I would just assume that this example is empirical when it comes to comparing renting/ownership scenarios in the same area (say, urban rent and urban ownership/non-urban ownership and non-urban renting). If you compared urban renting with non-urban ownership, would the same pro-renting scenario still occur? I am just wondering. There has to be some cases where home ownership is somewhat a better deal (cashflow wise) than renting?
I would just assume that this example is empirical when it comes to comparing renting/ownership scenarios in the same area (say, urban rent and urban ownership/non-urban ownership and non-urban renting). If you compared urban renting with non-urban ownership, would the same pro-renting scenario still occur? I am just wondering. There has to be some cases where home ownership is somewhat a better deal (cashflow wise) than renting?
You also have to remember about those pesky HOA fees and homerepairs that all come out of the pocket of the landlord, renting is the way to go for the next 5 years
Holy shit 6% mortgage, and u also save in taxes because ur paying for a house. U amerifags should be so thankful to all the hardworking jews who still print shit tons of priceless dollars.
BUYING IS BETTER EVERYONE....HE IS TRYING TO EXPLAIN GETTTING A LOAN.....THAT IS NOT BUYING....THAT IS GETTING A LOAN....IF YOU BUY, YOU BUY A 250K HOUSE, AND ITS YOURS, VS PAYING 2500 A MONTH RENT FOR 10 YEARS AND NOT OWNING ANYTHING. AND IF YOU CHOSE TO SELL AFTER 15 YEARS THEN YOU GET YOUR MONEY BACK IF NOT MORE, THAN JUST A LITTLE LESS, BUT IT WOULD EQUAL OUT THAT YOU WOULD END UP PAYING SAY 50 DOLLARS A MONTH IF YOU LOST 10K
@R0YB0T Well, it looks like there is another idiot that has no idea what he is talking about. I own 87 properties idiot. I know what rent is and payments and loans and mortages. Wehrle is the name, google me. Net worth $47 mil.
@R0YB0T Where in my comment do I say that rent on a $250k house would be $2500 a month? What I said is you can buy a house for $250k vs paying $2500 a month in bills for 10 years which would equal $300k in the end. If you save for 10 years, you will be able to buy a $250k house, vs paying bills for ten years and having nothing in the end. AND what he says in the video is nothing to do....nothing at all with BUYING a house. He only talks about buying a house and paying a mortage.
"IF YOU BUY, YOU BUY A 250K HOUSE, AND ITS YOURS, VS PAYING 2500 A MONTH RENT FOR 10 YEARS".
The video shows a person who wants to live in a million dollar house in silicon valley who has 250k in savings.
You are not taking into account that the place he rents can have amenities and he will not have to worry about repairs. He can use those 10 or so years he saved to properly invest his money outside of the real estate market.
@R0YB0T IT IS THE SAME WORDS WROTE, IN CAPS OR NOT. POINT IS, AND THIS IS MY LAST DEBATE ABOUT IT......IF YOU WANT TO BUY A HOUSE.....BUY IT...DON'T PAY 20 YEARS RENTING TO NOT OWN IT....IF YOU CAN NOT AFFORD A HOUSE, THEN SAVE UNTIL YOU CAN....BUYING A HOUSE WITH CASH IS GOING TO SAVE YOU THOUSANDS OF DOLLARS VS GETTING A LOAN TO BUY A HOUSE THEN PAYING ON THE LOAN FOR 20 YEARS. IN INTEREST ALONE ON A $100K HOME, YOU WILL PAY $140K. NO WAY YOU WILL SEE A RETURN IS YOU SOLD AFTER THAT.
@thejasonalex1 "DON'T PAY 20 YEARS RENTING TO NOT OWN IT"
A good point that a lot of people missed. One of the biggest considerations when deciding rent vs. buy is how long you anticipate living there. The guy states at the beginning of the video that he's renting right now because he expects the housing market to improve. Renting for the next few years while you wait for a better conditions is not the same as renting the same place for decades without ever attempting ownership.
What happens when you just save up, lets say 250k and buy a house thats worth 250k, would the process you just did be done every year after you finished paying the house or would all of those taxed be vanished just because your finished paying it, sorry if im not making much sense i'm new to the "real estate" world and would like some feedback in what to do and how to do it right. well thank you.
@MrEazyD831 be careful if you do that, take into account for inflation, id assume a 4-5% average inflation yearly worst case. to counter that you could buy assets like gold or invest your money into a cd or bond to keep your moneys "value" or "purchasing power".
Rent or buy??? It determines the individual's lifestyle. If someone gets bored living in the same place for a while and they love moving around or if they're making plans to relocate in the future; then they should continue renting. If someone is content with living in the same place for years and they always fantasize about landscaping their yard and decorating their home; then they should buy.
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Hey I dont think this is going to scale up in down. Think you buy a 250,000 dollar house and borrow nothing pay no rent and 1% tax. It just makes sense. I know the rent is going to be probably around 1300 which is what you would then save a month. That has to be the best option. Please if I'm wrong someone please explain this to me.
Josefclemens: if you are retired and don't work, you still have to pay for taxes on the home, repairs, maintenance and take inflation into account. Owning is not always better 100% of the time. Ask all of the people whose homes were foreclosed recently. Owning a home is only an investment if you make money on it (via sale) less the taxes, repairs, reno's and difference in inflation.
You ever think of buying a house for 250,000. Then not paying any interest. Also then only 1% property tax, 2,500/pear Saving 23,500?????? Thats the problem with people, you dont need a million dollar house!!
@TheDylana24 The principle remains no matter the cost. If a home rents for a certain amount, then it would sell for a significantly higher amount. You're not understanding his point about buying vs. renting.
@lolnonamesleft true, but in doing so, you also relinquish the added captial gains you *would* have had over those intervening rent years, had you bought the house in the first place. i say *would* because of course it could happen that the real estate value goes down, not to mention, you might very well do much better in not just putting that extra income in a savings account, but something more structured, like GIC's etc. that would earn you more.
Your philosophies are interesting, but your rental price vs. purchase price is incorrect. Unless you're renting from your buddy, you can't rent a million dollar home for $3k. It's an interesting concept though, and I think it poses the important point for anyone interested in purchasing a home to "do the math" and make sure it's actually a worthwhile investment, there are some good points.
Guys, before you try to point out flaws in this video, watch the whole renting vs. buying series. He has to make this simple because 10 minutes isn't a lot of time
to explain things.
Unless you also have an mba from harvard business school and deveral degrees from MIT don't think you know more than this guy.
This is really really wrong, it makes me cringe. I'm a Finance undergrad with minimal experience in the field, but I know enough to know that there are wayyyy too many oversimplifications made in this video.
It doesn't take into account time-value of money and the way mortgages actually work.
If you want to justify renting as opposed to owning talk about risk mitigation and unforeseen costs.
People should consult with a financial adviser (or someone educated) as opposed to watching this
Correct me if I'm wrong but when you rent, you don't create any asset value but you can buy a house from the perspective of an investment as well.
Example, if I were to lose my job today and be short on cash and I've been renting for lets say 2 years , I can't ask the landlord to give me back the rent for the previous 2 years (72k approx) but if I had been paying my mortgage for 2 years, and I decide to sell the house, the bank only takes the money unpaid on the loan and I get the rest back.
@dosterian 46k just the interest you need to pay each year but each year the money you loan lesser i suppose you use 23years to pay so the interest = 46k+44+..+2 = 552k so plus the money you brought the house 1m total is about 1.5 m
- CD & Money Market interest rates are near or below 1%. Paper currency is better invested in Metal currency in this phase of massive monetarism i.e., inflation.
it really depends of which cycle you buy your house in(up/down/sideways),what % the market value rose and of more importantly when and if you are going to sell the home to make a profit.You also have to calculate the profit potential of the money you would have invested if you were to not to buy a home but invest it in x y or z
Factor in the income tax to the renting side and you get $56k. The buying side is almost entirely wrong... $750k at 6% is just under $800k over 30 years, which is approx. $26,000 per year. Income tax savings on interest would be approx. $1500 for that year, so add $29,000. Add $10,000 property tax for a grand total of $65,000 per year to buy, vs. $56,000 to rent. Renting is cheaper, but you'll never own that house.
