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Renting vs Home Ownership

Lesson 17 from: How to Retire Early: The Latte Factor

David Bach

Renting vs Home Ownership

Lesson 17 from: How to Retire Early: The Latte Factor

David Bach

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Lesson Info

17. Renting vs Home Ownership

Why is real estate one of the best investments you can make in your future? David shares benefits and advice regarding mortgages, payment plans, bubble-proofing your real estate and how to become an automatic millionaire homeowner.

Lesson Info

Renting vs Home Ownership

My belief is this You can't get rich. Renting the bulk of wealth in America today is actually in homes all across America. The bulk well, 60% of equity in America. Today's inside a house. As long as you're alive, you have to live somewhere. So you know, I am a proponent of home ownership and have been my entire life. I said, that smart investment you'll ever make is your home again. Why? As long as you're alive, you have to live somewhere. You can pay rent and make somebody else rich like the Game of Monopoly. Or you can own it, pay it down and eventually have it free and clear and have very low rent. People go on, but you'll have taxes, yet you will. Oh, but you'll have service. Yep, you will. It would be cheaper to rent, then out. No, it wouldn't be. It won't be cheaper to rent a known long term, because rents always go higher. Why do rents always go higher? Because I'm a landlord. I want you to pay my taxes, my overhead and make me rich. There's no landlord in America who says, Oh, ...

good, you're a renter. I'm in the charity business, and I want to make sure your wrenches cheaper for you. That's not how the game works. Um, this is from 2010. 10 right? People said when the recession hit that realized it would never come back. It was just over. Nobody warned on a home. I'm like, Are you kidding me? We should all action away. Like hope for the next recession caused the last recession in markets across America, homes went down 50% 50% at Florida, San Diego Vegas and I would go. You know, there's no way these real estate prices are staying down here because there are markets that you go into where you basically got the home for free because the price of the home now you're just paying for the land. There's this thing called replacement cost. What is it cost to build a new home today? What does it cost to build a new apartment? The one thing I can promise you is in 10 years it's gonna cost more, which is why housing prices long term always go up. So in 1963 the average price of a home was about $18,000. I was born in 1966. My parents first home was, like $15,000 in Oakland, California today you can't even buy a car for that, right? How many of you drove here in a car that costs more the home price back then, right, So some of you flew here. You walked her home prices today. Medium home prices were looking up to $390, now depends on where you are, because they're cheaper places in that. But some markets home prices air to 25 to 50 but this just takes everything and combines it. What do you noticed? If home prices going up long term, even when they dipped, they came back up. So homeowners are a lot wealthier than renters, and here's why. They're six primary benefits to homeownership. First of all, it's four savings. Every time you make a mortgage payment, a little bit of it's going towards principal, and you are making the forced investment to save it's leverage. Nobody buys a home typically for cash unless they're an investor. Most people buy homes and they put 20% down and they borrow 80%. Other people's money the bank gives it to you. Easiest place to borrow money is for your first home. Massive tax breaks. You get a tax deduction on the interest, but the tax deduction it matters the most. In my opinion, when you buy a home and it goes up in value, you can sell home when you're single and you can put in your pocket up to $250,000 tax free in profit. If you're married, you can put up to 1/2 a $1,000,000 in profit tax. Three. It's the Onley investment vehicle You can do that in, and you could do it more than once. You can also buy, invest in property and basically never pay taxes. You might invest in property. And when you want to sell to buy something else, you could do a 10 31 exchange and prolong paying taxes really indefinitely until you die. You've got pride of ownership, and really real estate proves to be a great investment. It just does, and people who tell you doesn't They're just they're not being honest. Homeowners are worth statistically way more than renters, depending on the time of marketplace in the year, home arms were somewhere between 31 to 46 times more than renters. Call it in the middle. Roughly 41 time baron. Right now you have the average Rencher worth $5000 the average homeowner worth over 172,000. It's huge. Now let me show you how to get rich faster and real estate by a home and paid off early. This is the biweekly mortgage secret. So if you've got a home, I'm fine with a person getting a 30 year mortgage because you can lock in a low rate. But if you're in a home with a $300,000 mortgage and it's $15 a month, you split that payment in half and you go 50 every two weeks. You will save $40,000 pay that home five years earlier just by taking your payment splitting in half every two weeks. You're looking me like why, which is good cause you're paying attention and you're thinking the reason is wise that what happens is you make one little extra payment a year, and that little extra payment a year is paying the principal down faster. Another way to do this is just make one extra payment a year, but people don't so bi weekly payment plans air great because most people are paid twice a year twice a month, and you can set this up with the bank and its A force way to pay your mortgage down early. Now if you want to be aggressive and retire early, uh, there's nothing better than a 15 year mortgage because you'll be on a dead and 15 years. So take that a san example that mortgage and you will save $161,000 inches payments. So year mortgage. The rates lower. Now here's the thing. The payments are a lot higher. So 30 year mortgage again. The example is 300, payments $21, versus she just stayed over here versus 15th out 1520. So to pay this mortgage off 15 years faster and save $161,000 is a little over $600 a month, which is $20 a day. That's a big way to think about these things. Like if I could save an extra $20 a day on a typical American mortgage. I could be out of debt 15 years sooner. I would save $161,000 in interest payments. The common thing I've seen is that people who retire early, it's because their mortgage is paid off. People who were doing their fifties because their mortgage is paid off, so benefits of a biweekly mortgage plan saves you a fortune. Everything just basically told you it's a force way to save money. Get your cash flow easier, its automated. Which takes me to How do you bubble prove your real estate? We've had an up cycle in real estate, but a lot of people got hurt in last recession. Here's how you bubble proof your real estate. Make sure you can afford your mortgage. Borrow less in the bank will lend you lock your rates. Rates super low Right now. Locket rates don't have adjustable rate mortgages. Avoid interest only. Don't do interest. Only avoid home equity. Don't use home equity. Don't pull home equity out. Speak credit cards. You'll just pulled the equity out of your house. Pay off your credit cards, and five years later you'll be right back into credit card debt. Call your mortgage company now. See if you can read financial rates even lower. Don't use credit cards. Go from home ownership. Automatic Familiar? Here's what you do you buy home so the McIntyre's did in the automatic millionaire book. You buy a home, you live in it. You pay the debt down earlier as the payments get lower and lower lower. You go by another home, you rent your home toe a renter and you let them pay the restroom mortgage off. You pull a little equity out that first health and you buy another home, but you'll buy a bigger house. You buy the sand size home and then you pay that debt off earlier before you know what you've turned around in your in your fifties and your own one home free and clear and you have a second home almost paid off. It's exactly the McIntyre's did in the automatic familiar book. This is what Zoe learns how to do in the latter factor. How we say it's like monopoly. Only you don't need four green homes, three woodwork, three homes over a lifetime to Did you rent one that you live in? This paid off that works just great

Ratings and Reviews

Ling Fan
 

Great class! Concise and powerful! Wish I knew this 10 years ago.

Kennie Johnson
 

Very helpful and inspiring

Carlos Figueiredo
 

I thoroughly enjoyed the course love it!

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