Purchase vs. Renting: Which is the Greatest Choice for You?
What if you found that real estate is not as good an investment as everyone says it is? I know, I know everyone has heard the story of an aunt who bought her house for $ 100,000 in 1970 and sold it for $ 800,000 last year.
For most people, however, it doesn’t quite work that way.
Most people are unaware of all of the additional costs of buying a home besides the sticker price.
Here is the truth about whether it is better to rent or buy a home.
Beware of real estate propaganda
Have you ever thought seriously about where your beliefs about buying a home come from?
This is a very good thing to take a second to think about. Because the truth is, many people choose to buy houses based on belief systems given to them by society.
Our colleagues reaffirm that belief by praising those of us who buy homes and viewing renters as failures. It’s all BS.
To know where this belief comes from, we need to look at who has incentives to get us to buy houses. The answer to that is simple. It’s the money-hungry people within the National Association of Realtors.
They want you to buy, so they create powerful propaganda that sells messages like “real estate is only going up”. In fact, they will go so far as to say that when the market is rising is a good time to buy, and when the market is falling is a good time to buy.
Wait … tell me is ALWAYS a good time to buy real estate? It is absolutely not true.
But they’re not the only ones who have an incentive to make you buy a home. Our own government is also responsible. They offer things like tax write-offs to get you into that extremely hefty purchase.
From these propaganda machines, we as a culture buy two insidious myths that only serve to fatten the pockets of those who benefit from our purchase.
Let’s look at some of these myths and why they can lead you in the wrong direction.
Myth # 1 – When you rent a home, you are only paying for your landlord’s mortgage
This myth has led so many people to buy a home before they were finished believing that someone else could get the better end of the stick. This myth is rooted in a misunderstanding about how profitable real estate is.
Some people think this is what being a landlord is like: a landlord owns a place that costs them about $ 3,000 a month and they only add 10% and laugh to the bank.
That’s not how it works.
Your landlord can only calculate what the market will carry.
Which means that sometimes the landlord makes more than their expenses, but often times they don’t even cover their expenses. And you wanna know the crazy part?
Most of them don’t even know.
This is because it can be very difficult to calculate all the numbers and add up all of the expenses. These are known as phantom costs. How do you calculate the cost of a roof that costs $ 25,000 to repair but only happens once every 20 years? It’s hard to calculate!
Remember – your landlord cannot charge you what they want, they can only charge you what the market will carry.
Myth 2 – When you pay rent, you are throwing away money
This is one of those statements that sounds nice but actually means nothing.
So renting means that I throw away money without showing anything in return? Because when I pay rent, I have a roof over my head and a great view. With the rent you get a home to lay your head down. And that’s true even when you’re paying for practically everything.
If you go to a movie, you pay $ 10 and watch the movie. What do you have to show for this? You love the film, you have to show it!
What do you have to show when buying groceries? A delicious meal!
The same goes for rent. You pay for a service and get exactly what you pay for. As simple as that.
Before buying a home, enter the numbers
I know I put down home ownership in this article, but the truth is, there is nothing wrong with buying a home as long as you buy for the right reasons and are ready.
The right reasons could be that you want more space for your growing family or want to do projects like demolishing that kitchen wall. These are all good reasons to buy a home.
But whatever your reasoning, make sure you type in the numbers
It helps to see your home not as an investment but simply part of your rich life. When you take this perspective, you can make decisions like buying a home for the right reasons, not the wrong ones.
And if you’re a renter reading this article, you’re in luck! There is one advantage to rent that I didn’t include in this article and that is, you can negotiate how much rent you pay per month.
I’ve helped thousands of my students save thousands in rent every year. All you have to do is follow my step-by-step process. Read my post on negotiating your rent here.
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