The difference one realizes between paying rent verses the interest of a mortgage should also be seen as a benefit to renting: which is 15k. Then there is also a monthly principle cost eventually equaling 750k/ 30 months: which is 25k. This means that for a purchaser that has equal monetary access to both options, renting has the added opportunity cost bonus of 40k a month, which might draw an additional CD interest or be reinvested for further capital. postponing gratification=greater returns
@lolnonamesleft Yeah, but you're forgetting that the luxury you give up living in a cheap apartment for a few years has a negative value too. And if that value to you is greater than the rent you'd have to pay, it makes sense to pay that rent instead^^
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Great video! However, if you are going to calculate the taxes you'd pay on income per year on buying a house, why would you not calculate them into the equation when renting? If you add the $30K you pay in taxes to the $26K out of pocket for renting per year, you're actually paying $56K as opposed to the $41.5K for buying. Every instance is circumstatial though and I realize there are a number of other factors to consider. Very thought provoking...
Sensible video - but only to an extent. If you're actually renting for that much per month and not investing say, in real estate, then you're not very smart. Consider buying that same property as an investment, say a rental property, you may well be paying off your mortgage at someone else expense, not your own. So lets hope that you are really not renting for that much each month for the rest of your life and you are actually investing your money somehow - else that would be unwise:(
You were right u guessed that housing prices would revert ! I think the best time to have brought the house was during the recession when real estate prices were bottom low..(Provided one's wages are the same etc.) lol
Actually, buying is better. If you buy a house, you may pay interest but you don't have the fear of losing your property if you pay it off. You can fix it up and sell it when the value goes up and you make profit.
too bad when u rent, at the end of the day, u still have to keep renting =\ u own no property so that money you pay is forever someone else's. but if you buy a home, yea you are paying, but after a few years, it's all urs; in a way you were only paying yourself.
@P01029 He uses an interest only loan in the example, so your statement should be rephrased from "in a way you were only paying yourself." to "in a way you were only paying THE BANK." Banks are not charities - they issue mortgages to make money off you, like credit card companies.
@primeNUMBAZZZ :) yes but the interests for the bank is a lot less than ur monthly rent :) I rather pay the interest for a while and then own my own house at the end and not have to pay ANYONE anymore than to rent forever on and on.
The renter starts with 250k that doesn't go for a down payment on a home. The 15k savings (1250/mo.) is added to the 250k for 30 years. Plug in 6% annual return compounded monthly, and you get 2.8 million +.
In his example the renter saves $15,000 a year. So in 30 years he'll save 450,000. He'll have that 450,000 to show for himself. What will the home owner have? A house that now is worth 1 million and in 30 years should be worth much more. Is there somthing I'm missing?
@UnidentifiedUserID The example that he uses is an interest only loan. This means that at the end of 30 years the "homeowner" will still have a $750K loan outstanding. If he used a conventional loan in the example (one for interest and principal), then the mortgage payments would have been much higher.
GREAT GREAT POST, WE AS MUSLIMS ARE REQUIRED TO NOT GET INTEREST AS THE JEWS WERENT NEITHER IT ONLY HAPPENED WHEN THE NEW TORAH OR TALMUD CAME OUT THEY ALLOWED INTEREST SO THEY CUD MAKE CRAZY MONEY, YES SEE I WAS RIGHT PPL NOT NECESSARILY LOSE MUCH IF THEY ARE ON RENT. GREAT VIDEO!!
@suckafreeG not take interest is the dumbest thing i have ever seen in banking. i have been working at rbc for 4 years. and it's dumb not to have an rsp or tfsa. or a credit card that gives free money
@h1g97 stupid i have tsfa its just a tax break for your money that is under 5 grand that why i recall the dumbest ppl are folks like you they jump the gun before they open their mouth im done dont expect me to get involved with you in debate this is the last RIGHT FINAL ANWSER
@suckafreeG really oh yea i have family members about 4 of them CA's much smarter then you can ever be stupid, not taking interest its in our religion what your talking about those are through investment you call that capital faggot which come from mutual funds, investment fund etc, like interest in a sense str8 interest or any type involving a % raise on the money which you lend to some one.
@suckafreeG Muslims are the dumbest ppl in the world man. Such stupid beliefs. I don't believe in a god and there is no god. Religion is stupid all together. But muslims are so inbred that they starve themselves for the religion and don't take interest but will fuck over and blow up ppl thinking there will be virgins in the after life.
@suckafreeG So smart that you commented yourself. Lol. Don't come and blow my house up in the name of Allah. If you are so smart just honestly ask yourself if this universe was created by a supernatural being? Read a book about the big bang - you can't deny it. There is no mesiah, Jesus, buddah, tupac or unicorn
@h1g97 you indians are traitor your telling me that when your indian mother raised you without giving you any religious values, yea right see this the thing i hate about indian like "you" come to north america or born her first generation fix their accents ditch their religious values they grew up with start to amuse like dave chappel that they are white like he does in his blind kkk script lol this is the issue after all when a white person looks at you he knows that you are not on of them so
@suckafreeG Im Canadian all the way man. Im smarter than you since I don't follow any stupid, ignorant teachings of any religion, especially Muslim. Marry your cousins, have 4 wives, pray and waste time, then starve yourselves and become skinny malnurished weaklings.
There is no religion titled "Muslim", rather it's called "Islam". "Muslim" is one who follows "Islam". Marrying your cousins is a cultural practice primarily practiced by the European monarchy to keep the crown within the bloodline. In a sense, my friend, you have exposed your own ignorance.
@h1g97 so please next time keep religion and keep out of it because ppl like you make fools of them selves, plus ahahaha BIG Bang "did you try that part where it says in the book you can imagine that you can get anything, anyyythinggg" okay now imagine or wish that you get a brain and dont worry no one will blow your house up cause it stinks shit any theirs hairy all over the place you hindu cow worshipper and tell your bhangi indian government to stop slathering Kashmeries
Continue: Though you can consider the 250k as a fixed amount on the bank and you pay the rent with another income, then the example above is accurate.
@Khan: One problem with the assumption on the renting is that since you have to pay 26k each year your interest amount will decrease each year and so will your interest income. For example: The next following year after you paid the rent you will have $224k on the bank just giving you an interest income on 8,96k which implies the following spent money will be approx -27k. This will continue until your rent is equal to -36k per year. Not saying buying is better but it is something to consider
@stevejberry you most certainly are in that first year. presumably IF you dont' have an interest only loan, in subsequent years it will be marginally less, but then again, the 250k earning interest in that savings account is earning more now too, which negates things for a rough comparison.
@attemptingtobehumble - but you bought a mortgage not a home, the STATE OF___ holds the title on all real properties, we have a tenancy agreement, read your mortgage it's in there...
This is Retarded because if you BUY a home you can actually sell your home after 30years and you still get your $1 million back or even more. If you RENT after 30 years you will get NOTHING back. Common Sense Matters
@hmongpabhmong Lease to own or installment contract means you can buy without much down and credit . Just renting alone is not enough. Most people will not get anything back with economy the way it is anyway.
@hmongpabhmong Common sense DOES matter. You are putting out a LOT more than $1 million in the 30 years because of the interest. So even if you sell your home for $1 million, you're still losing money with the interest and property taxes. That doesn't even include repairs. But with the housing market fluctuating so much, there's no guarantee you'll even sell it for the $1 million you paid for it. If you rent it for 30 years you can invest the money that would go into a house.
This is a useful conversation about doing the math before you purchase or rent a home. I don't think most buyers look into the financial market this much. In some markets it is important to realize the buying is not the best choice, Waiting for the right time to buy and finding the right home to buy are the most critical elements fo the home purchase process.
How could the landlord afford to rent at 3000 if the mortgage is much higher? They must have financed differently... is buying vs renting a matter of timing and/or how much money you put down?
I wish I had $250k in the bank. Not sure what it's like out west but my guess is less than 10 of the 93,000+ people who watched this video have much, if any, savings left today. 2011 is a much different story than this video.
@iamgod604 That's about the price in the Bay Area when renting a house. If you rent an apartment it's about half that price...so about $1500. It sucks to live in the BAY AREA/ SIlicon Valley Area.
-3- i think im gona rent...it may be going out but shit i mean you can rent a house and have freedome dont like it move when you buy a house its insane
You are not even taking into account the fact you WILL have appreciation on the home. Why not compare apples to apples instead of apples to oranges like you are doing in your example. Either present the facts or do not present anything at all!!!
I will always own. I've lived in my home for 5 years and am about to sell it. With the small amount of equity the house has built up including my upgrades, I will basically be getting a 'REBATE' on literally 3 years of living expenses. Not bad.
