| by Kenneth Chase | 1 comment

Is Renting Always A Waste Of Money?


– To buy or not to buy. If you rent you’re making
somebody else rich. You’re paying someone else’s mortgage. You’ve heard that growing up. Now, coming from an Asian background we always were taught at a young age you want to own your home. You want to have a roof over
your head no matter what. Now, I was born in Hong Kong. In Hong Kong, a lot of peoples dreams, their entire dream in
life is to own a home. So, should you buy or should you rent? Now, I believe it is a stupid debate. Here’s why. Because it depends on
where you are at in life. It depends on your income
and also your goal. It’s like asking well should I buy a condo
or should I buy a house? Well, it depends. Do you like garden? Do you want to have facility? Do you want to have a gym? Do you want to work out in the morning? Do you want that condo lifestyle
so it’s less maintenance? Or you want to have a place,
a garden, or something, or you want your kids
run in the background? What is it you want? So, it’s a stupid argument. I understand that buying a
home is such a major decision. It is probably the most
important investment that you will ever make in your life. So, what I want to do today in this video, today I am going to
give you some principles that will help you to make
these decisions wisely and to think about this intelligently. I’m going to share some insights with you that you won’t get anywhere else. Question number one, can
you really afford it? If you look at a lot of theses charts, you see the cost of rent
versus the cost of housing, and you can see that. If you live in any major cities you know prices of
houses are so expensive. Real estate is expensive. So, with your current income you may not be able to buy
at all and that’s okay, because it might take
you years and decades to save up enough money
just for the down-payment. And then even then it is always a stretch to make that monthly mortgage payment. Then don’t buy, rent. Question number two, is it
cheaper to rent than to buy? Take Vancouver for example. The prices of housing is so expensive. It actually costs a lot
of money to buy a home. The mortgage payment is so high. If that is the case, maybe it is better to
rent and then buy later. Now, in real estate investing let’s say as a landlord I
have a piece of property and I’m renting it out. So, if my rent that is coming in is not even enough to
cover my mortgage payment, that’s called a negative cash
flow in real estate investing. So, you look at Vancouver. A lot of houses are
actually negative cash flow. If that is the case, you calculate. If I took a mortgage, let’s say my monthly
payment would be $3500. But if I actually just
rent the same place, it may be only $2800 or even $3000. So the landlord is actually
losing money every month for you to live there. The landlord is counting
on that appreciation, but you, as a tenant, that’s
okay, you save a few dollars. Then maybe you use that
money toward something else. Maybe starting your business
or developing a side hustle. Number three, rent if you are
still earning and learning. What do I mean by that? Maybe you just graduated. Maybe you are just starting your business. You are trying to figure things out. You are trying to figure
what is your career, what is your strength, what is the ideal location
for you to prosper. You never know because
there may be an opportunity in some other cities that
you may have to move. You might have to travel. For that I recommend you to rent. Why? Because you want to be mobile,
you want to be flexible especially if you are a millennial. Save that money. Instead of using it towards a down-payment use that money to invest in yourself or if you’re an entrepreneur
and you’re starting a business, invest that in your business
so you can grow that business. As that business makes you more money, as you make more money, then you can look into buying. But for now rent if you are still earning and you are still leaning. Number four, buy if you
are stable and established. Let’s say you are close to 30 years old or you are over 30 years old and you have a good career and you have good income coming in, then you can afford to buy
a home in a good location, in a good neighborhood and
still have money leftover. You buy. Or as a couple and
you’re working together. Maybe you and your husband
or wife both have jobs or you guys are working a
business together, then you buy. You buy because you are starting a family. You want to have a place where you can see your kids grow up. Number five, buy if
you are an entrepreneur and not yet an investor. Why? Because I know you as an entrepreneur. As an entrepreneur we like to take risks. Sometimes the opportunity
is right, you bet the farm. I know you, comment below. So, what happens is a home
is not and investment. It is a saving plan for you. Think of your primary residence
as your saving account. If you look at it that way, it is a force saving plan for you. So in case your business
goes through ups and downs, you are putting money aside. You are not betting everything
you have in your business. You notice that if you
stop paying your mortgage you’ll be out on the
street very, very quickly. Somehow as an entrepreneur
you’ll be creative enough that you will find the money. Good. So that every month you are
putting money in your mortgage that is just your savings account. In case something
happens to your business, in case you experience that ups and downs, at least you put a little
bit of money aside. You build up a little bit
of equity in your business. Yes, that is a little bit of buffer. Believe me, I learned this the hard way. Entrepreneurs are sometimes
overly optimistic. We think everything is
going to be so good. Everything is going so well,
but sometimes you never know. If you are an entrepreneur, buy. Number six, buy if you are
financially successful. If you are stable and you
are financially successful yes, buy. Why? Because I believe from my own experience when you have your own home there is a psychological benefit to that. That knowing that you’ve got a place. And you can design your home
exactly the way you want just like I designed my
home exactly the way I want to maximize my productivity. At the same time it is my sanctuary. But knowing that it is not an investment. I know that it is not an investment. I don’t look at it as an investment. It is simply just my home. It is my primary residence. Now, it depends on where you are at. If you are financially successful I would recommend that
you spend no more than 20% of your net worth on
that primary residence. Now, some people may say 30%, I say 20%, ideally less than that. So, let’s say your net worth
is two million dollars. You wouldn’t spend more than
400 K on your primary residence because your home is not an investment. You use your extra money
to buy more investments, maybe invest in more properties, more real estate investments. Your primary residence
is not an investment. So, no more than 20%. If you do that, just like me
I spend a very tiny percentage of my overall net worth
for my primary residence. That is my home. I have my sauna, I have my massage chair. I have my home theater, I have my library. I have my man cave, I have my gym. I have everything in one place and I designed the ideal home for me. That is where I feel relaxed, that is where I recharge my battery so I can be more and do more. That is what I do. So, comment below. Those are the six principles when it comes to should
you buy or should you rent. So, let me know. Are you going to buy or
are you going to rent?

1 Comment

Dan Lok

Aug 8, 2018, 8:02 pm Reply

What was your biggest takeaway from
my video? Comment below.

Also, you can comment any questions
you have for me.

I might feature your question
in one of my next videos.

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Paws Not Claws

Aug 8, 2019, 1:53 pm Reply

Great video, thank you

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