applies to car-buying as well.

[@FitnessFAQs]

Well researched and articulate presentation, great work.

[@PinataOblongata]

Hey Daniel. Weird video to see Australia's best calisthenics KZbinr commenting on, but I guess we all need housing advice in this crazy market! Good luck, mate!

[@dima_saur]

Your style of sharing information is not dissimilar, Daniel! Good stuff!

[@aimenaldarkhobi8366]

He forgot that rent goes up over time

[@Evensy2]

@@PinataOblongata I thought the same thing lol

[@alankoslowski9473]

@@aimenaldarkhobi8366 Not always. Sometimes rent decreases, and they might not be able to increase it for the duration of your lease depending on local laws.

[@treyshaffer]

THANK GOD YOU MADE THIS! I love how much you emphasize that rent is NOT throwing money away. I can't tell you how often I hear that parroted.

[@neptunedawn7121]

Except all you have to look forward to when renting is a rent raise.

[@AnnaSzabo]

On 7/16/2021, my apartment complex gave me a NON-RENEWAL LETTER and simply did NOT offer me a new lease, giving me 60 days to move out….. They listed my apartment for $708/month more than what I paid. This was in Atlanta, and after visiting 68 properties, I was unable to find an apartment due to inflated prices everywhere. I was forced to sell EVERYTHING and move to a small town 2.5 hours away from Atlanta. The risk is so high for renters! I’m a renter still in that same small town in 2024, I’m living here till I buy a house in Atlanta. I paid off all credit cards, my car, thousands of dollars on my student loan, and once I pay off the student loan, I’ll save for a house. Living in apartments in Georgia since 2009 for 15 years, I can tell you that neighbors who smoke weed all day can turn your space into hell. And no one can do anything about it. But if you live in a detached home, you at least don’t have to smell marijuana all day every day.

[@xvx4848]

See my problem is I've moved like 12 times in the last 15 years so the sheer amount of money I've spent on movers has been insane. Plus crappy landlords make you need to move even more frequently. Ultimately I understand that renting CAN be a better option for some, but there's something to be said for choosing what gets repaired, when, and how well it gets repaired. Plus being settled down building equity and having a consistent mortgage payment vs having rent constantly increase can stabilize your expenditures.

[@PinataOblongata]

Yeah, the precariousness is a huge factor in quality of life. I find it relatively easy not to compare myself to millionaires, but it would be nice not to be at the mercy of landlords who can kick you out or having to live with housemates as you get older and just want privacy.

[@fireant202]

Well said. That point cuts both ways though. That settling down of owning severely limits your flexibility.

[@matthewbutner8696]

Was the reason you moved so much because of your landlords or for some other reason?

[@a.j.4644]

Devin, yes. I have friends who have had experiences like yours. I think an important point Ben only touched lightly on was the role a sense of control plays. If you choose to rent when you know you *could* buy but are *choosing* not to, you probably are plenty happy--and probably have a good landlord, too. But lots of today's renter are renting with the knowledge that they could not buy, and that their preferences are irrelevant if they need to save up a six-figure downpayment. So they are not choosing to be renters, and that impacts happiness.

[@jefffawcett]

Moving costs, storage costs, costs of stuff you decide to not take with you, costs of setting up new cable and Internet and phone and utilities etc. opportunity cost of putting down deposits and delays in getting deposits back. There’s a lot that goes into being a renter who doesn’t just sit in one place forever which I think most analysis ignores

[@seand67]

Great video. I decided to stop getting stressed looking for a house to purchase in today's market. An apartment will give me much needed peace at this time

[@robinimpey101]

Watching Ben Felix is like going out for lunch with a friend, it always increases happiness! I ❤ Ben's holistic approach to wealth management.

[@dbuckleton]

hes a stock salesman...

[@jaimehurtado8149]

Whenever someone talks to me about anything related to finance, I immediately recommend them to your channel. As always, brilliant. Thanks, Ben!

[@alankoslowski9473]

Yes, Ben is among the few diamonds in the pile of coal that is YT financial channels.

[@JoipPhumn]

I absolutely love how Ben has been blending decisions for financial planning seamlessly with decisions to maximize happiness. Great work! I watched this end to end listening carefully, even though the decision to own or rent is one I made nearly a decade ago. The tie ins to happiness decisions were too enlightening to skip!

[@stephen7448]

Such great content! I'm a high school economics teacher and I'll definitely be sharing the ideas presented with my students. Content like this can literally shape and change the lives of people, leading to much more stress-free and happier outcomes. Lots of people watching this video learned this lesson the hard-way, and content like this allows young people to make truly informed decisions as they work their way through life. Keep up the great work!

[@michaelroos1893]

You sound like an awesome teacher, wish I had you for my economics in high school!

[@alexperoff-investingessent8367]

Funny, I just bought a home too. I know crazy market. But I believe I went into it with the right mind set. I've been renting for basically all my adult life and have been benefiting from the opportunity cost of equity invested in the market. In fact I don't think I would have been able to finance a house unless I did invest for so long. I think I've benefitted a lot from renting, but lately the neighborhood I live in has just gotten worse and my neighbors are extremely noisy. I see my house purchase as a purchase of peace, quite, and some good sleep. Great video Ben! And I support all you renters out there!

