Rent vs Own – What You Really Should Be Doing Now

Patriot Nation, I'm laying it on the line today. There is no debate between the concepts of renting versus owning. I'll get right straight to the bottom line. If you can possibly own immediately, you need to own immediately. You do not wait for the perfect interest rate environment. You do not wait for housing prices to come down. You do not wait for more closing cost coverage. All these things are maybe good to think about in the short run, but I'm telling you right now, in the long run, all they do is keep you from building significant wealth over time. I'm going to prove all that in this video, and I really want you to pay attention. Going to pass this video along to friends and family because it's a big it's a good topic. And uh let's kick off this rodeo right now, folks. I'm Kevin Fagan. on the mortgage patriot on your side, nestled here in the Hill Country above San Antonio, Texas, serving all you proud Texans and all you great folks all around the country. So, as always, a very important topic and I'm very passionate about this one because I just see people putting off and putting off and putting off the concept of home ownership because they're waiting for a rates to come down. They want housing prices to come down. They need more cash to close. They need something. But all I all I can tell you is after 30 years of watching this in my personal life, in my friends and family's life, if you don't own a home at some point, you are so far behind the curve that you may not be able to make up for that lost time come the senior years where you're going to need some nest egg. So, as always, if you hit the like and subscribe below, uh that really helps me with my content and brings my my videos to the forefront. I've got a lot of great videos, as you can see here. I talk about lowest ways to get a your cash to close down when you want to buy a home. I've got concepts on renovation loans, pretty much all everything across the board. So, spend a lot of time in my video library. You're going to learn a lot. But, let's talk about now owning versus renting because there's really no comparison when you really get down to it. Let me start off with some empirical data regarding wealth since I mentioned wealth uh building when you own. Okay, so here's a chart 1989 and it goes all the way to 2022. So obviously it's two or three years old, but the trend line is going to be the same. In fact, it's going to be even bigger. So it starts off in 1989. The difference between the wealth, the family wealth or individual wealth of a renter versus a homeowner. And in 1989, that wealth was approximately $200,000 for a renter versus about a little over 500,000 on a homeowner. So there's about a $300,000 wealth gap. In other words, a homeowner with about $300,000 on average had more wealth than a renter. As we go along the graph all the way to 2022, look how that spread has gotten bigger. So now the wealth gap between somebody who rents and owns is over a million dollars. Notice that the renters's wealth hasn't climbed that much. It's gone from about 200 to about 400,000. And on the ownership side though, we've gone from about 500 to looks like about a million4. So that gap now is a million dollar gap. The wealth difference between just owning and renting. This is just empirical doubters from the U consumer finance. Uh but that's going to be the case. The longer you hold a property, the more and the bigger uh your wealth is going to be. So, let's uh let's go into some quick, you know, overview of some benefits maybe of renting, but then otherwise, I'm going to show you uh real life numbers of what you can expect in terms of wealth building and ownership benefits by buying a home. Okay, let's get into the few benefits that a renter has in the short term over home ownership. And I'm not uh pulling any punches here. I get it that obviously if you're needing to be moving in 6 months then you don't want to be buying a home and then moving in 6 months later. I get that. Obviously if you're going to be moving in a year should you be buying a home now? The answer is probably not as well. But somewhere between one and two years it's going to make sense to to buy a home. Certainly after two years there's no question that you want to you know in other words if you're going to be moving in two years you know that for a fact. The question is do you buy or do you sell? the answer is going to be you're going to want to own m at a year and a half that's probably going to be your choice but I I think ownership is going to be better anything inside of a year yeah you're probably going to want to rent so those two big advantages are flexibility in renting obviously your terms of your lease can vary 3 months 6 months 12 months you don't have that flexibility obviously when you're buying a home you buy a home that's pretty much it right and then the other big one of course is lack of maintenance you know something breaks you're typically not having to fix that as a renter as a homeowner of course you're subject to those repairs. But as a way of mitigating those repair work, uh when you first buy a home, you want to be with a good agent like myself or somebody that I can point you in front of, you're going to be wanting to do what they call a home warranty. A lot of times the seller will pay for this. It cost about $500 to $600 for the first year of a warranty where if something breaks down, usually the internal systems like appliances, AC, water, and electrical, those big your big systems. If any of those break down, you're covered. So, I mean, you do have a small deductible, maybe $100. But again, it's not perfectly true, in other words, to say that as a homeowner, you're going to be paying for all your repairs. That's not true if you're covered with insurance, just like any other insurance coverage. Okay, folks, let's get right into the meat of this. Uh, why would you want to own after even a year's time versus renting? And the answer is going to be appreciation of your home value. Homes appreciate over time no matter what. And even if they didn't, even if they stayed the same, you bought a say a $300,000 house and it stayed the same for 30 years, you're still paying that note down, assuming you financed it down to zero. So you have $300,000 at the end of 30-year period. Whereas renting, of course, all your rents do is what? All they've done is go up over time, and that's all they will do over time because of inflation and other factors. So you've got to be able to own as quick as possible. Now, let's take an example. We're going to run this example all the way through the rest of the video. We're going to talk about two individuals and they both make the same amount of money, $72,000 a year or $6,000 a month. They can capture, they can buy at least in San Antonio, Texas today, a $275,000 home. You can see a picture of one right here. That home sells for $275,000 today in San Antonio, Texas. the payment on that if you put down three and a half% with an FHA loan, okay, at a 6% rate, which was about where we are now, given property taxes, levels, and so forth in the in the area, is $2,365. The rent on that property is about $2,150. So, individual A is the renter, and he rents for $2,150. Remember that. Individual B is the owner and he buys this house for $275,000 and he pays $2,365 a month. So, let's run this example all the way through showing all the the growth and the benefits so forth. Okay, so let's stay with this example, get a little dig a little deeper as we go from a one to a three-year horizon. You can either rent this property for 2150 or you can buy it at $275,000 paying 2365. That's where we are right now. So, let's make one assumption, one more additional assumption. the the appreciation on this house and the appreciation of your rent are both going to go up by 4% per year and that's about standard. In other words, if you sign a rent, you you can expect rental hikes of about 4% per year just till the end of time, right? And historically, home prices have been going up about 4%. Lately, been going up much more than that, but let's stay to 4%. So, here we are. After year 1, your $2150 rent has now turned into what? Well, it's turned into $2,236. Not so good. But you wanted to wait a year to buy that same home. Well, if that price of that $275,000 home appreciates 4%, you can't buy for $275 the next year. You can you have to buy for $286,000. It's gone up $11,000. In your mindset of saying, "Well, I'm just going to wait a year, see what happens. Maybe houses prices go down. Well, what if they don't? In our example, they've gone up $11,000 and now you're stuck paying rent of almost uh of about $86 more than you were prior. Not so good. So, let's keep going along this this little ride here. Uh after the first year, you decide to rent again. So, at the end of that second year with 4% appreciation now, your rent, which started out at 2150, is now 2325. $2,325. almost as much as your mortgage payment would have been. And the person that bought that house, which is appreciated another 4%, is now worth from 275 to 286 now to $297,000. So if you wanted to buy that same home after 2 years of indecision, it's going to cost you not 275, but $297,000. And again, if you don't, your rent now is as much as the mortgage payment was to begin with virtually. So, you're losing out if you don't jump on this bandwagon right away. And you might be saying, "Hey, Kevin, well, I don't have the money to buy a home right now." And that's the big advantage maybe of renting. Well, not so much. Let's talk about that. Most situations require, you know, you got to pay rent up front and you got to pay a first month's deposit. So, you basically you're paying two rental payments up front, right? And in our example, 2150 times two, that's $4,300. But if you bought the $275,000 home with the pro with the aid of and the advantages of seller concessions and down payment assistance, of which I have lots of videos. Okay, here's one right here. How to buy a $300,000 home for $1,000 total. Okay, that's my one of my most popular videos. I break it all down using down payment assistance and seller concessions. But getting back to our example, buying a $275,000 house, on average, I can get the cash to close down to $8,000 or lower using seller concessions and down payment assistance. So renting, you're coming out of pocket for $4,300 as in two months rent or buying this $275,000 house, you're coming out of pocket for 8,000 or a little bit less. So that difference is not a whole lot, friends. You've got to own as soon as you can because the numbers will always work in your favor. Always. Let me show you one more quick set of numbers. Let's look at the 30-year horizon. This assumes the worst case obviously scenario, but I've seen this happen that people keep waiting. I'm waiting for the market to come down. I'm waiting for the market to come down. I'm waiting for interest rates to come down. They do not own. So, they go five years, 10 years, 15. Next thing I know, they're in their 50s. They still have not owned a home. and they've gone 30 years now and they're renting. I can tell you I'm old enough to know that I used to pay $300 for rent way back in the late7s and here we are. We know where they are now, right? So, if we take that $2,150 in our example as a renter and we go out for 30 years at 4% per year, how much rent are they paying up at in year 30? Would you believe they're paying $6,75 per month? That's with the 4% increase appreciation and rental amounts and that's going to happen. And of course, how much equity have you built along the way? Zero. The answer is obviously a fat zero. You have zero wealth. All you're doing is making somebody else wealthy, right? Individual B who bought that $275,000 house in our example 30 years ago. We go forward 4% per year. That house is now worth basically $892,000. And guess what? Their mortgage is now zero. They paid it off in 30 years. So they have now accumulated just on their own without putting monies into you know side accounts, investment accounts, crypto, whatever your your thing is, just in their house alone. That's going to be your greatest asset in the house alone. They've generated almost $900,000 worth of of family wealth. Whereas the renter, of course, zero. You've got to jump on the house ownership train. I'm telling you. And with my help, you can. I've got some videos showing you what to do, what to avoid, how to lower your cash to close, all the things you need to do to get in if you're in if your credit scores are low. I can help you with that. Let me, the mortgage patriot, build a game plan to to get on and we'll get you set up and ready to own a house within 3 to six months. Okay, I'm hoping this video helps you and or your friends if you pass it along. I'm Kevin Fagen, the mortgage patriot. Make it a great one. END OF TRANSCRIPT