You didn't include cost of maintaining a house, when you rent you don't have to worry about that. Then home owners insurance (renters is lower). The time required to maintain your home. Then, assuming the market goes good for you (ur taking a huge chance there) and you break even when you sell after 30 years. Where are you gonna live now? You just sold off your home. Imma run these numbers assuming you just buy the house in cash; seems like that'd help a lot.
Private property is exploitative and parasitic on society. But you are not going to hear that from a pampered MIT MBA graduate. And why in the world would you live in a state that charges 3,000 per month? Gawn you probably can rent the same house for 1,200.00 (USD) in Pennsylvania. You Californians are nuts.
If you are spending 3,000 dollars a month on a freaking house you are insane, you can easily rent a brand new really nice apartment in texas for no more than 800 a month with bills! One day people will learn to live within their means
What kind of douche-bag has 250k in the bank and can afford a million dollar house? Bring it down to earth clown, some of us are lucky to have 2,500 in the bank and could maybe afford a 150k house.
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Steal my house for $49K !!! I currently have a move in ready 3/2/2 built in 2003 in Lehigh Acres, Florida that needs NO work. The house is located in the southeast side of town. It has NO CHINESE DRYWALL. This is not a short sale. There is no mortgage on the property and the house is free of any liens. This is a turnkey property you can move right into or rent out for $750-$800 per mo. CA$H Only! If your looking for a smoking hot deal in SW FL this is it. ONLY $49K net to seller ! 239-249-2600
Hey, I'm trying to rent Lego Indiana Jones: Original Adventures (Wii) for the Indiana Pwnz guide from the website: BoomerangRentals.co.uk.
I'd just like to know if I can actually rent the game because it says: "Ex-rental - Not For Sale", It has the demand in the amber area so it's quite a popular game but its not in the Red area meaning it's not got extreme demand.
Can I Not rent or buy this game or does it mean I can only rent this game but NOT buy it?
IN THE UK THE MATHS WORK GREAT AND AS THE MARKET IS JUST ABOUT TO GO THROUGH ANOTHER CYCLE OF BOOMING NEXT YEAR AS THE INTEREST RATE IS SO LOW HERE ! I RECOMMEND ANYONE TO WHO IS SERIOUS ABOUT MAKING IT BIG IN PROPERTY TO GET IN THE U.K. PROPERTY MARKET NOW!
Your math may be applicable for your area but If You have 250K in a state like South Carolina (where I live) You buy a house that will otherwise cost 1M in California and even after I pay the property taxes I'm still better off buying than renting.
Note that he isn't saying you should never buy a house. He simply says that you should go the calculation beforehand to make sure you are coming on top.
Sorry but only naive people think that you can make money when selling a house. You make your profit when you are buying the house. If you are buying an overpriced house, no matter how much the market goes up, you will be losing money compared to if you got one at the correct price.
Also, owning a house has one big advantage: you can adapt
If you buy a 300K home, your down payment would be $10,500 plus loan cost (which are deductible) with an FHA loan. Your payment would be about $1610 PI (5% int.) + $312 property taxes + $100 fire ins + $237 Mort ins (PMI) that can be eliminated in about 5 yrs. Total payment: 2,259. In 5 yrs it can go down to: $2,022 once PMI is eliminated when you have 20% equity.
Buy a cheaper house! Who buys a million dollar house on 100K salary? The most you should be buying anyway is about a $300K home. Where are you going to get a CD to pay 4% int? & the income tax rate would be lower because you would be in a different tax bracket once the mortgage interest & property tax deduction kicks in.
Well what about the fact you own a house in the end of paying it off. You could sell it for a generally equal amount and in more cases a higher amount then what you bought it for do to more population, inflation, etc... Then you could be the one to rent out your house. What about that? Then you could take that rent money profit and buy a nicer, bigger, and better house next. That sounds better then never saving a dime by renting to me.
@GodDamnit7711 i don´t ready all what you have written but YES,what the fuck is happenden with the fact that you own a 1million doller home,wich you can sell maybe for 1,4 in 10 years?!
This is a very good example of when it's best to rent. Typically (in normal housing markets) monthly rent should be close to 1% of the home's value. Therefore a $100K property should rent for $1K/month. If you're paying rent of $3K/month and that same house is listed at $1M - definitely stay renting!!
In comparison I live in Regina SK and my 3 housemates pay me $1,700/month to share my 4 bedroom townhouse with them. Yet I'd be lucky to sell my place for $200K in our current market.
A few things. 1. As stated before you wouldn't put all of your liquid cash into a CD and you wouldn't earn 4% 2. The cash you spend doesn't earn equity but the HOME does. Home value went down during the crisis, but only in crisis situations would this be true so the house would gain value typically. 3. Owning has finality. You pay for 15-30 years then it's YOURS and you don't pay anymore. So you have to take into consideration how long you plan to rent. 40 years? That's 10-25 yrs MORE payments.
@miraclemanays - Don't forget that he's comparing the rent paid to the interest paid on the mortgage and property tax. The money the homeowner pays towards the principal, the renter could instead invest and get a reasonable return. So in 30 years, the homeowner would own the house, and the renter would have saved, in this example, an amount larger than the value of the homeowners house. If he so chose, the renter could pay for a house in full with that money, zero debt.
I'm going to list the problems as the video plays...if you have 250k in the bank, you are not going to put all of that into a CD, as it would be locked up for a year and you would strictly have your salary for that year and no backup savings. Also, CD rates are 2.5% tops, not 4%. Next, on a similar note, no one would put their entire bank account into the house initially; putting in 200k instead of 250k would be more than adequate and would leave you with an emergency fund. This somewhat...
At 5:17, wouldn't you need to halve that 45k/mo (and subsequently the tax-deductible "bonus") to represent the shrinking interest over the life of the loan? Seems a bit shady to me, since the numbers here imply you'll never pay any principal and just keep forking over that 41.5k/mo indefinitely. I'll go watch the second half and see if it's adressed.
These calcs might only work in America, and even then, only in the short term. In Australia, my house has appreciated on average at 12% pa for the past 15 years, so value is now 5 times what I paid for it. No tax payable on sale either. Other differences - you pay income tax (say 30%) on your savings here, but mortgage interest not deductible unless it is an investment property or you are conducting a business from home. Property taxes a lot less here too - less than $2000 pa.
currently renting a 700k brand new home in connecticut for 2k a month had to take the stickers off the appliances . I know renting I'm gIetting more bang for my dollar .I don't think I will buy a house again and I could very well do so.
your fucking high if you rent a 1 million dollar house.... or buy a 1 million dollar house!! And why the fuck would you buy a house for a million bucks when you only make 100k a year? Thats ludacris!! And after renting for 30 years what do you have?
@saturn226 haha Thats crazy!! A nice 3 bedroom 1 bath house down the road from where i'm living now just sold for 55k!! haha Thats with a 2 year old $20,000 furnace!! Old woman passed away and the children sold it... In the town I grew up in, they haven't sold a house for over 100k in 5 years!! lol
I am having a hard time moving out of my parents house because a studio apartment is 800-1000 dollars. Guess I will wait til im making money out of college. But sheesh. My friends rent a 3 bedroom apartment for 1500 and its so freakin small.
@saturn226 Thats nuts!! I paid 745 a month in the biggest city in my state for a 2 bedroom apartment!! haha There is maybe one or two houses where I live that are over 275k.. The rest are all under 200k... But the jobs don't pay crazy around here
Maybe I'm overlooking something, but I don't understand how you can say that the interest payment stays the same every year. Each year it should get smaller. Did I hear you say something about an interest only loan? If that's the point I'm missing, well, don't get an interest only loan!
Actually, houses DO appreciate. Yes in 2008 they did not. But if I bought a house for 100 K in 1980 and it was worth 400 K in 2008..then after the crash it went down to 300K...i am still up money. And say when 2020 rolls around this same house will be worth a lot more than 300 K. I'd still be better off.