[@clubmate12]

Genuine question: why is a rental house more risky when it comes to noisy neighbors? I'd think the opposite. If you find out your neighbors are noisy, and you are renting, you can easily move somewhere else. How does buying make it better?

[@alexperoff-investingessent8367]

@@clubmate12 I think you are correct, there is always the option of moving when you rent, and moving is significantly harder when you buy a house. In my situation my wife and I really vetted the neighborhood where we would get a house, it definitely doesn't guarantee the neighbors won't be noisy. The noisy neighbors are people who live above us, so by being connected via a wall or ceiling we are just more prone to noise issues. When my wife and I were considering renting again, there was no way we could really vet the neighbors we would have. We were worried that moving to another rental property would result in the same issue. Anyway, I think your point is completely valid. Buying a house doesn't guarantee no noisy neighbors, and renting does provide you with more flexibility.

[@dosadoodle]

@@alexperoff-investingessent8367 For the vast majority of neighborhoods, there are rental options, so what you describe has little to do with buying/renting. I also don't see how you are avoiding many other risks of owning: - Ensuring no one will move into a home next to you and be a crappy neighbor or the neighborhood will go into a decline over the duration that you own the home. - Something can happen that will be costly to fix (e.g. slow roof leak). - Not taking a better job, because it's a longer commute or would require a move (in many cases, homeowners don't even apply for such jobs, because their home is fixed, so many don't even realize this downside until they get near the point where they are ready to sell). What you describe sounds a lot like what I and many other early homeowners felt when first buying (I regret having purchased, but it took me 4-5 years for the downsides to sink in). The short-term high of buying doesn't mean it is a thoughtful long term happiness strategy, because it's easy to focus on the positives in the short term and ignore the long term risks/downsides. And that is assuming someone even gets lucky in the short term and there aren't unforeseeable downsides in the property right at move in. (Side note #1: I actually feel very fortunate with my past ownership experience. While it wasn't financially smart, even in a booming local housing market, I fortunately avoided the major obvious downsides. The hindsight-is-20/20 issue that I do look back on is that I specifically didn't apply to work at some particular places that I would have really loved being at -- I got lucky that my job remained extremely good.) (Side note #2: I'd rather not even tell you, Alex, any of this, because you've already purchased, so you're committed. It sounds like you have avoided any major near-term downsides, which certainly increases your chance of being satisfied with your purchase long term. However, my comment is intended more as counter-considerations for others reading who may feel compelled to buy based on your comment. I think it's good to balance the romanticized feelings of buying with some of the cold realities touched on in the video and repeating the consideration that renting is an option in the vast majority of neighborhoods.)

[@TrollinOn22s]

It basically comes down to your net worth when you retire as all of us will retire. Do you think you can pay rent when you retire?

[@mariahsmom9457]

@@clubmate12 I have rented a lot and owned and just not having to share walls, having more space between you and your neighbor cuts way way down on noise. It is a reason I own (with a big yard) too!

[@50tigres79]

I've been a renter and Now I'm an owner. Owning a home doesn't equate happier than renting. But I'm 100% sure that 100% of renters are not happy renting.

[@TheKhalid1]

Love that I’ve found this channel. What a wonderful mix of financial analysis mixed with happiness. Awesome content!

[@TubularToob]

There are so many videos on this topic and this is one of the most clearly explained and thoroughly researched. Thanks Ben!

[@Mike0193Azul]

The first part of the video was so eye opening. Thanks for summarizing all the research you've done on these psychological, sociological, and economic studies. It was very eye opening indeed

[@javiermartinezrossi8957]

I really apreciate that you link all the studies that you name, it adds quality to the argument

[@d.k.3316]

Congrats on your new home! I hope you're still loving it ~2 years in. Outstanding analysis. I have 20+ years in finance and I still love it when I hear the well reasoned research of others.

[@marhabanet]

Ben, I keep coming back to your videos over and over when there's need for a refresher before making a decision. Thanks for all time and effort you put on making each

[@edwardmauer7442]

What's really crazy is how in some parts of the world, such as many parts of Asia where I spend most of my time, rental yields are like 1-2% of the purchase price. It makes absolutely no financial sense to ever own instead of rent with those numbers. Yet, people here always still feel compelled to own anyway because of how important it is culturally, and because property is seen as pretty much the only place to park your money here. Stocks and bonds aren't really very popular in these places.

[@mrslcom]

In many places, a property is regarded as a physical asset that people can understand and relate to, while stocks and bonds are considered paper assets and will involve a lot of knowledge in order to manage it personally. The capital markets in many less developed countries are also deemed to be more risky. Not to mention a property is often viewed as a status symbol.

[@arnoschuster4392]

A yield of 1-2% sounds bad to you? What numbers are you used to? Rent on a 400k home would be 4k a month?! Sounds like a great investment to me.

