Renting vs Home Ownership
Lesson 14 from: FAST CLASS: How to Retire Early: The Latte FactorDavid Bach
Renting vs Home Ownership
Lesson 14 from: FAST CLASS: How to Retire Early: The Latte FactorDavid Bach
Lesson Info
14. Renting vs Home Ownership
Lessons
Financial Education - Know Better To Do Better
15:12 2Start Early, Start Today
07:02 3The Latte Factor: How It Works
16:31 4FITE - Financial Independence to Transition Early
04:39 5Common Investment Mistakes
01:29 6Becoming Rich on an Ordinary Income
04:04 7How Much do You Need to Retire
01:47 8Retirement Plans & Where to Start
05:23Lesson Info
Renting vs Home Ownership
my belief is this, you can't get rich renting the bulk of wealth in America today is actually in homes All across America, the bulk of, well 60% of equity in America today is inside a house. As long as you're alive, you have to live somewhere. So, you know, I am a proponent of home ownership and have been my entire life. I said, the smartest investment you'll ever make as your home again, why? As long as you're alive, you have to live somewhere, you can pay rent and make somebody else rich, like the game of monopoly or you can own it, pay it down and eventually have it free and clear and have very low overhead and people go, oh, but you'll have taxes, yep, you will, oh, but you'll have service, yep, you will, it would be cheaper to rent than out. No, it wouldn't be, it won't be cheaper to rent than own long term because rents always go higher. Why do rents always go higher? Because I'm a landlord, I want you to pay my taxes, my overhead and make me rich. There's no landlord in America ...
who says, oh good, you're a renter. I'm in the charity business and I want to make sure your rent is cheaper for you. That's not how the game works. Um this is from 2010, 10 right? People said when the recession hit, that real estate would never come back, It was just over, nobody wanted to own a home. I'm like, are you kidding me? We should all action away. Like hope for the next recession because the last recession in markets across America homes went down, 50% Florida San Diego Vegas and I would go, you know, there's no way these real estate prices are staying down here because there are markets that you could go into where you basically got the home for free because the price of the home now, you're just paying for the land. There's this thing called replacement cost, what does it cost to build a new home today? What does it cost to build a new apartment? The one thing I can promise you is in 10 years it's going to cost more, which is why housing prices long term always go up. So homeowners are a lot wealthier than renters and here's why there's six primary benefits to homeownership. First of all, it's forced savings every time you make a mortgage payment, a little bit of its going door to the principal and you are making a forced investment to save It's leverage, nobody buys a home typically for cash unless they're an investor, most people buy homes and they put 20% down and they borrow 80% other people's money. The bank gives it to you, easiest place to borrow money is for your first home, massive tax breaks, you get a tax deduction on the interest, but the tax deduction that matters the most. In my opinion, when you buy a home and it goes up in value, you can sell a home when you're single and you can put in your pocket Up to $250,000 tax free in profit. If you're married, you can put up to a half a million dollars in profit. Tax free. It's the only investment vehicle. You can do that and you can do it more than once. You can also buy investment property and basically never pay taxes. You might investment property and when you want to sell and buy something else, you can do a 1031 exchange and prolonged paying taxes really indefinitely until you die. Um, you've got pride of ownership and really real estate proves to be a great investment. It just does. And people who tell you it doesn't, they're just, they're not being honest. Um, homeowners are worth statistically way more than renters Depending on the time of marketplace in the year. Home ours are worth somewhere between 31 to 46 times more than renters call it in the middle of roughly 41 times the rate writers, you have the average renter worth $5,000 in the average homeowner worth over 172,000. It's huge. Now let me show you how to get rich faster in real estate, buy a home and paid off early. This is the biweekly mortgage secret. So if you've got a home, I'm fine with a person getting a 30 year mortgage because you can lock in a low rate. But if you're in a home with a $300,000 mortgage and it's $15 a month You split that payment in half and you go 7: every two weeks. You will save $40,000 and pay that home five years earlier. Just by taking your payment splitting in half every two weeks. You look at me like why? Which is good because you're paying attention and you're thinking, the reason is why is that? What happens is you make one little extra payment a year and that little extra payment a year is paying the principal down faster. Another way to do this is just make one extra payment a year. But people don't. So biweekly payment plans are great because most people are paid twice a year, twice a month and you can set this up with the bank and it's a forced way to pay your mortgage down early. Now if you want to be aggressive and retire early, Uh, there's nothing better than a 15 year mortgage because you'll be out of debt in 15 years