4% CD. Man your gonna lock your money for at least 2 years. Can you afford to do that. Your assumptions are not practical or realistic. Also, you have to consider the profit of selling the house down the road. I would say you will have some profit from the sales price to what your owe on the loan that you can earn. Not the case with renting.
bottomline for me is that different circumstances dictate what is best for each individual. Those who say everyone who doesn't buy is a fool forget that if everyone bought their house, they'd have noone to rent their house/apt to. In my situation, I'd love to buy, but the numbers just don't add up for me yet, maybe they will next year, but not yet. I'd be looking to buy a 2 bedroom apt, but I can rent the same apt for about 3 or 400 less so what I'm doing is saving that money & getting interest
Sal, the numbers would look worse if you expense-adjust. I sold my fourth house in the Bay Area for a good price, but between that house (held 23 years), the house I'm currently selling (held 21 years), and the two I still have (over 30 years each), I can tell you an honest accounting would add a minimum of $500/mo as another negative to factor in. That is without the type of upgrades most people make that people make to various area of their houses (modern kitchens, bathrooms, etc).
Considering the losses taken the first several years of ownership, aggregating that over time, and honestly accounting for expenses, etc, I would've done better investing that money over time, avoiding losses, and compounding interest in a variety of low-risk investments. Houses are great as a cost-containment strategy ONLY in the house you live in, if you will live in it over 15 years. But when you look at it as a profit center (rather than a cost center) you're burning money without question.
Sal is correct. I own two properties in the SF Bay Area that are ~$1.3M each. They both rent for $3,000/mo. I just lost a good tenant at one of them bc he wanted to rent for less which I wouldn't do. I can tell you at that range, good qualified tenants are hard to find these days, as people are the polar opposite these days when it comes to renting. Much more conservative than 5 years ago, obviously. So, as someone who ACTUALLY knows, bottom line Sal is correct.
I rent a nice 3 bedroom house for only $450.00 a month. If I had to pay $3.000.00? I might as well buy it. That is too much money for just a roof over you're head for a month? You be a fool to pay that much. Especially in todays economy. :P Also...When you own a home today? Your stuck if you want to sell it? All over my town there are for sale signs but no buyers. So the owners are forced to rent because of the taxes they have to pay.
@DoctorMontalban $250.000 a year? Be nice, but if I made that kind of money? I buy an Estate in Las Vegas Nevada. I'm dreaming again. Unless I hit the lottery that never will happen? :)
This video is basically comparing liabilities but i agree with krillin876 the math is not right unless you got really lucky & found a home to rent that cheap. To me when you buy & you can generate cashflow thats an asset so it seems like the guy who is renting out the house in khanacademy story is looking to go foreclosure soon.
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I would just assume that this example is empirical when it comes to comparing renting/ownership scenarios in the same area (say, urban rent and urban ownership/non-urban ownership and non-urban renting). If you compared urban renting with non-urban ownership, would the same pro-renting scenario still occur? I am just wondering. There has to be some cases where home ownership is somewhat a better deal (cashflow wise) than renting?
DinkerTinker1 2 days ago
I would just assume that this example is empirical when it comes to comparing renting/ownership scenarios in the same area (say, urban rent and urban ownership/non-urban ownership and non-urban renting). If you compared urban renting with non-urban ownership, would the same pro-renting scenario still occur? I am just wondering. There has to be some cases where home ownership is somewhat a better deal (cashflow wise) than renting?
DinkerTinker1 2 days ago
Love ya... You just made my day
abdulfattahahmad89 1 week ago
@lolnonamesleft Good point, however with cheap rented homes comes higher risk for crime in the neighborhood. Just something to consider I guess
arjunaram 1 week ago
nice video, one details, that was on 2008 when you can have saving at 3% but now the max you can find is 0.9%.
agredo 2 weeks ago
great vid......but if i had 250k i would just buy a 100k+ house. Good explanation however
meezee44 2 weeks ago 2
You also have to remember about those pesky HOA fees and homerepairs that all come out of the pocket of the landlord, renting is the way to go for the next 5 years
AlbertoBarreradotcom 1 month ago
Holy shit 6% mortgage, and u also save in taxes because ur paying for a house. U amerifags should be so thankful to all the hardworking jews who still print shit tons of priceless dollars.
kamikazerus 1 month ago in playlist Finance
Jesus fuck who pays 3k for rent? you would have to work 150 hours a week on minimum wage to get that lol
kphantomkk 1 month ago
BUYING IS BETTER EVERYONE....HE IS TRYING TO EXPLAIN GETTTING A LOAN.....THAT IS NOT BUYING....THAT IS GETTING A LOAN....IF YOU BUY, YOU BUY A 250K HOUSE, AND ITS YOURS, VS PAYING 2500 A MONTH RENT FOR 10 YEARS AND NOT OWNING ANYTHING. AND IF YOU CHOSE TO SELL AFTER 15 YEARS THEN YOU GET YOUR MONEY BACK IF NOT MORE, THAN JUST A LITTLE LESS, BUT IT WOULD EQUAL OUT THAT YOU WOULD END UP PAYING SAY 50 DOLLARS A MONTH IF YOU LOST 10K
thejasonalex1 1 month ago
@thejasonalex1 I doubt you would be paying $2500 a month in rent for a $250,000 house.
R0YB0T 1 month ago
@R0YB0T Well, it looks like there is another idiot that has no idea what he is talking about. I own 87 properties idiot. I know what rent is and payments and loans and mortages. Wehrle is the name, google me. Net worth $47 mil.
thejasonalex1 1 month ago
@thejasonalex1 Are you saying that rent on a $250k house would be $2500 a month?
Also where in the video did he say it wasn't worth it to buy a house for full price without taking out a loan?
R0YB0T 1 month ago
@R0YB0T Where in my comment do I say that rent on a $250k house would be $2500 a month? What I said is you can buy a house for $250k vs paying $2500 a month in bills for 10 years which would equal $300k in the end. If you save for 10 years, you will be able to buy a $250k house, vs paying bills for ten years and having nothing in the end. AND what he says in the video is nothing to do....nothing at all with BUYING a house. He only talks about buying a house and paying a mortage.
thejasonalex1 1 month ago
@thejasonalex1 In your elegant all caps post:
"IF YOU BUY, YOU BUY A 250K HOUSE, AND ITS YOURS, VS PAYING 2500 A MONTH RENT FOR 10 YEARS".
The video shows a person who wants to live in a million dollar house in silicon valley who has 250k in savings.
You are not taking into account that the place he rents can have amenities and he will not have to worry about repairs. He can use those 10 or so years he saved to properly invest his money outside of the real estate market.
R0YB0T 4 weeks ago
@R0YB0T IT IS THE SAME WORDS WROTE, IN CAPS OR NOT. POINT IS, AND THIS IS MY LAST DEBATE ABOUT IT......IF YOU WANT TO BUY A HOUSE.....BUY IT...DON'T PAY 20 YEARS RENTING TO NOT OWN IT....IF YOU CAN NOT AFFORD A HOUSE, THEN SAVE UNTIL YOU CAN....BUYING A HOUSE WITH CASH IS GOING TO SAVE YOU THOUSANDS OF DOLLARS VS GETTING A LOAN TO BUY A HOUSE THEN PAYING ON THE LOAN FOR 20 YEARS. IN INTEREST ALONE ON A $100K HOME, YOU WILL PAY $140K. NO WAY YOU WILL SEE A RETURN IS YOU SOLD AFTER THAT.
thejasonalex1 4 weeks ago
@thejasonalex1 "DON'T PAY 20 YEARS RENTING TO NOT OWN IT"
A good point that a lot of people missed. One of the biggest considerations when deciding rent vs. buy is how long you anticipate living there. The guy states at the beginning of the video that he's renting right now because he expects the housing market to improve. Renting for the next few years while you wait for a better conditions is not the same as renting the same place for decades without ever attempting ownership.
SeauxG00d 2 days ago
gave me some great ideas
buytoletlandlord 1 month ago
What happens when you just save up, lets say 250k and buy a house thats worth 250k, would the process you just did be done every year after you finished paying the house or would all of those taxed be vanished just because your finished paying it, sorry if im not making much sense i'm new to the "real estate" world and would like some feedback in what to do and how to do it right. well thank you.
MrEazyD831 1 month ago
@MrEazyD831 be careful if you do that, take into account for inflation, id assume a 4-5% average inflation yearly worst case. to counter that you could buy assets like gold or invest your money into a cd or bond to keep your moneys "value" or "purchasing power".
ctoon6 1 month ago
Rent or buy??? It determines the individual's lifestyle. If someone gets bored living in the same place for a while and they love moving around or if they're making plans to relocate in the future; then they should continue renting. If someone is content with living in the same place for years and they always fantasize about landscaping their yard and decorating their home; then they should buy.