[@kaisbendhahbi60]

@@arnoschuster4392 4k per year

[@lingyanglim4706]

@@arnoschuster4392 1-2% annually. Not monthly

[@victoneter]

@@mrslcom This is definitely it. It's not just with this issue too. I call it the non-abstraction premium.

[@robertwallace5498]

Fantastic video as always, love the reasonable perspective that acknowledges more than just the financials, but is also well researched and takes many variables into account. Youre the best!

[@stevenbrady440]

Ben is outstanding. I'm probably a more sophisticated investor than average. He is right on about housing. Buying versus renting. If you can, renting is significantly better. These little one percents add up to enormous money, especially opportunity costs, over time. And your home ends up owning you. But owners won't say it… houses take away your freedom.

[@devilsadvocate2643]

Houses also gain insane value over time and leave a great inheritance to the family.

[@alankoslowski9473]

@@devilsadvocate2643Not necessarily. It depends on the time and location. Sometimes their value can be flat or negative for for extended periods, and your heirs might not want an old, crappy house.

[@Alice_Walker]

One of the main reasons I choose to rent over buy is that I live a 25min walk/10min tram ride from my job in the city. To buy at a anywhere near the same price I'm renting my commute would be more than an hour both ways. I am not willing to give up ten hours + of my life every week. Those hours allow me to exercise, read, spend time at art and music events (that I am also a ten minute tram ride away from). It is far more preferable to me to save well for my retirement and "invest" in my mental health and happiness now. I am also close to great services like world class hospitals here which would not be the case if I bought. I also get by fine without owning a car which saves me a lot of money. My quality of life would be much lower if I bought a home. My only concern with home ownership is having a stable place to live in my elderly years.

[@Kiko-xv6vg]

I love it when those Ben Felix notifications pop up 🥰

[@AAkCN1]

Yeeees me too

[@benh9781]

This video has only become more relevant at the price of homes has continued to rise faster than rents. Thanks for helping me be informed and more capable of calculating the real costs for my situation.

[@Reapwhatsown]

Epic. Been arguing this with peers much less convincing for years without success, and much suspicion as renter who's actual envious of owners. So grateful this is presented this way. Facts. Thanks 👍

[@Wesleyanite]

This is a must watch video for renters and would-be homebuyers. Excellent analysis and explanation.

[@327efrain]

I just bought a house. And hearing you say you are 45 mins from your folks makes me tear up, moved halfway across the country when my dad is one of my best friends

[@Libertino]

Congratulations on the new home, Ben! And thank you very much for this video, very helpful information to me at this point in my life.

[@draino13]

I like that you talked about it from a well-being and happiness perspective. First principles thinking. You are talking my language.

[@adonisds]

These videos talking about the scientific evidence of what makes you happy are the best. Amazing content here

[@daviddegea920]

Great video! It reminds me of all the good reasons that keep me renting. Most of my friends and certainly all my close relatives own their homes, and every time the topic pops up everyone look at me and say "Do you have plans for buying? Why not? You could pay a mortgage with that rent." There's no way to turn these misconceptions to people in morgage debt because it'd prove them wrong. And to be honest, sometimes I question myself. But then I remember I live in the perfect place for me and my family, and pay a monthly rent of only 0.18% of the estimated price of the property, and that puts a smile on my face.😊

[@robocop581]

Your Landlord is happy too

[@michaeldegrave5905]

@@robocop581 No problem with paying someone to do a job. Both sides of an exchange are SUPPOSED to be happy with their transaction.

[@thedownunderverse]

@@michaeldegrave5905 spot on.

[@alohastateofmind3565]

Don't forget the literal translation of mortgage is "death contract"

[@StayFreshMyFriends]

​@@michaeldegrave5905being a landlord is not a job but I still agree with your sentiment

[@djlethal]

these videos are so well researched and well articulated. Ben, you are great

[@scooby91808]

Thank you for this great video covering so many points that one would not normally consider when debating buying a home.

[@FrequencyModulator]

I remember having a talk with my friend in 2016. He bought his house in Mississauga for 765k with a downpayment of ~100k. I had about the same money invested in a B&D portfolio. Now his house costs ~1500k and my equity is nowhere near that (despite regular monthly deposits on this investment account, that is managed by a very well known company for a fee of 0.35% per year). And btw, back then I was also thinking that "how much the houses can still go up? It doesn't make sense!", but they did. What I want to say is that in the big Canadian cities there's no logic (or I don't see it) when it comes to housing. For some reason, houses here always go up. We'll see what the future brings.

[@michaeldegrave5905]

Now imagine you had that same conversation in 2007. Your friend would be far in the negatives, and you'd only be down 50%. You can't really use the period with the fastest real estate appreciation in the last century as a benchmark for future gains. Better to use averaged data like the studies from the video.

[@FrequencyModulator]

@@michaeldegrave5905 not in Canada. Here it went down for a little bit in that period but after went up like crazy. If my friend would have bought his house in 2007, his house would have tripled-quadrupled in price.

