To Rent or to Own

Once you leave your parents’ house (your parents were paying a mortgage), you’ll also have the opportunity to pay a mortgage. Why? Because it costs money to live indoors. Most of us want a house, but the house we choose often has very little to do with shelter and much more to do with stature. If it was shelter only, think about how much less you would actually pay?

When I say you will always pay a mortgage, you will pay your mortgage (if you own) or pay a landlord’s mortgage (if you rent). Once you pay off your mortgage, there is still a misunderstanding about being ‘debt free’. Debt free is a decision. People who borrow money because they have to, are called borrowers. People who borrow money because they choose to do so are called investors.

Example: If I buy a $400,000 house, the largest down payment I can put down is $400,000, and the least would be $0. The location, location, location is less about the house, and more about where you choose to locate your money over time. The real cost that is not seen is the impact of that $400,000 over time (I’ve talked about that ad nauseum in prior newsletters with examples). Given that I’ve had several conversations lately about renting, I wanted to provide some public resources. I’ll refer people to these PRIOR to speaking with them about renting versus owning. It is important they do some of their own work so your advice is more valuable. If they won’t take the time to explore and bring good questions, then you shouldn’t waste your time either.

Housing costs are neither good nor bad, they are just part of living, as is eating and not walking to work every day (buying a car). Remember, the car you drive is probably less about transportation and also more about stature too! There’s nothing wrong with that, but there is a stature cost worth considering. I like driving a nice car, but I am aware the car I drive is more about ‘me’ than transportation. This can be an important part of a conversation, especially for new home buyers that are stretching for housing stature instead of a housing structure.

Debt is relative to your strategy, you are not in debt if you can pay off the loan with your cash - you are an investor… buying a house is an investment as is deciding how much to locate inside the house as equity over time.

That said - Rent-vs-Own Resources I like to share:

a BORROW SMART CONCEPT
Recessions Can Help Housing

In the way that a vaccine can help the body fight off future disease, but you don’t want to die from the vaccine. The economy is slowing down… we just need it to slow down but not melt down to get interest rates lower without triggering a loss of jobs that leads to bigger problems.

Rates are moving down again, and I think it is a political hot button now. I originally felt we’d see 3-5 rate cuts this year, and still believe that to be true. In our world, the weak economy is a justification for rates to be lowered to stimulate it (low rates free up cash flow), which is great for lending and housing.

We just don’t want it to be TOO BAD as that leads to job losses, and then people can’t pay their existing mortgages. If foreclosures start and that drives down house prices, BUT in this case there is so much pent up demand, I think all that housing stock would be scooped up almost immediately, so 2025 could still be a very good year for lending, and housing if we can get through the first two quarters!

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