DERBENJ 1 month ago
no my dear the house i rented all these years is not mine eventually on the other hand the house am baying mortgage for is
lseshew 1 month ago
I'm a Mortgage Banker with a FSB (Federal Savings Bank). If anyone has any questions you call me direct 917-620-8805 (Vito). I'm licensed in all fifty states. Feel free to call me anytime, and I will give you a free consultation. New purchases, we use FHA (Federal Housing Authority) only 3.5% down needed. Re-financing a home? Interest rates are @ a 60 year low. Good Luck =)
vmucci729 1 month ago
Hey I dont think this is going to scale up in down. Think you buy a 250,000 dollar house and borrow nothing pay no rent and 1% tax. It just makes sense. I know the rent is going to be probably around 1300 which is what you would then save a month. That has to be the best option. Please if I'm wrong someone please explain this to me.
TheDylana24 1 month ago
K its not 2008 anymore and your not getting 4 percent on a CD..........
CityLoch 1 month ago
wow.. that is easy.
adamaqmal 1 month ago
Josefclemens: if you are retired and don't work, you still have to pay for taxes on the home, repairs, maintenance and take inflation into account. Owning is not always better 100% of the time. Ask all of the people whose homes were foreclosed recently. Owning a home is only an investment if you make money on it (via sale) less the taxes, repairs, reno's and difference in inflation.
ami6580 1 month ago
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it's too hard for me！！！
tellyang 1 month ago
what's gonna happen if you are old and can no longer work? where will you live?
Josefclemens1 1 month ago
It's wrong… And what about the 25 years after paying the mortgage? All the incomes are 100% benefit +interests…
panolog 2 months ago
You ever think of buying a house for 250,000. Then not paying any interest. Also then only 1% property tax, 2,500/pear Saving 23,500?????? Thats the problem with people, you dont need a million dollar house!!
TheDylana24 2 months ago
@TheDylana24 The principle remains no matter the cost. If a home rents for a certain amount, then it would sell for a significantly higher amount. You're not understanding his point about buying vs. renting.
Jonmad17 1 month ago
@lolnonamesleft true, but in doing so, you also relinquish the added captial gains you *would* have had over those intervening rent years, had you bought the house in the first place. i say *would* because of course it could happen that the real estate value goes down, not to mention, you might very well do much better in not just putting that extra income in a savings account, but something more structured, like GIC's etc. that would earn you more.
mikegleeson909 2 months ago
Your philosophies are interesting, but your rental price vs. purchase price is incorrect. Unless you're renting from your buddy, you can't rent a million dollar home for $3k. It's an interesting concept though, and I think it poses the important point for anyone interested in purchasing a home to "do the math" and make sure it's actually a worthwhile investment, there are some good points.
thestarragency1 2 months ago
Guys, before you try to point out flaws in this video, watch the whole renting vs. buying series. He has to make this simple because 10 minutes isn't a lot of time
to explain things.
Unless you also have an mba from harvard business school and deveral degrees from MIT don't think you know more than this guy.
wemustkungfufite 2 months ago
This guy probably thinks whole life insurance is a good deal also.
FullWaveElectronics 2 months ago
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FullWaveElectronics 2 months ago
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FullWaveElectronics 2 months ago
This is really really wrong, it makes me cringe. I'm a Finance undergrad with minimal experience in the field, but I know enough to know that there are wayyyy too many oversimplifications made in this video.
It doesn't take into account time-value of money and the way mortgages actually work.
If you want to justify renting as opposed to owning talk about risk mitigation and unforeseen costs.
People should consult with a financial adviser (or someone educated) as opposed to watching this
wilsa122791 2 months ago
Correct me if I'm wrong but when you rent, you don't create any asset value but you can buy a house from the perspective of an investment as well.
Example, if I were to lose my job today and be short on cash and I've been renting for lets say 2 years , I can't ask the landlord to give me back the rent for the previous 2 years (72k approx) but if I had been paying my mortgage for 2 years, and I decide to sell the house, the bank only takes the money unpaid on the loan and I get the rest back.
SharangShah 2 months ago
holy shit, houses in california are expensive.
Skaterdude4321 3 months ago
Besides when you're renting the house you can be kicked out one day... and you have nothing left because your capital is gone by paying the rent
dosterian 3 months ago
OK then after 30 years :
- if you rented the house you paid 26k*30=780k
-if you bought the house : 46k*30=1245k BUT you own the house and you can still sell it : 1245k-1000k = 245k .
Who is winning now? And even if the house lost a little bit of its value its still way more interesting to buy rather than to rent...
dosterian 3 months ago
@dosterian 46k just the interest you need to pay each year but each year the money you loan lesser i suppose you use 23years to pay so the interest = 46k+44+..+2 = 552k so plus the money you brought the house 1m total is about 1.5 m
haneowz 2 months ago
- CD & Money Market interest rates are near or below 1%. Paper currency is better invested in Metal currency in this phase of massive monetarism i.e., inflation.
BlackAthenaBC 3 months ago
it really depends of which cycle you buy your house in(up/down/sideways),what % the market value rose and of more importantly when and if you are going to sell the home to make a profit.You also have to calculate the profit potential of the money you would have invested if you were to not to buy a home but invest it in x y or z
thetruth377 3 months ago
i keep wanting to move this calculator out of sight...:(
1t2t3t4t5t6t7 3 months ago
@lolnonamesleft It is always better to have $2 million.
arr3stth3f3ds 3 months ago
Factor in the income tax to the renting side and you get $56k. The buying side is almost entirely wrong... $750k at 6% is just under $800k over 30 years, which is approx. $26,000 per year. Income tax savings on interest would be approx. $1500 for that year, so add $29,000. Add $10,000 property tax for a grand total of $65,000 per year to buy, vs. $56,000 to rent. Renting is cheaper, but you'll never own that house.
arr3stth3f3ds 3 months ago
Well now. I've found my president.
OswaldtheFourth 3 months ago
The difference one realizes between paying rent verses the interest of a mortgage should also be seen as a benefit to renting: which is 15k. Then there is also a monthly principle cost eventually equaling 750k/ 30 months: which is 25k. This means that for a purchaser that has equal monetary access to both options, renting has the added opportunity cost bonus of 40k a month, which might draw an additional CD interest or be reinvested for further capital. postponing gratification=greater returns
accidomunam1869 3 months ago
@lolnonamesleft Yeah, but you're forgetting that the luxury you give up living in a cheap apartment for a few years has a negative value too. And if that value to you is greater than the rent you'd have to pay, it makes sense to pay that rent instead^^
semperFi4ever100 3 months ago
don't forget about ongoing maintenance costs, landlord-required utilities such as water and garbage (or whatever they impose on you)
MovingUpp 3 months ago
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lightandbeautiful 4 months ago
Great video! However, if you are going to calculate the taxes you'd pay on income per year on buying a house, why would you not calculate them into the equation when renting? If you add the $30K you pay in taxes to the $26K out of pocket for renting per year, you're actually paying $56K as opposed to the $41.5K for buying. Every instance is circumstatial though and I realize there are a number of other factors to consider. Very thought provoking...
TMurph1221 4 months ago
Sensible video - but only to an extent. If you're actually renting for that much per month and not investing say, in real estate, then you're not very smart. Consider buying that same property as an investment, say a rental property, you may well be paying off your mortgage at someone else expense, not your own. So lets hope that you are really not renting for that much each month for the rest of your life and you are actually investing your money somehow - else that would be unwise:(
oyanej 4 months ago
Thank you SAL for your wonderful videos !
The +10 k will be taxed along with the 100000 at 30% leaving -33,000 k as liability/annum of rent....
BUT if you take the opportunity cost (what ur missing) you add -13.5 k(tax benefit lost) = -46500
So if you actually own a house you save -5000 k p.a.
......and in the long run you own a house (Shelter is a human necessity not a luxury)
Regarding wether or not house prices revert; they'll come back - its an economic cycle.
KevinSlasHr 5 months ago
@KevinSlasHr
You were right u guessed that housing prices would revert ! I think the best time to have brought the house was during the recession when real estate prices were bottom low..(Provided one's wages are the same etc.) lol
KevinSlasHr 5 months ago
good video, but i love how u predicted house prices would revert and they did. you rock
inevitabull 5 months ago
Buying your own house is also not the ONLY way to invest in real estate. My 403b earned 29% last year, all from a real estate fund.
kendigjl 5 months ago
Hey Khan,
What do you think about buying a house now around 400~500k in the Silicon Valley now (August 2011) vs renting? Thanks
eecsta 5 months ago
lol i cant even get a percent on my cd i want to know where your going
andrew24p 6 months ago
Actually, buying is better. If you buy a house, you may pay interest but you don't have the fear of losing your property if you pay it off. You can fix it up and sell it when the value goes up and you make profit.
undertake782 6 months ago
too bad when u rent, at the end of the day, u still have to keep renting =\ u own no property so that money you pay is forever someone else's. but if you buy a home, yea you are paying, but after a few years, it's all urs; in a way you were only paying yourself.
P01029 6 months ago
@P01029 He uses an interest only loan in the example, so your statement should be rephrased from "in a way you were only paying yourself." to "in a way you were only paying THE BANK." Banks are not charities - they issue mortgages to make money off you, like credit card companies.
primeNUMBAZZZ 6 months ago
@primeNUMBAZZZ :) yes but the interests for the bank is a lot less than ur monthly rent :) I rather pay the interest for a while and then own my own house at the end and not have to pay ANYONE anymore than to rent forever on and on.
P01029 6 months ago
@P01029 but you pay taxes forever that is still rent...
killaking22 6 months ago
@killaking22 tax is a lot less than rent hun :) buying and selling homes (flipping) is one of the most profitable way of investing.
P01029 6 months ago
The renter starts with 250k that doesn't go for a down payment on a home. The 15k savings (1250/mo.) is added to the 250k for 30 years. Plug in 6% annual return compounded monthly, and you get 2.8 million +.
1boysan 7 months ago
In his example the renter saves $15,000 a year. So in 30 years he'll save 450,000. He'll have that 450,000 to show for himself. What will the home owner have? A house that now is worth 1 million and in 30 years should be worth much more. Is there somthing I'm missing?
UnidentifiedUserID 7 months ago
@UnidentifiedUserID The example that he uses is an interest only loan. This means that at the end of 30 years the "homeowner" will still have a $750K loan outstanding. If he used a conventional loan in the example (one for interest and principal), then the mortgage payments would have been much higher.
primeNUMBAZZZ 6 months ago
He is comparing a 3k rent with 1mil mortgage. Realistically if a house was 3k rent per month, it would be worth about 500k in mortgage at the worst.
Please do not take this comparison as valid advice. A million dollar house is not going to be for rent for 3k.
Vote up so people do not fall for this silliness. .
azfarmb 7 months ago
@azfarmb
I live in Albuquerque, NM and a 1 million dollar house actually goes for around 2k to 3k for rent. He's pretty spot on. Well, for me, at least.
MrMamini 7 months ago
@azfarmb He was talking about the very hard to rent area of Ventura
CA and a 1million dollar home would rent for $3,000. I live in WA state where a $25o,ooo
home in a little town would rent for 12,000. The mortgage at less than 6% with no money
down is $2,ooo a month. Then there is property taxes, plus neighborhood community fees,
must keep your yard looking good-costs more money. Plus as the years go buy you replace
the roof, furnace, hot water heater, duct cleaning expenses. He is right on.
doula2010 6 months ago
Why are people talking about religion? THIS VIDEO IS ABOUT BUYING HOMES!
controlpad008 7 months ago
@controlpad008 Because the death of religion in this age of information is what is most important to people on both sides of the debate.
EliteDoomer 3 months ago
thats amazing that interest is deductible in usa. its only a deduction in canada when the house is rented out.
h1g97 7 months ago
GREAT GREAT POST, WE AS MUSLIMS ARE REQUIRED TO NOT GET INTEREST AS THE JEWS WERENT NEITHER IT ONLY HAPPENED WHEN THE NEW TORAH OR TALMUD CAME OUT THEY ALLOWED INTEREST SO THEY CUD MAKE CRAZY MONEY, YES SEE I WAS RIGHT PPL NOT NECESSARILY LOSE MUCH IF THEY ARE ON RENT. GREAT VIDEO!!
suckafreeG 8 months ago
@suckafreeG not take interest is the dumbest thing i have ever seen in banking. i have been working at rbc for 4 years. and it's dumb not to have an rsp or tfsa. or a credit card that gives free money
h1g97 7 months ago
@h1g97 stupid i have tsfa its just a tax break for your money that is under 5 grand that why i recall the dumbest ppl are folks like you they jump the gun before they open their mouth im done dont expect me to get involved with you in debate this is the last RIGHT FINAL ANWSER
suckafreeG 7 months ago
@suckafreeG really oh yea i have family members about 4 of them CA's much smarter then you can ever be stupid, not taking interest its in our religion what your talking about those are through investment you call that capital faggot which come from mutual funds, investment fund etc, like interest in a sense str8 interest or any type involving a % raise on the money which you lend to some one.
suckafreeG 7 months ago
@suckafreeG Muslims are the dumbest ppl in the world man. Such stupid beliefs. I don't believe in a god and there is no god. Religion is stupid all together. But muslims are so inbred that they starve themselves for the religion and don't take interest but will fuck over and blow up ppl thinking there will be virgins in the after life.
h1g97 7 months ago
@suckafreeG So smart that you commented yourself. Lol. Don't come and blow my house up in the name of Allah. If you are so smart just honestly ask yourself if this universe was created by a supernatural being? Read a book about the big bang - you can't deny it. There is no mesiah, Jesus, buddah, tupac or unicorn
h1g97 7 months ago
@h1g97 you indians are traitor your telling me that when your indian mother raised you without giving you any religious values, yea right see this the thing i hate about indian like "you" come to north america or born her first generation fix their accents ditch their religious values they grew up with start to amuse like dave chappel that they are white like he does in his blind kkk script lol this is the issue after all when a white person looks at you he knows that you are not on of them so
suckafreeG 7 months ago
@suckafreeG Im Canadian all the way man. Im smarter than you since I don't follow any stupid, ignorant teachings of any religion, especially Muslim. Marry your cousins, have 4 wives, pray and waste time, then starve yourselves and become skinny malnurished weaklings.
h1g97 7 months ago
@h1g97
There is no religion titled "Muslim", rather it's called "Islam". "Muslim" is one who follows "Islam". Marrying your cousins is a cultural practice primarily practiced by the European monarchy to keep the crown within the bloodline. In a sense, my friend, you have exposed your own ignorance.
MrMamini 7 months ago
@MrMamini Iraqis marry their own cousins. I have witnessed it. And her reason was " the kids will be better looking this way".
h1g97 7 months ago
@h1g97 so please next time keep religion and keep out of it because ppl like you make fools of them selves, plus ahahaha BIG Bang "did you try that part where it says in the book you can imagine that you can get anything, anyyythinggg" okay now imagine or wish that you get a brain and dont worry no one will blow your house up cause it stinks shit any theirs hairy all over the place you hindu cow worshipper and tell your bhangi indian government to stop slathering Kashmeries
suckafreeG 7 months ago
thx for the video
GUPTABAG 8 months ago
Continue: Though you can consider the 250k as a fixed amount on the bank and you pay the rent with another income, then the example above is accurate.
ariesrapid 8 months ago
@Khan: One problem with the assumption on the renting is that since you have to pay 26k each year your interest amount will decrease each year and so will your interest income. For example: The next following year after you paid the rent you will have $224k on the bank just giving you an interest income on 8,96k which implies the following spent money will be approx -27k. This will continue until your rent is equal to -36k per year. Not saying buying is better but it is something to consider
ariesrapid 8 months ago
I stand to correct you -
you are not paying 1 million dollars in 1 year in interest.
you are spreading it out over 30 years, you messed up the calculation
which means your yearly interest is 6% of the years worth of payments, not the entire million dollars.
Please correct your error.
stevejberry 8 months ago 13
@stevejberry congratulations on somehow being the only person smart enough to realize this.
IncoherentCommenter 7 months ago
@stevejberry - wow that might be the dumbest thing I've read in a long, long time.