[@nfldream221]

Is he gonna sell his house?

[@FrequencyModulator]

@@nfldream221 because he made some renos, he calculated that if he sells his current house then buys a similar house in his neighborhood, fixes it to live in it, he will pocket 100k.

[@a.j.4644]

@@FrequencyModulator I'm in Ontario, and I believe it! I laughed during the whole section Ben talked about how you have to keep your house well maintained or sell it for less. True enough on its face, but in my town plenty of sales show that no one cares about getting "less" when the price of their poorly maintained house is still twice what they bought it for six years ago. People sell As Is for sky-high prices here all the time.

[@hichdoedi]

Please, keep reminding me! It’s a challenge to maintain this view, while the ideal is generally believed to be owning a home.

[@mackerel2002]

It sure is, especially when friends and relatives believe it without any real knowledge on the topic. Like when someone asks "why don't you buy a property, you're losing money renting?" I say well not really i have my money in index etfs. "Oh the stock market is risky, better to buy a place" I could pass them on some to Ben Felix but they will more than likely not watch his videos

[@yosmuc]

Thank you so much Ben, for the great insights and sharing your personal decision as well. Extremes helpful ! :)

[@ziboy666]

Ben, you are one of a kind. All your stuff is legit. You make a difference for your audience. Keep grinding. Bon travail !!

[@joeisawesome540]

I bought a home last year..right before everything went nuts. I love it. It is really nice to have your own home. I found that because it is mine, I don't feel like a tourist anymore, and I actually want to improve it. It is a lot of fun.

[@christophergraves6725]

It's "farther" away, not "further" away from work. 'Farther' is a physical distance, 'further' is a temporal or logical progression.

[@mamaberry]

I wish we still had the "farrer" (more far) vs. "further" (more forth) distinction. Obviously, it was still confusing, or we wouldn't have ended up on our current predicament, but at least it was clearer what the difference was, and why.

[@marti5045]

This was the most wonderfully done video I've seen in a while. Your voice is also very soothing.

[@ashleyslingers2814]

I feel this topic is hardly discussed in this level of transparency and/or objectivity. Thanks a lot

[@anthalamo1]

One aspect that wasn't really touched on is that purchasing a home using a mortgage gives you access to a tremendous amount of leverage, which a typical investor in stocks would not have access to. Even with moderate increases in housing values, that leverage can make an enormous difference in the overall return. That said, the same is true in a market downturn.

[@BenFelixCSI]

It is mentioned briefly. Surprisingly, it does not make much of a difference even when not allowing leverage for the renter. If we do allow leverage for the renter, they do not need to get anywhere near the leverage ratio of the owner to make up the small wealth gap. This is a casually appealing argument that I often see for home ownership, but it does not stand up to scrutiny. Of course, as you point out, leverage also works both ways.

[@joeltegman]

I really enjoyed the broad perspective of pro's and con's of owning a house in this episode. And I think that when looking from a financial perspective on it all, the biggest pro of owning a home is exactly what you mention here. Access to a low-interest large capital loan. As the ROI would be on the appreciation of the total value of the home and not only your down payment, this makes all the difference. Good reminder of the downside of this aspect as well.

[@NeilGirdhar]

Leverage is a great point. Renters who invest their down payment instead of buying a house can also access leverage (although not necessarily as cheaply), namely through in-the-money calls, buying on margin, and leveraged ETFs. The benefit of leverage also decreases with age. This is covered in Ayres, Ian and Nalebuff, Barry, Life-Cycle Investing and Leverage: Buying Stock on Margin Can Reduce Retirement Risk (June 2008). NBER Working Paper No. w14094 (This might make a very interesting video from Ben?)

[@mcnamun]

@@BenFelixCSI thanks for this reply, this is something I’ve struggled to understand, would love to see a video going into it in more detail

[@TheBoyTee]

@@BenFelixCSI +1 I found this really helpful Ben. But would definitely love to hear you tackle the leverage argument in more detail

[@ericd.9157]

I bought a home below my means, paid it off in 10 years, the cost of living now is so insanely low that I can save and invest over 50% of my income, I think this is the way to go

[@TheSteinbitt]

Or rent below your means and save from the get go and compound interest. It’s a very complicated topic.

[@Aniblast]

10 years is a long time to spend in one place these days

[@lifeskills-technicaltutori9589]

Lol, he had Apple, Tesla and NVIDIA stocks

[@MaritsaDarman]

That doesn’t seem to happen anymore

[@Jonathan-ex3sl]

I would buy bellow my means if I could, but it’s not an option where I work. (A studio condo is still too expensive in socal) If I moved to a cheaper area my income would decrease. I think this is true for a lot of people

[@infantry101102]

Owning a home is just cheaper in the majority of markets. For example, in my current market (NC), I can buy a home for 970a month or rent one for $1400 plus. And that's the same in the majority of places I've lived. I made 6 figures buying a house at the right time in WA, and I'll tell you, that material purchase, made me very happy, and it was still cheaper to buy than rent I'm they case as well.

[@Music-my7kx]

So much wisdom with Ben Felix. Thanks man.

[@adm58]

Time of life also makes a difference. I'm 63 and presently rent. In some ways I'd like to own (complete security of tenure for example, however, on the other hand, I like the flexibility of being able to easily move that renting gives) but we all need somewhere to live until we die and there's no way to spend capital tied up in a home before you go, whereas savings can be blown provided you have enough income to cover living costs in a rental home. Many older people are asset rich but cash poor, if they sold their homes and rented that problem could be resolved. Another issue that may concern older people more is repairs and maintenance. I have never liked having to deal with contractors etc. and am sure I will like it even less when older. My landlord just had a new kitchen fitted in my flat, plus the electrics overhauled. It was a pain having the contractors in but at least I didn't have to manage the job or pay for it. As you indicated Ben, it's a horses for courses job.

[@phonk64]

"there's no way to spend capital tied up in a home before you go" - from your mouth to God's ears.

[@alastairlocke4621]

Another consideration is remorgaging an owned house in old age with no plan to fully pay it off. That would solve the asset rich cash poor issue

[@adm58]

But how would anyone get a mortgage when old?

[@GHTRider]

Congrats on buying your home! If you found what works for your lifestyle, that's a big win in many aspects of life.

[@LuisGarcia1992_]

I enjoyed this video very much! Thank you for sharing your knowledge with us!

[@heinrizliyaputra7811]

I like when someone proof that what is my standpoint of view for a long tine is actually wrong Thank you

[@MsSoresa]

My favourite investment KZbinr. Well researched topics, excellent presentation and wonderful presenter ❤️ Keep it up bro.

[@Lucky13_537]

people who are totally on one side or another in this debate ('renting is always better!' or 'buying is always better!) remind me of political people who are 100% conservative or 100% liberal. Unable to think for themselves, playing for a 'team' that forms their opinions for them. Renting is better in some circumstances, buying is better in some circumstances. Depends on the circumstances. Simple as that.

[@BenFelixCSI]

Finally, someone who heard what I said!

[@Oncopoda]

While I agree that renting is better for some and owning is better for some, this was a TERRIBLE analogy.

[@clarence968]

@@Oncopoda why?

[@tyrecarmon20]

Thank you!

[@Lucky13_537]

@@Oncopoda perhaps it is, for you. For me, the dogmatic nature of those strongly on the rent or buy camp, and their flat-out refusal to accept any arguments that may tell them their own choice to rent or buy might not always be the better option, this reminds me very much of fierce conservatives' and fierce liberals' dogmatic beliefs and refusal to accept anything that is contrary to them.

[@electric-fire21]

Great video, I like the references You made to research papers instead of only giving your own opinion. Will be checking out more Cicero’s from your channel!

[@kostiantynlevytskyi9335]

What definitely made me happier is running into this video😄 Thanks for the well explained and valuable information!

[@Lemonsmeringue]

Thanks so much for this video. I’m considering buying an older home that’s a duplex but it’s becoming overwhelming with what I see the landlord goes through.

[@alankoslowski9473]

Before committing to being a landlord it's important to understand how demanding it can be. Broadly diversified stocks and bonds are much less maintenance and liquid.

[@eynsai]

I love the new focus on personal wellbeing and life quality instead of just focusing on numerical outcomes. Keep up the good work!

[@sagarshah4214]

Another excellent video! Thank you for improving so many lives through such information.

[@issecret1]

I've been thinking a lot about this lately, I'm really looking forward to this video

[@jasonmiddleweek1509]

One thing to note is that investing very aggressively to achieve comparable returns can feel just as emotionally draining due to the volatility as having a huge mortgage hanging over your head. Also, a recent change is that banks were pretty nice to owners during covid, deferred mortgage payments etc etc. Banks were known to be incredibly ruthless in the past taking homes of people who missed a few payments, no hardship provisions, steep late payment fees etc.

[@mrslcom]

Although it is not a fair comparison because it is based solely on historical data, owning a home in the last 15 years had proved to be far superior financially than renting and investing. Capital gain on principal residence is completely non-taxable as you mentioned. Yes you can use TFSA for investing but the yearly contribution limit is very small. Same with RRSP, which not only is it income dependent, but also it is only tax deferred and not tax exempted. Looking towards the future, your analysis is spot-on. Many other renting vs. buying studies do not consider all the relevant factors, or the correct ones. Renting is always cheaper than buying once you add up and compare all the costs. However, since a property is supposed to be an appreciating asset, there is usually a break-even point after which owning a home will yield a better return. Not all home owners are happy. But we shouldn't under-estimate the pride and joy of ownership either. Many would prefer to live in their own house than in a rented mansion.

[@ChaceBonanno]

Exactly. It all comes down to what the after-tax yield on your home compared to your alternative investments.

