009 | Housing - Should You Rent Forever?

The guys discuss renting vs buying a house. Which is superior from a financial standpoint?

Websites mentioned during the podcast:

Headline: They lived paycheck to paycheck before the pandemic. Then their worst nightmare came true.

Renting VS buying a house

When is renting a good thing?

• When you are unsure of your career and could have to move for a career.
  • I.E. Military, people early in their careers
  • Someone who hasn’t yet “settled down.”
• If you’re someone who doesn’t like dealing with maintenance of a property
• If you’re someone who likes having access to a lot of amenities
• If you’re in a market with super high housing costs but low rent price
• If you don’t have adequate savings (emergency fund, retirement, etc..). It may make sense to wait until you have your financial house in order. Don’t rush into buying a home as there are expenses that come with it.

Advantages to renting:

• No maintenance costs or repair costs -These can often be ~1% of the cost of the house. So if you own a 300,000 house, you’re looking at 3,000 in repair costs just to upkeep the property. Just call up the landlord to get things fixed when they break. No out of pocket to you
• Insurance costs are lower- you’re not insuring the house- just your belongings. Renters insurance policies are cheap.
• You don’t “pay” real estate taxes - all costs are built into your rent payment (exception is utilities).
• Have a better idea for budgeting purposes what it’s going to cost to live somewhere.
• No down payment- with a house - it’s 20%. With renting - it’s often just a month’s rent which can be a substantial difference. You don’t need that big down payment
• Flexibility on where you can live. If you find a better place that’s chearper, you just pick up and move. Don’t have to pay 6% to realtors to sell your place.

Advantages to buying:

• You have a fixed housing expense for the next 30 years (or however long your mortgage is).
• No landlord can raise your cost of living there.
• Every single month when you make a payment to the mortgage company, you are building equity in that house. So not all of that payment is a sunk cost like it is when you rent. It’s a form of forced savings.
• You get to make the house your own and nobody can kick you out.
• Homeowners can take tax deductions on the interest they pay toward the house. They can also take tax deductions for certain energy improvements made to the house.
• If you tire of the house, you can rent it out and possibly turn it into a side hustle.
• Ways people make money when buying:
  • Equity build up
  • House appreciation (3% annually on average)

Main takeaway: Given that the money you’re putting into buying a house often either improves the home and it’s value or equity - it’s generally a better idea to buy rather than rent. Buying almost always increases your net worth faster than renting (especially in a low interest rate environment).

Hops Showdown:

Scott: Evolution Craft Brewing, Salisbury, MD, Pine'Hop'Le Pineapple IPA, Score: 81

Lance: Coast Brewing Co., North Charleston, SC, Hop Art IPA, Score: 87