Dude, your first sentence "This guy's scenario is unrealistic" seemed like a pretty blanket statement to me. Sorry for misinterpreting. FYI, there are tons of people on this board not living in Houston, or even Texas.
If you merely bought the house, didn't live in it or rent it and sold it after 30 years, that would be an apt comparison.
I'm just saying what my expectations are with my home. I didn't say people can't do it. I just wouldn't ever expect to purchase a house and make money on it in the long run after all the expenses associated with owning it.
Did you not see the house you linked was 3300 a month for an 898k home? That's a bit of generous rounding if you wanted to make it match the video's scenario. The funny thing is, if you look at the home's value, you can see its sales history: 01/05/1996 Sold $275,000 02/06/2003 Sold $505,000 (+230k) 09/09/2013 Est $898,000 (+393k) So if the owner were to sell it now and get the estimated value, he would net a $393,000 profit over the past 10 years. So he would have made about 39k a year off this investment, which is a pretty nice return that can cover your interest and tax costs. As much as the video would like you think this isn't the case, it's just a matter of being able to invest properly. Don't buy in an area on its way down, don't panic if the market tanks, etc etc. Houses can be just as volatile as other investments, you just have to be smart enough to play the market properly.
this is what i'm getting at. home ownership has its place and serves its needs but from a purely monetary asset as a primary residence, it doesn't provide a good return. every cost that affects your bottom line should be considered. homes have heavy transaction, carrying, hidden, and indirect costs: opportunity costs, real estate commissions, closing costs, lawn maintenance, furnishings, upkeep, insurance, repair, higher utilities (in most cases), longer commutes from work (in most cases) which means more maintenance and gas for your cars, tolls, etc. you can't just subtract your sale price from your purchase price.
That's a disingenuous comparison though if you're comparing someone's 3000 sq ft house to your 1000 sq ft apartment. If you're comparing buying a 3000 sq ft house to renting the same 3000 sq ft house then the lawn maintenance, furnishings, utilities, small item upkeep, gas, car repair, etc are the same. Yes there are opportunity costs, big item upkeep, insurance, etc but your mortgage is lower than what you're renting out at to cover this.
You seem to be comparing apartment with house and in a big city. That isn't apples to apples. Rent is designed to cover the cost of mortgage, insurance, taxes, repairs & maintenance. So you generally are paying for those either way. You can buy a house with minimal closing costs. Selling is expensive if you use a realtor (5% is common).
I didnt read through the comments, but I will say this...that CD rate is completely false. To open my 2nd practice, I took a loan from BoA. They required me to buy a CD for 20k, as collateral. My rate is 0.25% on the CD. Current rates for a CD are 0.14%. In other words, dont waste your time putting money into a CD bc it's not worth it.
I could not rent an equivalent house for less than my mortgage payment. My house has increased in value by about 80% since we bought it (about 10 years). Why would I rent?
That's zillow's estimated rental rate. The actual rent it is on the market for is $2,995. Anyway, I was mainly just countering your statement that those numbers are unrealistic, and then seemed to try to prove that by saying look here, you'll pay 3k in rent for a house that is only 300k here in Houston. My example after a quick one minute search on Zillow seemed to be more comparable to what the video is trying to convey (the video maker's experience in Silicon Valley) than your example of a 300k house in Houston renting for $3k. Again, I misinterpreted your post as a blanket dismissive statement of the video.
I put together this spreadsheet comparing renting vs owning the same house in Houston. I'm sure I'm missing some math so please let me know and I'll fix it. But basically you can see that the monthly cost of renting and buying is basically a wash. But you have to put a down payment on the house to buy it in the first place so that's the opportunity costs. That money could have been used to invest. That's fine. But the house also appreciates, although at a lower rate than you would gain in the investment market, the entire value of the house appreciates and not just the 20%. From my chart you would come out ahead even if the house appreciated with just 3% with inflation. I have a sneaking feeling my math is messed up somewhere so someone point it out. Spoiler
Did you see the spreadsheet I posted earlier (from Khan Academy)? It kind of already does a lot of that (plus some other things), and you just have to put in the basic variables (purchase price, interest rate, maintenance, HOAs, etc.). edit: I think the numbers show similar results in that spreadsheet model too though, so your math doesn't seem too far off.
I think the video was meant to be more general than asking whether white lightening should rent or buy. One out of every 4 homeowners are still underwater. Just saying there are millions of people that have the exact opposite experience with their home purchase as you.
Whoa. Reading comprehension problem here. I missed that totally and would have saved me some trouble. lol. Thanks.