BGoose22 3 months ago
@stevejberry what do you say??? can we get 1 million doller @6% per 30 years??????
afsalmpm 3 months ago
@stevejberry YOU stand corrected, dumbass
ITSASTI 3 months ago
@stevejberry
"6% of the years worth of payments" ???? God I hope you don't have mortgage Steve...
it's 6% of the entire 1m the first year. If you managed to pay off 20k principle then in year two you would pay 6% on 980k, and so on and so on.
stargatefan23 2 months ago
@stevejberry you most certainly are in that first year. presumably IF you dont' have an interest only loan, in subsequent years it will be marginally less, but then again, the 250k earning interest in that savings account is earning more now too, which negates things for a rough comparison.
mikegleeson909 2 months ago
Are you familiar with the boom-bust cycle created by the Fed and explained my Ludwig Von Mises? Ron Paul 2012
RunLiberty 8 months ago
Ron Paul 2012
The only presidential candidate that understands economics
RunLiberty 8 months ago
This depends on where you live. In the Philadelphia suburbs where I live it is way cheaper to buy, I bought a single home for 140,000.
attemptingtobehumble 9 months ago
@attemptingtobehumble - but you bought a mortgage not a home, the STATE OF___ holds the title on all real properties, we have a tenancy agreement, read your mortgage it's in there...
ngonea 8 months ago
This is Retarded because if you BUY a home you can actually sell your home after 30years and you still get your $1 million back or even more. If you RENT after 30 years you will get NOTHING back. Common Sense Matters
hmongpabhmong 9 months ago
@hmongpabhmong Lease to own or installment contract means you can buy without much down and credit . Just renting alone is not enough. Most people will not get anything back with economy the way it is anyway.
3089280288 9 months ago
@hmongpabhmong Common sense DOES matter. You are putting out a LOT more than $1 million in the 30 years because of the interest. So even if you sell your home for $1 million, you're still losing money with the interest and property taxes. That doesn't even include repairs. But with the housing market fluctuating so much, there's no guarantee you'll even sell it for the $1 million you paid for it. If you rent it for 30 years you can invest the money that would go into a house.
bparsons69 8 months ago
This is a useful conversation about doing the math before you purchase or rent a home. I don't think most buyers look into the financial market this much. In some markets it is important to realize the buying is not the best choice, Waiting for the right time to buy and finding the right home to buy are the most critical elements fo the home purchase process.
Papamilty 9 months ago
How could the landlord afford to rent at 3000 if the mortgage is much higher? They must have financed differently... is buying vs renting a matter of timing and/or how much money you put down?
8xngc 9 months ago
I wish I had $250k in the bank. Not sure what it's like out west but my guess is less than 10 of the 93,000+ people who watched this video have much, if any, savings left today. 2011 is a much different story than this video.
brown55061 9 months ago
3k per month house? this guy is crazy with unrealistic renter price.........
iamgod604 9 months ago
@iamgod604 That's about the price in the Bay Area when renting a house. If you rent an apartment it's about half that price...so about $1500. It sucks to live in the BAY AREA/ SIlicon Valley Area.
ERAP1st 9 months ago
-3- i think im gona rent...it may be going out but shit i mean you can rent a house and have freedome dont like it move when you buy a house its insane
lovedapizza1 9 months ago
You forgot to Tax your savings income 10k dude or is it diffrent in the US ?
abarford1 9 months ago
You are not even taking into account the fact you WILL have appreciation on the home. Why not compare apples to apples instead of apples to oranges like you are doing in your example. Either present the facts or do not present anything at all!!!
cleehomes333 10 months ago
One more factor comes into play tho o.O (real life example):
house my parents bought 10 years ago for 300k = worth over 1.5 million now
nwre 10 months ago
I will always own. I've lived in my home for 5 years and am about to sell it. With the small amount of equity the house has built up including my upgrades, I will basically be getting a 'REBATE' on literally 3 years of living expenses. Not bad.
TheTruthHurtsYup 10 months ago
Why buy a home when you can rent?
X9Intelectual 10 months ago
@X9Intelectual Lots of people ARE renting when they get foreclosed on. (haha)
3089280288 9 months ago
You didn't include cost of maintaining a house, when you rent you don't have to worry about that. Then home owners insurance (renters is lower). The time required to maintain your home. Then, assuming the market goes good for you (ur taking a huge chance there) and you break even when you sell after 30 years. Where are you gonna live now? You just sold off your home. Imma run these numbers assuming you just buy the house in cash; seems like that'd help a lot.
Hrel88 10 months ago
Private property is exploitative and parasitic on society. But you are not going to hear that from a pampered MIT MBA graduate. And why in the world would you live in a state that charges 3,000 per month? Gawn you probably can rent the same house for 1,200.00 (USD) in Pennsylvania. You Californians are nuts.
donttellmethetime 11 months ago
If you are spending 3,000 dollars a month on a freaking house you are insane, you can easily rent a brand new really nice apartment in texas for no more than 800 a month with bills! One day people will learn to live within their means
silvergreentrader 11 months ago
oh and stop repeating words constantly
darkwolf228 11 months ago
What kind of douche-bag has 250k in the bank and can afford a million dollar house? Bring it down to earth clown, some of us are lucky to have 2,500 in the bank and could maybe afford a 150k house.
darkwolf228 11 months ago
@darkwolf228 lol you speak the truth lol
silvergreentrader 11 months ago
Comment removed
donttellmethetime 11 months ago
@darkwolf228
One that aligns himself with Bill Gates. I appreciate many of Khans videos but really, in the end, he is liked by BIll Gates because Capitalists, like Gates, need a cheaply educated army of skilled laborers to increase surplus value for their multi billion dollar enterprises and to transfer wealth to the top .01% which is created on the backs of exploited, underpaid labor. Bill Gates "foundation" is a fraud. It is totally a corporate, for profit political project .
donttellmethetime 11 months ago
This didnt even include maintenance
informationrevolt 11 months ago
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Miles52431 1 year ago
Very Misleading!
craigbri103 1 year ago
IN THE UK THE MATHS WORK GREAT AND AS THE MARKET IS JUST ABOUT TO GO THROUGH ANOTHER CYCLE OF BOOMING NEXT YEAR AS THE INTEREST RATE IS SO LOW HERE ! I RECOMMEND ANYONE TO WHO IS SERIOUS ABOUT MAKING IT BIG IN PROPERTY TO GET IN THE U.K. PROPERTY MARKET NOW!
savoy123ful 1 year ago
YOU NEED TO ADD $10,000.00 back To the "Rental" cost, because "NO ONE/ANYWHERE" is offering 4% interest on savings!!
beloit22 1 year ago
Your math may be applicable for your area but If You have 250K in a state like South Carolina (where I live) You buy a house that will otherwise cost 1M in California and even after I pay the property taxes I'm still better off buying than renting.
bogdanovr 1 year ago
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siththee 1 year ago
Great Video. Check Out Mine.
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EdinburghCommunityTn 1 year ago
Great video!!!!
xxbondsxx 1 year ago
Note that he isn't saying you should never buy a house. He simply says that you should go the calculation beforehand to make sure you are coming on top.
Sorry but only naive people think that you can make money when selling a house. You make your profit when you are buying the house. If you are buying an overpriced house, no matter how much the market goes up, you will be losing money compared to if you got one at the correct price.
Also, owning a house has one big advantage: you can adapt
Canon5dTips 1 year ago
yes but you did not calculate the value of owning your own house and compare this with paying for house that someone else owns
t4c4 1 year ago
If you buy a 300K home, your down payment would be $10,500 plus loan cost (which are deductible) with an FHA loan. Your payment would be about $1610 PI (5% int.) + $312 property taxes + $100 fire ins + $237 Mort ins (PMI) that can be eliminated in about 5 yrs. Total payment: 2,259. In 5 yrs it can go down to: $2,022 once PMI is eliminated when you have 20% equity.
TheShortSaleDiva 1 year ago
Buy a cheaper house! Who buys a million dollar house on 100K salary? The most you should be buying anyway is about a $300K home. Where are you going to get a CD to pay 4% int? & the income tax rate would be lower because you would be in a different tax bracket once the mortgage interest & property tax deduction kicks in.
TheShortSaleDiva 1 year ago
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Biggest city in the state? Where do you live? South Dakota? or Wyoming?? hahaha.
Instilinachange1 1 year ago
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Instilinachange1 1 year ago
Well what about the fact you own a house in the end of paying it off. You could sell it for a generally equal amount and in more cases a higher amount then what you bought it for do to more population, inflation, etc... Then you could be the one to rent out your house. What about that? Then you could take that rent money profit and buy a nicer, bigger, and better house next. That sounds better then never saving a dime by renting to me.
GodDamnit7711 1 year ago
@GodDamnit7711 i don´t ready all what you have written but YES,what the fuck is happenden with the fact that you own a 1million doller home,wich you can sell maybe for 1,4 in 10 years?!
kunkunn123 1 year ago
This is a very good example of when it's best to rent. Typically (in normal housing markets) monthly rent should be close to 1% of the home's value. Therefore a $100K property should rent for $1K/month. If you're paying rent of $3K/month and that same house is listed at $1M - definitely stay renting!!
In comparison I live in Regina SK and my 3 housemates pay me $1,700/month to share my 4 bedroom townhouse with them. Yet I'd be lucky to sell my place for $200K in our current market.
landongendur 1 year ago
A few things. 1. As stated before you wouldn't put all of your liquid cash into a CD and you wouldn't earn 4% 2. The cash you spend doesn't earn equity but the HOME does. Home value went down during the crisis, but only in crisis situations would this be true so the house would gain value typically. 3. Owning has finality. You pay for 15-30 years then it's YOURS and you don't pay anymore. So you have to take into consideration how long you plan to rent. 40 years? That's 10-25 yrs MORE payments.
miraclemanays 1 year ago
@miraclemanays - Don't forget that he's comparing the rent paid to the interest paid on the mortgage and property tax. The money the homeowner pays towards the principal, the renter could instead invest and get a reasonable return. So in 30 years, the homeowner would own the house, and the renter would have saved, in this example, an amount larger than the value of the homeowners house. If he so chose, the renter could pay for a house in full with that money, zero debt.
adiprai 1 year ago
I'm going to list the problems as the video plays...if you have 250k in the bank, you are not going to put all of that into a CD, as it would be locked up for a year and you would strictly have your salary for that year and no backup savings. Also, CD rates are 2.5% tops, not 4%. Next, on a similar note, no one would put their entire bank account into the house initially; putting in 200k instead of 250k would be more than adequate and would leave you with an emergency fund. This somewhat...
SuperWoody85 1 year ago
At 5:17, wouldn't you need to halve that 45k/mo (and subsequently the tax-deductible "bonus") to represent the shrinking interest over the life of the loan? Seems a bit shady to me, since the numbers here imply you'll never pay any principal and just keep forking over that 41.5k/mo indefinitely. I'll go watch the second half and see if it's adressed.
temporalpitmage 1 year ago
@temporalpitmage He said it was addressing interest only.
kaakoo 8 months ago
These calcs might only work in America, and even then, only in the short term. In Australia, my house has appreciated on average at 12% pa for the past 15 years, so value is now 5 times what I paid for it. No tax payable on sale either. Other differences - you pay income tax (say 30%) on your savings here, but mortgage interest not deductible unless it is an investment property or you are conducting a business from home. Property taxes a lot less here too - less than $2000 pa.
ALFAGOMMA 1 year ago
currently renting a 700k brand new home in connecticut for 2k a month had to take the stickers off the appliances . I know renting I'm gIetting more bang for my dollar .I don't think I will buy a house again and I could very well do so.
swami24u 1 year ago
your fucking high if you rent a 1 million dollar house.... or buy a 1 million dollar house!! And why the fuck would you buy a house for a million bucks when you only make 100k a year? Thats ludacris!! And after renting for 30 years what do you have?
rangaman86 1 year ago
@rangaman86 in my state most 3 bedroom homes are pretty close to 1mil
saturn226 1 year ago
@saturn226 haha Thats crazy!! A nice 3 bedroom 1 bath house down the road from where i'm living now just sold for 55k!! haha Thats with a 2 year old $20,000 furnace!! Old woman passed away and the children sold it... In the town I grew up in, they haven't sold a house for over 100k in 5 years!! lol
rangaman86 1 year ago
@rangaman86 so freaking lucky. :(
I am having a hard time moving out of my parents house because a studio apartment is 800-1000 dollars. Guess I will wait til im making money out of college. But sheesh. My friends rent a 3 bedroom apartment for 1500 and its so freakin small.
saturn226 1 year ago
@saturn226 Thats nuts!! I paid 745 a month in the biggest city in my state for a 2 bedroom apartment!! haha There is maybe one or two houses where I live that are over 275k.. The rest are all under 200k... But the jobs don't pay crazy around here
rangaman86 1 year ago
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@rangaman86 Biggest city in the state? Where do you live? South Dakota? or Wyoming??
Instilinachange1 1 year ago
Maybe I'm overlooking something, but I don't understand how you can say that the interest payment stays the same every year. Each year it should get smaller. Did I hear you say something about an interest only loan? If that's the point I'm missing, well, don't get an interest only loan!
bret14jb 1 year ago
I tried to minimise the calculator. Duh!
molyneux1000 1 year ago
Very interesting
InventoryClerkTV 1 year ago
Actually, houses DO appreciate. Yes in 2008 they did not. But if I bought a house for 100 K in 1980 and it was worth 400 K in 2008..then after the crash it went down to 300K...i am still up money. And say when 2020 rolls around this same house will be worth a lot more than 300 K. I'd still be better off.
Bullionaire90 1 year ago
Nice video
Ibuysellinvest 1 year ago
The Housing Conspiracy! Download it at: Lulu.com
ericnies 1 year ago
4% CD. Man your gonna lock your money for at least 2 years. Can you afford to do that. Your assumptions are not practical or realistic. Also, you have to consider the profit of selling the house down the road. I would say you will have some profit from the sales price to what your owe on the loan that you can earn. Not the case with renting.
oshahid1983 1 year ago
bottomline for me is that different circumstances dictate what is best for each individual. Those who say everyone who doesn't buy is a fool forget that if everyone bought their house, they'd have noone to rent their house/apt to. In my situation, I'd love to buy, but the numbers just don't add up for me yet, maybe they will next year, but not yet. I'd be looking to buy a 2 bedroom apt, but I can rent the same apt for about 3 or 400 less so what I'm doing is saving that money & getting interest
elnik32 1 year ago
Wow this was actually very helpful and informitave. You have a very lively voice that makes it easy to pay attention aswell :)
Heartly10 1 year ago
Sal, the numbers would look worse if you expense-adjust. I sold my fourth house in the Bay Area for a good price, but between that house (held 23 years), the house I'm currently selling (held 21 years), and the two I still have (over 30 years each), I can tell you an honest accounting would add a minimum of $500/mo as another negative to factor in. That is without the type of upgrades most people make that people make to various area of their houses (modern kitchens, bathrooms, etc).
DoctorMontalban 1 year ago
Considering the losses taken the first several years of ownership, aggregating that over time, and honestly accounting for expenses, etc, I would've done better investing that money over time, avoiding losses, and compounding interest in a variety of low-risk investments. Houses are great as a cost-containment strategy ONLY in the house you live in, if you will live in it over 15 years. But when you look at it as a profit center (rather than a cost center) you're burning money without question.
DoctorMontalban 1 year ago
Sal is correct. I own two properties in the SF Bay Area that are ~$1.3M each. They both rent for $3,000/mo. I just lost a good tenant at one of them bc he wanted to rent for less which I wouldn't do. I can tell you at that range, good qualified tenants are hard to find these days, as people are the polar opposite these days when it comes to renting. Much more conservative than 5 years ago, obviously. So, as someone who ACTUALLY knows, bottom line Sal is correct.
DoctorMontalban 1 year ago
I rent a nice 3 bedroom house for only $450.00 a month. If I had to pay $3.000.00? I might as well buy it. That is too much money for just a roof over you're head for a month? You be a fool to pay that much. Especially in todays economy. :P Also...When you own a home today? Your stuck if you want to sell it? All over my town there are for sale signs but no buyers. So the owners are forced to rent because of the taxes they have to pay.
Godzie1 1 year ago
@Godzie1 In the Bay Area that #3000/mo house would cost you $6-8k/mo. to own. Unless you make $250k/yr. that would be a bad idea.
DoctorMontalban 1 year ago
@DoctorMontalban $250.000 a year? Be nice, but if I made that kind of money? I buy an Estate in Las Vegas Nevada. I'm dreaming again. Unless I hit the lottery that never will happen? :)
Godzie1 1 year ago
This video is basically comparing liabilities but i agree with krillin876 the math is not right unless you got really lucky & found a home to rent that cheap. To me when you buy & you can generate cashflow thats an asset so it seems like the guy who is renting out the house in khanacademy story is looking to go foreclosure soon.
chochatucha696969 1 year ago