[@mistaree5731]

Great video sir. Very informative and concise. The end put a smile on my face lol and gave me lots of inspirations. We need as much help as we can with living situations these days, and just simplifying the process. Cheers Ben! Well done.

[@serhatkuk4180]

Thoroughly explained, backed up with evidence... Good job!

[@Pieter2360]

Excellent video, as always! The rational analysis makes perfect sense, yet - to me - the emotional return on my home ownership makes up for the financially less-than-optimal choice vs renting and your personal story at 13:23 is almost identical to mine, and I derive great happiness from owning my home, exactly for the reason you mention (and he, I actually enjoy the DIY stuff 😂).

[@mjrc123]

7:18 Functional depreciation is, fundamentally, a North American problem. In the UK older homes are often seen as far more desirable than newer homes, even with the increased upkeep and efficiency losses. A Victorian or Edwardian home would be far more desirable - due to aesthetics and construction techniques, than a 70s or 80s home, or even a new build. Over the last 18 months of the pandemic, older homes have, generally, increased in value more than newer homes and therefore make them more desirable, not less.

[@dosadoodle]

Investment helplines that put their phone number in their username are almost certainly scams (see the reply above, *not* Mark's message). Do your good deed for the day and click the triple-dot menu on the comment and report such messages.

[@rainbowcrown6226]

That's also the case in older cities in North America. The most desirable homes in Washington are in the old Georgetown district. There's Boston and Back Bay and New York's rowhomes, which are extremely expensive. A well-maintained historic home is very expensive.

[@mantykarhu]

The historic homes in well maintained neighborhoods in the US have some of the best and most expensive homes barring the enormous newly built mansions in some areas. The older neighborhoods often are located in better geographic locations and on better plots of land. The parks and landscaping are more developed and maintained. The materials, architecture and craftsmanship are much better too. "Smart money" or "sophisticated money" people tend to gravitate towards these historic neighborhoods. The big earners, bigger-is-better, ultra consumers buy McMansions in the suburbs. Depends a lot on the state and city though.

[@Anikom15Live]

You still have to maintain them. Any maintenance is depreciation.

[@jackrussett2792]

An excellent explanation of opportunity cost and overall costs of owning!!!!!

[@galaxytrio]

Thanks so much, Ben. This really helped give me a saner perspective.

[@vpv-pp]

The full disclosure was funny after the previous content. Congratulations!

[@shauna996]

Haha, societal bias when we congratulate people on becoming a homeowner but not for being a renter. It’s ingrained in all of us. Luckily I had people like Ben showing me that investing in stocks is the better option and I have outpaced house appreciation even in this crazy time.

[@9starhegemon]

Extremely informative video. this value of the information presented is worth its weight in low cost global total market indexs funds. Cheers Ben!

[@georgiosvavliaras1066]

This was truly a fantastic breakdown, thank you Ben!

[@soundwriterkokomaru]

Thanks Ben, really well articulated - keep up the great work

[@Zycoreination]

I bought my apartment (Sweden) in 2006, no loans on it, it has roughly 10x value in appreciation since. I love living here and it's very cheap monthly expenses. To me buying my home was a great investment as I know I wouldn't have been disciplined with my money in my 20s.

[@sandysimmer1279]

Great video! I am a homeowner and agree that rent is bound to go up every year. But you can expect it like clockwork at times. However, major issues such as plumbing, electrical, leaks, foundation cracks, etc. can happen when you least expect it as a homeowner. If you are not prepared, it can be extremely costly. You can however, rely on taxes on your home to go up every year...lol

[@XInfinity2024]

Based on a person that I know who owns their place their property taxes have gone up far slower than if they were to rent and that doesn't include the fact that landlords can evict you just so that they can rent for higher price and you have to pay moving cost and not everyone is taking that into account. Another thing is that owners can put solar on their roof making it not only lower their power bill but also not pay more in the future as the power companies increase their rates. There are areas that property taxes vs how much rent is could be far more expensive than owning but that is only assuming that the person would be saving + investing the difference.

[@rayzerot]

​@@XInfinity2024Depends on what state you live in

[@XInfinity2024]

@@rayzerotYou are 100% correct but its something that isn't talked about in detail as much on videos and I feel like it is misleading with the numbers.

[@rinatsaber]

So glad I found your channel! Thank you!

[@briansmith5239]

Congratulations on your new home Ben. Great content as always

[@emh7738]

@Ben Felix Long time fan here, I preach your channel to everyone I know. I was wondering if you could offer some insight on how income tax deductions from a mortgage effect the 5% rule. If my understanding is correct, at least in the US, you're able to deduct your mortgage interest payments, but not your margin interest payments. If this is the case, it would make the cost of borrowing slightly cheaper for the home owner depending on your income tax bracket. For someone not looking to buy the house outright, how much effect do you think this would have on the finance side of the decison? Any answers would be appreciated, thanks

[@iridescent888]

The idea of renting and having option to move and explore the world, plus having more liquid assets like bond and stock, feels very liberating to me. But I agree that renting might not be for everyone. Most people accumulate a lot of possessions and have many obligations to take care of. In such cases, it's better to own and have more stability in your life.

