Investor · Las Vegas, NV · Member since 2020 · 153 posts · 136 votes
“Live where you rent. Rent what you own.”
I’m sure many of you have heard Grant Cardone say this. I’m curious if anyone has applied it.
My wife and I own investment properties and had our minds set on purchasing our own primary residence before end of 2021. But after we dove into this theory, it has us second-guessing what we want to do.
The evidence is clear that owning your home is a bad “investment.” All expenses, no income. Big liability, not an asset. It’s wiser to take that money we’d use for a down payment and acquire more real estate.
But is everything about money? Even knowing that it doesn’t make fiscal sense to own where you live, is it smart to buy a home because you want a place where you can decorate it how you want to, put holes in the wall where you want to, and not worry about a lease ending every few years?
I understand all of this comes down what my wife and I get aligned on. It’s ALL we’re talking about this weekend 😂
Just curious to see if other investors rent their primary residence and your experiences. TIA 🤞🏽
In my area it's quite a bit cheaper to own than to rent. That's why rental properties make good money. I also want to keep my kids in the same school so I don't move around.
GC is entertaining, but you have to remember he has an agenda.
I could get into the anecdotal data of how our triplex allows us to afford more home than we could ever afford to rent in a VHCOL city. But at a very basic level, aren't all of us here banking on the fact that it costs more to rent than to own? If the mortgage cost for any of our investment properties is more than rents for that area, we don't buy it.
For what we do to work, you have to have rent higher than the mortgage. For many people, rent is temporary while they are starting out or saving for a down payment to buy their own home for that exact reason (mortgage is less than rent). However, there is a new group of people who would rather rent long term instead of buying.
I purchased a new, larger home in 2011 that I didn't necessarily need. My current home was paid for and at 2200 sq, ft., big enough for my wife and myself and our 1 remaining child. My new home was nearly 7,000 square feet and due to the GFC a bargain. The current owner had to bring nearly 250k to the closing table due to being upside down.
Fast forward 10 years later and the house has recovered it's pre 2008 value and it's fully paid off. May not be the best investment, but still a really good one.
I also managed to acquire about a 130 doors during the GFC so I don't think your choice has to be one or the other. You can definitely own your own home and turn it into your dream house while you turn your real estate investment portfolio into your dream investment.
I rent where I live to because it's so expensive in California and I move every few years with my projects. I would definitely consider owning my primary, but it's not an available option for me as I chose location and living on the beach for a premium for awhile at this time in my life.
Make sense provided you are enjoying yourself and happy with your decision.
@Juan V Lopez in the market I live in it was cheaper to rent based on the value I get from renting. I don’t have to mow the lawn, or make any repairs. I get a lot of my time back by not owning a home. I can use that time and money to concentrate on growing my real estate business.
Also I am not locked in on a property and have more freedom to pick up and leave. Of course with a home you can always sell it but, that process is time consuming. With a rental you can be out of it a lot more quickly.
I will say this about Cardone. The man is worshipped by many but 99% of that crowd is very early into their financial life, have limited financial education, are at the lower end of the net worth totem pole, are quite naïve about finance in general.
If you are a more educated, successful and sophisticated investor, he will likely not get your respect and will fit right into the used car salesman type personality.
I used to be a devoted advocate of "don't pay your landlords mortgage!".....and then I bought 20+ buildings (100+ units) and started several businesses around them.
Now my mindset has shifted...kind of. I own and live in my current house. We also travel during the winter (travel nursing) and stay in apartments/condos/airbnbs where everything is handled. I get to see both worlds.
Most of the time I wish that someone else was responsible for repairs, lawn, snow, ect. It's so much easier. No managing contractors or wasting time troubleshooting "easy problems". You also don't have those strange nagging urges to do unnecessary upgrades, renovations, and landscaping that costs a ton of money (or time) and bare (if at all) makes you any happier.
BUT.....If I didn't own, then I wouldn't have any control over the land (location) my house sits on. We live on the river on a dead end street with 7 other houses. We are 20 minutes from the city, with a store/butcher/deli 3 minutes away. There's no noise or light pollution. There's wildlife and tree's. There's instant access to fishing/kayaking/ect. Our cat prowls the area 24/7 without any fear of getting hit by cars.
AKA, we could never rent this.
I think it's entirely situational based on your location, lifestyle, family setup, ect. Yes, we spend more money and deal with more headaches by owning. Yes, we often look at renters (my tenants) with envy because they don't have to worry about any of woes that come with property ownership. But at the same time, I get to live in a pretty sweet place that creates a very peaceful lifestyle (to balance the chaos of my business life) because I put up with all that ****.
There's tradeoffs. You just have to figure out what works best for you and your family.....and live anywhere else other than California.......unless you're super rich already.
Cardone's statement is not an either or proposition, he is speaking of a singularity action that is doing BOTH, renting where you live AND owning what your renting. When you can answer how you can be your own best tenant, than your able to start seeing the potential of the financial strategy, one that is all but common knowledge to the HNW(high net worth) world.
A tip, the answer to this is also the answer to how OJ lost lawsuit for millions yet never lost a thing, legally.
Do you live to be an investor or do you invest to live? Dont listen to hucksters with podcasts and you tube channels to tell you what you should or shouldn't want or should or shouldn't do. Buy a house if you want for stability, lifestyle, schools, family etc etc. Dont if you want to relocate every 2 years or just dont want the hassle of home ownership. I can tell you this, most well off people own homes. I dont know any millionaires who are renting. I do know a lot of poor people who do. You decide.
@Mike Hern why wouldn’t you buy in California? The best appreciation historically in the nation. Also, prop 13 keeps your taxes low. I know many people that are millionaires simply because they bought a home 20 years ago.
GC built his brand on being radical in his fews - 10x everything! He is an entertainer and showman, it's like taking HGTV for real.
For most of us owning a home makes good financial sense compared to renting:
- ultra low rates
- tax write off
- exempt from captial gains - 500k, married
- principal pay down, equity
- appreciation
- potential for a HELOC (if you BRRRR rentals with cash for example)
Rent is just a consumer expense, gone. It can make sense in markets where renting is cheaper than buying, extreme expensive homes etc - but that's not most of us.
And then there is lifestyle.
Your home, your way. Part of why you REI is to fund the life you want. That includes a home that has what you want. We own a custom home, I have a gym with a sauna, a home office designed around my needs (not just a room with a laptop), and everything else is built to how we like it. I could not get that for rent and how I live is very important to me.
The whole point of investing is to enjoy life, not to live to invest.
Are there opportunities in your area to house-hack a primary residence? Walkout basement unit, garage apt, in law suite?
Now your primary/liability produces some income.
Either way Juan, a quick glance at your profile lends me to believe you will do great things either way.
Your desire to give your father more opportunities in his retirement coupled with your ultimate vision, it is a noble one. Reciprocity will be your biggest reward I believe.
Let’s also throw out there that … A doughnut shop owner…this means you probably do more by 8am than grant cardone does all day. Ha!
@Juan V Lopez I have an apartment building where I put a live in manager to manage the building. A few years ago a young newly married couple took the job. They were interested in real estate investment so I mentored them. The question came up many times of “but shouldn’t we own our own home first?” Well, I’m happy they listened to me and while living in my apt the bought two rentals with positive cash flow. When they eventually had kids and needed to move, they then bought their own home for their family.
“The American Dream” should be positive cash flow not homeownership. Who made that up anyway? Mortgage bankers, RE salespeople, etc…
OK, with my standard joke out of the way, thoughts:
1. If renting was cheaper than owning, then what most of us are doing would make no sense whatsoever, financially speaking.
2. Inflation destroys the value of fixed rate debt - or even variable rate debt, below the rate of inflation - over time, resulting in financial gains for the debtor and financial losses for the debt owner. You pay a 30 year mortgage out over 30 years, even with the front-loaded interest payments, your average payment is going to be worth anywhere from 60-100% less than the day you started. In very low interest rate environments like now, that means your "rent" payment is likely to be substantially lower than rent on day one, forget about 30 years from now.
3. Principal recapture and tax benefits provide a nominal rate of return back to the homeowner which eludes the renter.
4. The idea that homeowners pay for maintenance, repair and taxes while renters do not is laughable. All of those costs, and a profit margin if you're doing it right, are baked into the price of the rental.
5. While inflation is destroying the value of the debt you hold on that property to the debt owner, it is inflating the value of the asset that you hold, benefits all accruing to you.
I'm not saying that it never makes sense to rent your primary home; however, it rarely makes *financial* sense. If you had a job that forced constant geographic relocation, it might be a compelling reason to rent since there are up-front costs to ownership that take time to amortize (inspections, appraisals, etc). Beyond that, most other reasons are outside the scope of financial sense - you want to live in something considerably more fancy than your financial assets allow you to buy, might be a reason to rent. It's not an accident, however, that homeowners end up with far, far greater assets over any given time period than renters. I agree that everyone should consider the home in which they live a place to live first, rather than an income-producing asset. But it is a wealth-producing asset, even if it only mirrors the general rate of inflation.
Have you heard the story of the Mexican Fisherman?
This is a long answer. But I promise it will provide clarity.
"This is the story that started the “be more with less” movement for me. While I knew all work and no play wasn’t the way, I thought I would forever be stuck in the cycle of working to live. I thought I would always have a car payment, credit card debt and not enough month at the end of the money. I thought I had to work harder to make more, buy more and have more. At one time, I really thought that would make me better somehow.
This story is my inspiration to slow down, reassess, and get real about how I want to live life.
An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, “only a little while. The American then asked why didn’t he stay out longer and catch more fish? The Mexican said he had enough to support his family’s immediate needs. The American then asked, “but what do you do with the rest of your time?”
The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siestas with my wife, Maria, stroll into the village each evening where I sip wine, and play guitar with my amigos. I have a full and busy life.” The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boat, you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing, and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually New York City, where you will run your expanding enterprise.”
The Mexican fisherman asked, “But, how long will this all take?”
To which the American replied, “15 – 20 years.”
“But what then?” Asked the Mexican.
The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions!”
“Millions – then what?”
The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siestas with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."
The way I find out my correct path is this.. what is my big why? Why do I want to invest? To have financial freedom. Why do I want financial freedom? To be able to work/volunteer anywhere I want without worrying about the pay, to be able to travel wherever I want without worrying about the cost or time away from a job, to be able to help others and the planet, and to be able to have a home base that is MINE.
Do you want to invest so that you can one day have a house that is all yours? THEN DO IT NOW. You will succeed and have a plenty fruitful investing business with only consistency and systematic processes, not by denying yourself a house to play, dream, create, make love, and cultivate ritualistic health and safety. Live the life you want now and still strive for growth and change.
I’m sure many of you have heard Grant Cardone say this. I’m curious if anyone has applied it.
My wife and I own investment properties and had our minds set on purchasing our own primary residence before end of 2021. But after we dove into this theory, it has us second-guessing what we want to do.
The evidence is clear that owning your home is a bad “investment.” All expenses, no income. Big liability, not an asset. It’s wiser to take that money we’d use for a down payment and acquire more real estate.
But is everything about money? Even knowing that it doesn’t make fiscal sense to own where you live, is it smart to buy a home because you want a place where you can decorate it how you want to, put holes in the wall where you want to, and not worry about a lease ending every few years?
I understand all of this comes down what my wife and I get aligned on. It’s ALL we’re talking about this weekend 😂
Just curious to see if other investors rent their primary residence and your experiences. TIA 🤞🏽
I own and live in a quiet residential area that's just a few blocks away from one of the most metropolitan areas of Los Angeles. We can walk to many of the trendy little shops in our area. This is our dream home and our monthly P&I + property tax is much less than how much a 2br/2ba with shared walls rents for in our area. Our equity in the property has gone up a ton I'm sure... I have no idea how much, but I do know that 500K of that gain is tax free. So no, I don't follow what Grant Cardone says. Neither did my parents, who became very wealthy from their primary in South Korea.
What's the point of FI (if you call managing tenants a form of independence, that is) if you have to rent an apartment or deprive yourself all the time? I'd much rather provide a nice home for my family, buy them nice, safe cars to drive, a backyard where we can play in the grass everyday and barbeque all the time, have neighbors that have a decent amount of class and create memories in a home that your children grow up in?
@Juan V Lopez the bigger pockets CEO, Scott Trench, does this. He said that he lives in a really nice place that’s affordable to rent but not to own. I think the idea is that you can scale your quality of life without too much impact from rent while buying could be much more difficult.
He can also put the difference towards more investments.
Obviously you’re forfeiting a lot of nice owner occupied benefits, but if you weight the pros and cons then you may find one is better than the other for your needs.
I live by that. Not because Grant Cordone said it though. The variation IM familiar with is " Live where you want to live, invest where it makes senses." I rent where I live and I 11 doors and trying to acquire more.
I dont necessarily consider owning your home as a bad investment. I dont consider it an investment at all. More of a lifestyle decision.
I eventually will buy or build a home to live in. I will not see it as a real estate investment though.
Renting is good but im growing tired of pet restrictions and yard usage restrictions. For now, renting is serving my purpose.
@Mike Hern why wouldn’t you buy in California? The best appreciation historically in the nation. Also, prop 13 keeps your taxes low. I know many people that are millionaires simply because they bought a home 20 years ago.
Not sure what you mean by "low" taxes. I have taken two houses priced at $1,000,000 per Redfin. One in Torrance CA and one in Henderson NV just as an example. Time wold fail me if I went into all the comparisons obvioulsy.
$1,000,000 in Torrance - 1521 Beech Ave,Torrance, CA 90501 - 3 Beds 2 Baths 1,360 Sq Ft - Built 1927 Lot 4,275 - Prop Tax $12,696
$1,000,000 in Henderson - 1964 Larkspur Ranch Ct, Henderson, NV 89012 - 4 Beds 4.5 Baths 3,503 Sq Ft -Built 1997 Lot 8,712 - Prop Tax $ 3,636 - (1/3 the tax of CA)
The property in Henderson is 70 years newer, Nearly Three Times the size, the lot is twice the size and the taxes are 1/3 of the Torrance property.
Californians are "frog in the boiling pot" mesmerized. Over time things have degraded so much they simply don't notice.
Not to mention, the crime, the traffic, the cost of living, the cost of entering the housing market, no cash flow, and the crazy politics. The state of California taxes your wealth, lifelong no matter where you move. Look it up.
I love the California weather and the water and we just got back from Leguna Beach (which we frequent) along with Newport Beach and Santa Barbara.
But, I would not invest there. There are too many unpredicables about the future course of CA.
By the way, your appreciation and $5.00 will get you a cup of coffee. You can't eat appreciation, you can't invest appreciation, you can't guarantee that appreciation will be there next year.
@Mike Hern why wouldn’t you buy in California? The best appreciation historically in the nation. Also, prop 13 keeps your taxes low. I know many people that are millionaires simply because they bought a home 20 years ago.
Not sure what you mean by "low" taxes. I have taken two houses priced at $1,000,000 per Redfin. One in Torrance CA and one in Henderson NV just as an example. Time wold fail me if I went into all the comparisons obvioulsy.
$1,000,000 in Torrance - 1521 Beech Ave,Torrance, CA 90501 - 3 Beds 2 Baths 1,360 Sq Ft - Built 1927 Lot 4,275 - Prop Tax $12,696
$1,000,000 in Henderson - 1964 Larkspur Ranch Ct, Henderson, NV 89012 - 4 Beds 4.5 Baths 3,503 Sq Ft -Built 1997 Lot 8,712 - Prop Tax $ 3,636 - (1/3 the tax of CA)
The property in Henderson is 70 years newer, twice the size, the lot is twice the size and the taxes are 1/3 of the Torrance property.
Californians are "frog in the boiling pot" mesmerized. Over time things have degraded so much they simply don't notice.
Not to mention, the crime, the traffic, the cost of living, the cost of entering the housing market, no cash flow, and the crazy politics. The state of California taxes your wealth, lifelong no matter where you move. Look it up.
I love the California weather and the water and we just got back from Leguna Beach (which we frequent) along with Newport Beach and Santa Barbara.
But, I would not invest there. There are too many unpredicables about the future course of CA.
By the way, your appreciation and $5.00 will get you a cup of coffee. You can't eat appreciation, you can't invest appreciation, you can't guarantee that appreciation will be there next year.
Those taxes in Vegas will continue to rise as the values increase. In Torrance prop 13 keeps this from happening. I should have been more specific on what I meant by low taxes. Lower in the long run because they don’t rise proportional to the property values.
@Mike Hern why wouldn’t you buy in California? The best appreciation historically in the nation. Also, prop 13 keeps your taxes low. I know many people that are millionaires simply because they bought a home 20 years ago.
Not sure what you mean by "low" taxes. I have taken two houses priced at $1,000,000 per Redfin. One in Torrance CA and one in Henderson NV just as an example. Time wold fail me if I went into all the comparisons obvioulsy.
$1,000,000 in Torrance - 1521 Beech Ave,Torrance, CA 90501 - 3 Beds 2 Baths 1,360 Sq Ft - Built 1927 Lot 4,275 - Prop Tax $12,696
$1,000,000 in Henderson - 1964 Larkspur Ranch Ct, Henderson, NV 89012 - 4 Beds 4.5 Baths 3,503 Sq Ft -Built 1997 Lot 8,712 - Prop Tax $ 3,636 - (1/3 the tax of CA)
The property in Henderson is 70 years newer, twice the size, the lot is twice the size and the taxes are 1/3 of the Torrance property.
Californians are "frog in the boiling pot" mesmerized. Over time things have degraded so much they simply don't notice.
Not to mention, the crime, the traffic, the cost of living, the cost of entering the housing market, no cash flow, and the crazy politics. The state of California taxes your wealth, lifelong no matter where you move. Look it up.
I love the California weather and the water and we just got back from Leguna Beach (which we frequent) along with Newport Beach and Santa Barbara.
But, I would not invest there. There are too many unpredicables about the future course of CA.
By the way, your appreciation and $5.00 will get you a cup of coffee. You can't eat appreciation, you can't invest appreciation, you can't guarantee that appreciation will be there next year.
Those taxes in Vegas will continue to rise as the values increase. In Torrance prop 13 keeps this from happening. I should have been more specific on what I meant by low taxes. Lower in the long run because they don’t rise proportional to the property values.
Interesting. You focus on what Henderson Might do in the future rather than what IS happening where you invest.
I’m sure many of you have heard Grant Cardone say this. I’m curious if anyone has applied it.
My wife and I own investment properties and had our minds set on purchasing our own primary residence before end of 2021. But after we dove into this theory, it has us second-guessing what we want to do.
The evidence is clear that owning your home is a bad “investment.” All expenses, no income. Big liability, not an asset. It’s wiser to take that money we’d use for a down payment and acquire more real estate.
But is everything about money? Even knowing that it doesn’t make fiscal sense to own where you live, is it smart to buy a home because you want a place where you can decorate it how you want to, put holes in the wall where you want to, and not worry about a lease ending every few years?
I understand all of this comes down what my wife and I get aligned on. It’s ALL we’re talking about this weekend 😂
Just curious to see if other investors rent their primary residence and your experiences. TIA 🤞🏽
The gains on your primary residence are tax free if you've lived there 2 of the past 5 years.
Until that changes Grants stance on this is misguided at best and purely idiotic at worst.
Im sure there's some scenario in which it works in a few high cost of living areas in the county, but for most of America. It's terrible advice.
Mark Ferguson has debunked this statement in longer form and much more eloquently than I care to get into on the forum. Just go read some of his stuff on home ownership or follow him on Instagram, where he talks about this very stance of grants, at length.
@Mike Hern why wouldn’t you buy in California? The best appreciation historically in the nation. Also, prop 13 keeps your taxes low. I know many people that are millionaires simply because they bought a home 20 years ago.
Not sure what you mean by "low" taxes. I have taken two houses priced at $1,000,000 per Redfin. One in Torrance CA and one in Henderson NV just as an example. Time wold fail me if I went into all the comparisons obvioulsy.
$1,000,000 in Torrance - 1521 Beech Ave,Torrance, CA 90501 - 3 Beds 2 Baths 1,360 Sq Ft - Built 1927 Lot 4,275 - Prop Tax $12,696
$1,000,000 in Henderson - 1964 Larkspur Ranch Ct, Henderson, NV 89012 - 4 Beds 4.5 Baths 3,503 Sq Ft -Built 1997 Lot 8,712 - