When Renting Makes More Sense Than Buying // 10 Reasons
Summary
TLDRThe 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
🏠 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.
💰 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.
📈 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.
Mindmap
Keywords
💡Upfront Cost
💡Ongoing Cost
💡Equity
💡Diversification
💡Maintenance
💡Flexibility
💡Desirable Neighborhoods
💡Amenities
💡Risk Mitigation
💡Investment
💡Real Estate Investment
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
today's video sponsored fundrise
Flagship fund if you watch any of my
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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
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