[@quackgarage9551]

I've been living in Brazil and recently just happened to help some friends move to a different home. They were renting an apartment for the equivalent of $1.500 per month plus condo fees and the rent kept going up. In the same building, they found an apartment exactly like the one they were renting for a decent price, which would total their monthly spending at a mere $1000 plus condo fees. They obviously chose to buy. Depreciation here is unheard of and people really flock to live in this particular neighborhood, in this case they made the right choice.

[@omarguerrero2814]

How does a channel like Graham Stephan has so many views and this so little. This is pure gold, the other just entertainment.

[@canadianmaple09]

My wife and I bought our first house just over two years ago. I can safely say it's the best decision we've ever made. Everyone needs their castle. I never really felt any attachment to the nearly dozen apartments I lived in. Our house truly feels like home, and you can't put a price on that (although 20-30% house price increases each of the last two years certainly don't hurt).

[@Bradbajc]

Those days are over.

[@jus4fungaming745]

I see you are applying the 3% opportunity cost to the entire home value, but I thought the opportunity cost should only be applied to the down payment, the mortgage portion is the leveraged part which the 3% opportunity cost shouldn’t apply. Yes, it's a loan but you won't be able to borrow out such a large amount without home ownership anyway. Also HELOC can be used to invest. I prefer renting, I'm 30 y/o not owning a home yet, thanks for sharing another great video. 😊

[@eldoriath1]

For me the decision for buying a house was much influenced by getting into a relationship and needing a bigger place to live. But I have always wanted to own a house, mainly to gain access to a garage or similar area where I can do various crafting. Also added bonus was when I got into 3D printing, being able to have a small storage room used for that with just some added ventilation. Things I never would be able to do or have living in an apartment. I also work from home and the small town I live in is also where my sister, parents and grand parents live. Friends either live in the same town or 50 minutes drive away. Plus, houses here are much cheaper than many other places, most of them being in approximately 60-90k US dollars and some up to 150k. So when he chose to count on a home worth a million I was like "Bruh, my home didnt even cost 10% of that 😂" So yeah, I agree about the last part, style of home should be decided by what's right for the life you live.

[@dfancu]

Very happy for you and your Family Ben, very informative as always

[@Xeqcme]

This is comforting to know. Societal pressure really is the only driving factor in being a home owner. All this stuff about millennials not being able to afford houses, or not wanting to buy houses- sure, a lot of us can't but it kinda isn't really a loss for us and may even be accidentally a win..?

[@alankoslowski9473]

I think it's a case of younger persons having a better understanding of contemporary reality. I'm 50 and don't like having a house, so will eventually sell it and return to renting.

[@Egilhelmson]

I do not believe that “societal pressure” drove the family of one of my mother’s bridesmaids to buy a 1930s era Hammond Theater Organ and install it in their house, which I rather doubt that they could do in a rented house. OTOH, there is societal pressure in that renters tend to foul their nests. Few cases of “da hood” are filled with homeowners.

[@xo7454]

I'm renting a townhouse... no yard work, no maintenance... and less than 10 min walk to my $550k/yr salaried job. If I buy, I need to take care of maintenance, and I need to buy a vehicle and drive. And then I need to schedule a separate gym time. :p

[@aritraray3068]

Fantastic video. Thanks for all the great insights.

[@chaydonofallon1352]

This is an interesting video to come back to a couple years down the road. We got our house in the beginning of 2020, since then we have pit solar on the roof, built a garden, planted some fruit trees, remodeled the kitchen and built a home gym. I enjoy spending time at home doing hobbies. Most of those hobbies i couldnt do in a rental and with the added benefit of adding value to the home when we move in the future. Owning the home allows me to do what i want without worrying about what a landlord will say.

[@therighteous802]

I can confirm this. Owning is absolutely underwhelming.

[@lanceareadbhar]

Owning can be nice once you realize all of the costs involved. You can't just compare a mortgage to a rent payment as a house will cost a lot more than that mortgage payment.

[@lanceareadbhar]

I want to add that owning only makes sense if you plan to live there at least 5 years and I'd up it to at least 7 years in this market. I would never tell someone to buy a small house with the intention of buying a larger house later and to just wait until you can afford the larger house or to find a way to make the smaller house work until it makes sense financially to move as moving and selling a house cost a lot of money.

[@cianog]

Really. I hate renting. I never feel like its my own space. When I visit my family home I feel so much better.

[@therighteous802]

@@cianog grass is always greener I guess. But I think you can't ever feel the same as in your parents house anywhere if it's your childhood home.

[@mantykarhu]

Depends how cozy you can make it. If it's just a boring home with no personality in a big development with an HOA and no privacy, then 🤢 gross! A truly cozy, homey house is special...

[@Sgman1991]

This video doesn't seem to address the most common argument for home ownership that I've heard. Many older people I know will say that the low overhead of owning a home outright, having no mortgage at all, makes life, and especially retirement, much less stressful. If you happen to lose your job or become medically disabled, then the low overhead is a lifesaver, for example. These types of situations can be very difficult as you get older since it's often harder to re-enter the job market. Do you know if there are any studies on the happiness, and financial stability, of people who have paid off their mortgage VS. those who are still renting at an older age? I'm currently in the process of making the decision of whether to buy, and it's not easy! I do appreciate all the great information you guys put out here and through your Rational Reminder podcast. It's been the single best source of good investment information I've found.

[@lonecyborg4957]

If you're buying a home, you should also be careful not to buy a home with a lot of Pine trees because they fall down and you have to spend a lot to cut them down especially if they are already dead and dry. It will cost you thousands to cut them down. Also make sure that whatever home you buy that the Roof will last you another 20 years and that it isn't old and going to have to be replaced or fixed within the first years of purchase. Usually people only care about the cosmetic aspect inside but the outside is the most important. Make sure when it rains that the property has proper draining so flooding doesn't happen.

[@aaronward9140]

Ben smashing it out of the park again, great video!🏆

[@connormatlock7839]

Hey Ben, love the videos! Just wanted to hear if you might have any thoughts on emerging markets in the near - intermediate future? Don’t know if you have any thoughts but something I’ve been curious about? Thanks!

[@Norwayfoeshoe]

How about the risk of rent inflation in old age when your income flexibility very low? This risk is nullified by outright homeownership.

[@treyshaffer]

Homeowner's still have to pay property tax, homeowner's insurance, and HOA fees which does increase with home value over time. And by renting, you have more money to invest in the stock market. Although, that latter point is often something that renters don't take advantage of -- lots of people just spend according to however much money they have in their pocket -- so having the shackles of a mortgage does induce forced savings for retirement in less financially prudent individuals. Of course, people are often under-diversified in their assets by owning a home which is usually an outsized proportion of their net worth, which has negative side effects for investment returns. Considering climate change as well, home ownership in many parts of the world likely carries a higher risk than before, so returns may not justify this. If you're financially disciplined, this dilemma may not be too much of an issue, but it's worth bringing up no doubt.

[@NeilGirdhar]

Remember that the alternative to buying is renting *and investing your down payment*. Just as the home you buy can produce a larger saved rent (which is your return), so too can the invested down payment produce larger returns. In other words, the risk of "rent inflation" is matched by the risk of losing out on larger returns.

[@scottwilly86]

what if you had an aggressive portfolio and tapered down to holding less volatile positions as you increase in age? similar to lifecycle funds

[@dbuckleton]

He clumsily completely forgot about rent inflation amongst numerous severe errors in this sloppy analysis.

[@RetroAndChill]

The more I think about it, the more I'm convinced that buying might be a bad investment. Interest rates shot up around the time I started by search, which combined with the insane cost of real estate in my area has left me with no good options. The mortgage payments I have are literally the same if not worse than a rental property for a condo that isn't super well maintained. I originally got into the market because of skyrocketing rent, but even that is showing signs of calming down, as home prices slowly decrease. My ultimate analysis is that I'm too early in my career to potentially tether myself to a subpar home that I going to pay crazy high interst on and very wel might loose money on when I go to sell it.

[@JeriDro]

I recognized this at a young age watching my parents and friend's parents. I paid attention and asked questions about their lives.

[@raasprasad2575]

Love your channel mate… thank you.

[@danielhermanus6909]

Dude your videos are on another level. You're the Lemmino of finance

[@cryengine_x]

His videos are definitely of value and enjoyable watches, but there are some quibbles. His tactic of relying on random papers as if they are arbiters of truth for example. Look at climate change, it's 100% fake yet backed by millions of papers for political reasons.

[@danielhermanus6909]

@@cryengine_x good thing you know better than all these smart ppl writing all these papers🤔

[@cryengine_x]

@@danielhermanus6909 If you want to believe your car tailpipe makes it rain or not rain, well you believe in voodoo.

[@danielhermanus6909]

@@cryengine_x it's not just the car tailpipe and it's not just the rain. But things like that aren't properly discussed in a few words in a comment section, which is why we should leave it at that :)

[@cryengine_x]

@@danielhermanus6909 yeah, at the end of the day that's it. You believe, or more properly pretend to believe, actual voodoo. When you really think about it. Whenever they do surveys the vast majority of people wouldn't pay even $10 a month if it would stop climate change. Noone believes this nonsense. Noone. It's a political tool fabricated by communists. It lines the pockets of a whole lot of politicians and their allies. While they jet around to swanky climate change conferences. But then Jets emit a lot of carbon dont they?

[@istvannagy1849]

I think for home appreciation using a global average, is too big of a shortcut. Like you said in Canada, in the past years much higher appreciation was experienced. I metropolitan areas we should expect higher increase. Also a home you own, you can rent out in case you need to move. (Disclosure I own a few properties that I rent out but I live in a rental apartment :) )

[@tyrecarmon20]

Appreciate the research and data !

[@janusface6628]

As always, absolutely excellent!