When Renting Makes More Sense Than Buying // 10 Reasons

Summary

The video script discusses the advantages of renting over buying a home. It highlights the lower upfront and ongoing costs, minimal maintenance, and the flexibility that renting offers. Renting allows for investment in other assets, access to desirable neighborhoods, and enjoyment of amenities without long-term commitment or high costs. The script also touches on the risks associated with homeownership, such as fluctuating property values and the burden of maintenance and repairs.

Takeaways

• 💰 Lower Upfront Cost: Renting requires less initial investment compared to buying a home, often just a security deposit.
• 💼 Lower Ongoing Costs: Renters avoid property taxes and homeowner insurance, which are significant expenses for homeowners.
• 🏠 More Bang for Your Buck: In high-cost living areas, renting can provide more space for less money than owning.
• 💹 Build Wealth Elsewhere: Renting frees up cash for investment in other appreciating assets, diversifying wealth-building strategies.
• 🛠 Minimal Maintenance: Renters enjoy the convenience of having landlords handle repairs and maintenance.
• ⏰ Saves Time: Renting eliminates the time-consuming process of home maintenance and the stress associated with it.
• 📉 Lower Overall Risk: Renting reduces exposure to market fluctuations and the risks tied to owning a home.
• 🔄 Flexibility: Renting offers the freedom to move easily in response to life changes without the commitment of owning.
• 🏘️ Access to Desirable Neighborhoods: Renting allows for living in sought-after areas without the high costs of homeownership.
• 🎉 Access to Amenities: Renting often includes access to amenities like pools and fitness centers without the associated costs and maintenance responsibilities.

Q & A

What is the primary reason mentioned for considering renting over buying a home?

The primary reason is the lower upfront cost associated with renting, which typically involves a security deposit equal to one month's rent, as opposed to the significant down payment, transaction costs, and potential renovation expenses required when buying a home.

How does renting affect ongoing costs compared to owning a home?

Renting generally results in lower ongoing costs as renters do not have to pay for property taxes, homeowner's insurance, or major maintenance expenses, which are typically included in the monthly rent or handled by the landlord.

In which type of living areas does renting provide more value for money?

In high cost of living areas, such as coastal cities, renting often provides more value for money as the monthly expense of ownership is much higher compared to the rent for a similar size space.

How does renting allow for better investment opportunities?

By saving on upfront and ongoing costs, renters have more cash available to invest in appreciating assets, such as stocks, bonds, or other real estate investments, which can potentially lead to wealth building.

What is the role of the Fundrise Flagship Fund in the context of renting versus buying?

The Fundrise Flagship Fund offers a way for investors to gain exposure to the growing build-for-rent market, allowing them to invest in a diversified portfolio of real estate properties without the responsibilities of being a landlord.

Why might minimal maintenance be a reason to prefer renting?

Renting eliminates the need for homeownership maintenance, as landlords are responsible for repairs and upkeep, saving renters time and effort that would otherwise be spent on home maintenance.

How does renting save time in the context of finding a place to live and dealing with issues?

Renting saves time as it typically requires less effort to move in, with landlords ensuring the property is ready, and renters can report issues without having to find and coordinate with contractors themselves.

What is the overall risk associated with owning a home compared to renting?

Owning a home ties a significant portion of one's wealth to the fluctuating housing market, which can be affected by external factors. Renting, on the other hand, isolates the renter from these market fluctuations, reducing overall financial risk.

How does renting offer flexibility in terms of living arrangements?

Renting provides the flexibility to move quickly in response to life changes, such as job opportunities or family growth, without the commitment and hassle of selling and buying property.

What are the benefits of renting in terms of accessing desirable neighborhoods?

Renting allows individuals to live in desirable neighborhoods with better schools or proximity to work without the high costs and long-term commitment of owning property in those areas.

How do amenities factor into the decision between renting and buying?

Renting often includes access to amenities like pools, fitness centers, and parks at no additional cost, which would be expensive to maintain or install for homeowners. This makes renting a more cost-effective option for those who value these amenities.

Outlines

00:00

🏠 Lower Upfront Costs: Renting vs. Buying

The first paragraph discusses the financial benefits of renting over buying a home, highlighting the lower upfront costs. It explains that buying a home requires a significant down payment, transaction fees, and potential renovation costs, which can add up to tens or hundreds of thousands of dollars. Renting, on the other hand, typically only requires a security deposit equivalent to one month's rent, making it a more financially accessible option for many people.

05:00

💰 Lower Ongoing Costs and More Bang for Your Buck

The second paragraph emphasizes the ongoing costs associated with homeownership, such as property tax and homeowner's insurance, which renters do not have to worry about. It also points out that in high-cost living areas, renting can provide more value for money compared to owning. The paragraph suggests that renting can leave individuals with more cash on hand, which can be invested in other appreciating assets, offering an alternative way to build wealth.

10:00

📈 Investing Your Rent Savings

This paragraph explores the idea of using the money saved from renting to invest in assets that can appreciate over time. It argues that while owning a home can build equity, the costs of maintaining the property and the lack of flexibility can be drawbacks. Renting allows for more investment opportunities, such as low-cost index funds or career capital, which can contribute to wealth building without the responsibilities of homeownership.

🏡 Minimal Maintenance and Time Savings

The fourth paragraph focuses on the maintenance aspect of renting versus owning a home. It describes the time and effort saved by not having to deal with home repairs and maintenance when renting. This can be particularly beneficial for those with demanding careers or family responsibilities, as it allows them to focus on their work and personal lives without the stress of property upkeep.

📉 Lower Overall Risk and Flexibility

The fifth paragraph discusses the risks associated with tying a significant portion of one's wealth to their primary residence, as home values can fluctuate due to various external factors. Renting, in this context, offers a lower risk profile as the renter is not directly affected by these market fluctuations. Additionally, renting provides flexibility in terms of moving and responding to life changes, which is not as easily achievable when owning property.

🌆 Access to Desirable Neighborhoods

The sixth paragraph highlights the benefits of renting in terms of accessing desirable neighborhoods that may be financially out of reach for many if they were to buy. Renting allows individuals to enjoy the amenities and lifestyle of these areas without the long-term financial commitment and costs associated with homeownership.

🏊‍♂️ Amenities Without the Hassle

The final paragraph talks about the amenities that often come standard with renting, such as pools, parks, or fitness centers. These amenities are typically maintained by the property management, eliminating the need for the renter to worry about maintenance or additional costs. The paragraph suggests that renting can be a more attractive option for those who value these amenities but do not want to bear the financial burden of owning a property with such features.

Keywords

💡Upfront Cost

Refers to the initial expenses required when purchasing a home, which can include a down payment, closing costs, and renovation expenses. In the video, it's highlighted as a significant reason why renting might be more financially feasible, as it avoids the need for a large initial investment that home buying entails.

💡Ongoing Cost

These are the continuous expenses associated with homeownership, such as property taxes, homeowner's insurance, and maintenance costs. The video contrasts these costs with the typically lower ongoing costs of renting, which are often included in the monthly rent and do not require the renter to pay separate fees.

💡Equity

Equity in a home refers to the homeowner's ownership interest in the property, which is the difference between the property's market value and the outstanding mortgage debt. The video discusses how renting can free up cash that would otherwise be used to build equity in a home, allowing for investment in other appreciating assets.

💡Diversification

Diversification is an investment strategy that involves spreading investments across various assets to reduce risk. The video suggests that instead of investing solely in a primary residence, renting allows individuals to diversify their wealth by investing in other assets, such as index funds or real estate investment trusts (REITs).

💡Maintenance

Maintenance refers to the tasks and costs associated with keeping a property in good condition. The video emphasizes that renting typically means minimal maintenance responsibilities for the tenant, as these are handled by the landlord, saving time and reducing stress.

💡Flexibility

Flexibility in the context of the video refers to the ease with which renters can move or change their living situation without the long-term commitment of owning a home. This is highlighted as a benefit of renting, especially for those who anticipate life changes or frequent relocations.

💡Desirable Neighborhoods

Desirable neighborhoods are those that are sought after due to factors like good schools, proximity to work, or other amenities. The video points out that renting can provide access to these neighborhoods without the high costs and long-term commitment of buying property there.

💡Amenities

Amenities are features or services that add value to a property, such as pools, fitness centers, or private parks. The video discusses how renting often includes access to these amenities at no additional cost, whereas homeowners would need to invest significantly to replicate these features.

💡Risk Mitigation

Risk mitigation involves采取措施来降低潜在风险的影响。视频中提到，通过租房而不是拥有房产，可以减少因房价波动带来的财务风险，因为这些风险主要由房东承担。

💡Investment

Investment refers to the allocation of resources with the expectation of generating a profit. The video suggests that the money saved by renting can be invested in various assets, providing an alternative way to build wealth beyond traditional homeownership.

💡Real Estate Investment

This term encompasses the various ways individuals can invest in property, such as buying rental properties or investing in real estate funds. The video mentions the Fundrise Flagship Fund as an example of how renters can still gain exposure to real estate as an investment class.

Highlights

Renting can be a better option due to lower upfront costs compared to buying a home.

Avoiding private mortgage insurance requires at least 20% of the home value as a down payment.

Transaction costs for buying a home include appraisal, title, and application fees.

Renting typically involves only a security deposit, often equal to one month's rent.

Ongoing costs for renters are generally lower, as they don't have to pay property tax and homeowner's insurance.

In high cost of living areas, renting can provide more value for your money compared to owning.

Renting allows you to invest saved money into appreciating assets, offering an alternative to building wealth through homeownership.

Investing in real estate through platforms like Fundrise can be a way to capitalize on the trend of renting.

Maintenance responsibilities are minimal when renting, saving time and effort.

Renting saves time in the initial phase of moving, as landlords ensure the property is ready for occupancy.

Lower overall risk is associated with renting, as fluctuations in home values do not directly affect renters.

Flexibility is a key benefit of renting, allowing for easy relocation in response to life changes.

Renting provides access to desirable neighborhoods that may be financially out of reach for homeowners.

Access to amenities like pools and fitness centers is often included in rent, avoiding the costs of homeownership.

Renting can be a temporary solution to enjoy a lifestyle and amenities without long-term commitment.

The decision to rent or buy should consider factors like upfront costs, ongoing expenses, maintenance, and flexibility.

Investing in real estate investments like the Fundrise Flagship Fund can offer exposure to the growing trend of renting.

Renting can be a strategic choice for those looking to diversify their wealth beyond traditional homeownership.

Transcripts

that's right sometimes it just makes

more sense to rent versus buying so let

me share with you 10 reasons why renting

might be the right choice for you the

number one reason why you should

consider renting instead of buying lower

upfront cost this is probably one of the

biggest reasons why it makes sense for

many people to rent versus buying buying

a home no doubt is one of the biggest

purchases we'll make In Our Lifetime not

only do many of us need to take on a big

mortgage it requires big upfront cost if

you want to avoid private mortgage

insurance you need at least 20% of the

home value as down payment then you have

the transaction cost appraisal fee title

fee application fee Etc and what if the

home is a fixer upper and not moveing

ready you have big renovation cost new

appliances new flooring and a new paint

job and that is if your home only

requires surface level cosmetic updates

anything more could cost you 10 if not

hundreds of thousands of dollars th when

you add up everything The Upfront cost

to purchase a home can range from

minimum tens of thousands if not

hundreds of thousands of dollars amount

that requires a lot of saving and

waiting however the initial upfront cost

to rent is less

much less most often when you choose to

rent the only major upfront cost

required is a security deposit equal to

one month's rent maybe slightly more for

a high-end property but once you have

that down that's pretty much it and with

the security deposit as long as you take

care of the property well and don't have

major damages it should be returned to

you when you decide to move out so if

you're concerned about the high upfront

cost of buying a home renting might be

the right option for you number two

reason why you should consider renting

instead of buying in the line of cost

lower ongoing cost when you rent you

don't have to worry about big ongoing

expenses like property tax and homeowner

insurance that homeowners have to worry

about property tax varies by state and

the county you live in but these can

range from 0.5% to 2% of the property

value yes you can move to a state with a

lower property tax but do you know what

state is known to have the lowest

property tax in the US according to

Rocket money Hawaii with effective

property tax rate at

0.32% but for those of you who ever

visit a Hawaii know it also has one of

the highest home value in the US

average homes going for $1 million plus

which kind of negates the benefit of

having a low property tax rate well when

you rent you don't have to worry about

this at all everything is baked into

your monthly rent as long as the monthly

rent works for you the property owner

has to deal with the big ongoing cost

such as tax and when it comes to

Insurance while the homeowner needs to

maintain a homeowner's insurance policy

in order to protect your property you as

a renter only needs renters insurance

policy and renters insurance compared to

a homeowner insurance is much cheaper

because only covers the stuff that you

own not the property itself for example

according to bank rate while the average

homeowner insurance for a $250,000

dwelling is approximately $1,800 in the

US the average renters insurance is 1110

St similar to the big upfront cost of

buying a house if you're concerned about

ongoing cost of housing renting is

definitely a better option leaving you

more cash in your pocket number three

reason why you should consider renting

versus buying in some places especially

high cost of living areas you get more

bang for your B buck in high cost of

living areas like coastal cities when

you calculate the monthly expense of

ownership and compare that to the rent

of a similar siiz space it is much

higher for example near where I live in

Orange County California on Zillow I was

a to find a decent three-bedroom 2.5

bathroom, 1600 ft condo renting for

$3,800 a month in the same neighborhood

there is a similar Place three-bedroom

two B 1,700 ft on the market for

$999,999 yes $1 shy of $1 million Maybe

the owner thought six digits would

attract more potential buyers than a

flat $1 million regardless if you to

purchase this $1 million property with a

$800,000 mortgage because you put 20%

down with a 30-year fixed 8% your

monthly payment will be close to

$6,000 and we're not including property

tax homeowner insurance and other

ongoing cost such as maintenance with

that you're close to paying two times

more for the same square footage yes I

know you own the property so that is

fundamental different However the fact

is that if you to go out to the market

right now to find a place with, 1600 ft

for your family especially in a high

cost of living area it is cheaper to

rent you get more bang for your buck and

this is a part where I get a lot of

counterarguments yes I know I see

renting is cheaper here but I don't have

any Equity I don't own the property how

can I build wealth don't the majority of

Americans build wealth by owning versus

renting yes it is true that the majority

of Americans wealth by the time they

retire is in their property but most

often this isn't as intentional as it

might look most often it was by accident

forced saving if you know where to

invest and have the discipline to do it

there are other ways to build wealth

which leads to the next reason number

four reason why you should consider

renting versus buying freeze sub cash

for investment that money that you save

by renting instead of buying it is now

free to be invested in appreciating

assets yes owning your home is a way to

build some wealth when you're locked

into a 30-year mortgage you're forced to

pay your Banker every month because they

lend you the money and this forcing has

allowed many Americans to build equity

in their home however there were costs

to paying down that mortgage for the

past 30 years you had to upkeep your

property and you continuously paid high

ongoing expenses such as property tax

and homeowner insurance and you didn't

have the flexibility to move and to be

frank owning a home especially your

primary home shouldn't be your only or

the main strategy to Building Wealth

with more cash freed up from renting

versus buying you can invest more into

other assets such as lowcost broad

market index funds into yourself to

build career capital or even other real

estate Investments the theme of why

renting could be better than buying do

you know that there are actually ways

you can capitalize on people favoring

rent versus buying as an investor which

is why I'm excited to talk to you about

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to get started today all right with that

