Buy vs. Rent: What is the best option for you?
What if you have discovered 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 in 1970 for $100,000 and she sold it last year for $850,000.
For most people, however, that's not quite how it works.
Most people are not aware of all the extra costs involved in buying a house in addition to 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 seriously thought about where your beliefs about buying a home come from?
This is a very good thing to think about. Because the truth is that many people decide to buy homes based on belief systems given to them by society.
Our colleagues reinforce this belief by praising those of us who buy a home and considering tenants as failures. It is all BS.
In order to know where this belief comes from, we need to look at who drives us to buy houses. The answer is simple. They are the moneyed people within the National Association of Realtors.
They want you to buy, so they make powerful propaganda that sells messages like "real estate only goes up". They will even go so far as to say that when the market goes up it is a good time to buy, and when it goes down it is also a good time to buy.
Wait... are you telling me that it is ALWAYS a good time to buy real estate? That is absolutely not true.
But they're not the only ones who encourage you to buy a house. Our own government is also responsible. They offer things like tax deductions to get you to make this extremely heavy purchase.
Of these propaganda machines, we as a culture buy two treacherous myths that only serve to fatten the pockets of those who buy from us.
Let's take a look at some of these myths and why they can send you in the wrong direction.
Myth #1 - Renting a house means you just pay for your landlord's mortgage
This myth has led many people to buy a house before they were ready because it makes them think that someone else is getting the better end of the stick. This myth is rooted in a misunderstanding about how profitable real estate is.
Here is what some people think a landlord is like: a landlord owns a place that costs them about $3,000 a month, and they just add it at 10% and laugh all the way to the bank.
That's not how it works.
Your landlord can only charge you what the market will carry
Which means that the landlord sometimes makes more than their costs, but often they don't even cover their costs. And you want to know the crazy part?
Most people don't even know.
That's because it can be difficult to calculate all the numbers and add up all the costs. These are called phantom costs. How do you calculate the cost of a roof that costs $25,000 to repair, but only happens once every 20 years? That is difficult to calculate!
Remember that your landlord can't charge you what they want, they can only charge you what the market will bear.
Myth 2 - When you pay rent, you throw money away
This is one of those statements that sounds good, but doesn't really mean anything.
So renting means I'm throwing money away with nothing to show for it? Because when I pay rent, I have a roof over my head, and a great view. The rent gives you a house to put your head. And this is basically the same as paying for everything.
If you go to a movie, you pay $10 and you watch the movie. What are you willing to pay for it? You love the movie, that's what you have to show for it!
When you buy food, what do you have to show for it? A delicious meal!
It's the same with the rent. You pay for a service and you get exactly what you pay for. It's as simple as that.
Before you buy a house, check the numbers
I know I gave the home ownership in this article the beatdown, but in reality there is nothing wrong with buying a house, as long as you buy for the right reasons and are ready for it.
The right reasons may be that you want more space for your growing family, or that you want to do projects like knocking down that kitchen wall. These are all good reasons to buy a house.
But whatever your reasoning, make sure you get the figures
It helps to see your home not as an investment, but simply as part of your rich life. Taking this perspective will help you make decisions such as buying a home for the right reasons, not the wrong ones.
Was this article helpful?13 Posted by: 👨 Oscar A. Bennett