said let's get back to the video

number five reason why you should

consider renting versus buying and this

is my personal favorite minimal

maintenance I shared with you before in

my other videos but I'm a total buffoon

when it comes to Home Maintenance I feel

I do more harm than good most of the

time for example a few months ago we had

a water leak in our roof a water pipe

that ran across our bathroom ceiling had

a small hole me despite knowing nothing

about leaky water pipes and how to fix

it thought I'd be mcgyver and give it a

try unfortunately it didn't work work

out too well not only did I not fix the

broken pipe I made the situation worse

the attic floor under the broken pipe

had weakened with all the water and

meing the fool that I am decided to step

on it I almost fell through the ceiling

if it wasn't for the 2x4 that saved me

without that you might have seen the

last of Mr Financial tortoise thankfully

no one got hurt but my wife who happened

to be in the bathroom at the time got a

pretty big scare and she Banned Me from

ever going to the attic again now if we

were renting versus owning I would have

never gone up into the attic I would

just call the landlord and tell them

that we had a Le and can you send

someone immediately to fix it and they

would need to coordinate everything

however in this case we had to do

everything and to be honest even finding

the right handy man is a lot of work

finding someone who has the right skills

who is reputable as well as being

available that is a lot to ask for when

you have water dripping all over your

bathroom floor but when you rent you

don't have to worry about any of that

you either call or these days you just

fill out a work order form on your phone

and it's their responsibility now not

yours which leads to a next reason

number six reason why you should

consider renting versus Pine it saves

time as you saw in my example when you

rent you don't have to worry about

trying to fix something or finding

someone reputable to fix it the landlord

is responsible for all of that thus if

you're in a high demanding career or

have life responsibilities like family

you have more time to focus on those

things your career yourself and spending

time with loved ones you don't have to

deal with the stress associated with

dealing with a broken pipe or a busted

electrical outlet and let me tell you

getting my feet stuck in the ceiling of

my bathroom was stressful and this also

applies to the initial phase when you're

looking for a place to live buying

property not only requires finding the

right place but lining up the financing

and finding contractors if the property

requires renovation so much energy and

time goes into buying and getting your

property ready for move in but when you

choose to rent after a quick credit

check in a security deposit you can move

in right away the landlord is

responsible for making sure the property

is moveing ready and you're responsible

only for the things that goes in the new

place the number seven reason why you

should consider renting versus buying

lower overall risk as I stated earlier

many Americans have much of their wealth

in their home by the time they retire

because they got in the habit of paying

their mortgage every month thus it feels

nice to own their property the feeling

that they have equity in something some

money to retire however there is risk to

the strategy for one home values

fluctuate constantly yes not as volatile

as the stock market but home values are

constantly going up and going down and

many times this doesn't have anything to

do with the property itself macro events

such as rising interest rate tough job

market new schools opening up and New

Roads being built right next to your

house these all have the abil ility to

both increase and decrease the home

value and if you have the majority of

your wealth tied up in your primary

residence your wealth is also at the

mercy of these external forces that are

completely out of your control however

when you rent the home value

fluctuations doesn't affect you it

affects the landlord and they might

choose to increase or decrease your rent

but that is about it if you have your

money Diversified and invest in many

other different assets outside of your

primary residence your risk profile is

mitigated the number eight reason why

you should consider renting versus

buying flexibility this isn't one of my

favorite reasons why renting at times

makes more sense than buying renting

provides the ultimate flexibility where

to live what kind of property to live in

and for how long new events happen

constantly in our lives we get offered a

new career opportunity in a new city we

want a bigger place because the family

is growing or we go through a midlife

crisis and we want a change of scenery

well if we own our property it's hard to

respond to these events quickly we have

to decide if we're going to sell and buy

in a new city if we decide to keep our

current property renting it out and all

these require a tremendous amount of

coordination and work not to mention the

added cost but when you rent you can

just decide to pick up and go yes if

you're in middle of your contract and

you're leaving before it ends you would

need to pay a penalty most often 2

months of rent but that is surely less

than taking a $50,000 loss in your

property because you're forced to sell

at a down Market bottom line one of the

biggest benefits to renting versus

buying is the flexibility that it

provides so if you see yourself going

through a life transition or a major

life event in the next couple of years

it might best serve you to rent versus

buy a quick reminder before we move on

to the next reason make sure to download

your free onepage pdf companion guide

that goes along with this video it has

everything I'm covering in a simple to

digest onepage format go to the link

I'll have in the description below to

download your free copy number nine

reason why you should consider renting

versus buying in the theme of

flexibility access to desirable

neighborhoods let's say you want to live

in a specific neighborhood because it

has great schools or is closer to your

work most often the homes in these

desirable neighborhoods as you can guess

are quite expensive without a sizeable

down payment and the ability to handle

large on costs it would be extremely

hard to live in one of these

neighborhoods as an owner but if you're

looking to rent more doors open up the

entry and the ongoing costs are much

lower thus renting offers an enticing

opportunity to live in a desirable

neighborhood that may be financially Out

Of Reach or let's say that you do have

the money if you're looking at a

neighborhood just because of the kids

schools would you feel comfortable

putting so much of your financial

resources based on that desire alone

what happens after they've grown up and

moved out would you still want to live

in that neighborhood you'll be at a

completely different phase in life 10

years from now well by renting you can

experience a lifestyle and the amenities

of these neighborhoods without the

long-term commitment and financial cost

and if you do come to love that

neighborhood you can always choose to

buy later number 10 reason why you

should consider renting versus buying

seg going from an earlier Point access

to amenities amenities such as a pool a

private park or fitness center comes as

a standard at many midscale to upscale

Apartments condo complexes and some

communities and the nice thing is that

these complexes or neighborhood

management is responsible for

maintaining these amenities no need to

worry about pool maintenance or cleaning

no need to get a separate gym membership

if you as a homeowner want to have

regular access to these amenities you

likely need to spend thousands if not

tens of thousands of dollars imagine the

work and the cost of installing a new

pool in your house the work the

permitting the ongoing costs are no joke

so if you value amenities but don't want

to pay Crazy Prices renting could be a

better option compared to buying thank

you guys for watching in the line of

talking about homes and renting if you

want to get smart about some commonly

used real estate terms please check out

my video here until next time I'll the

best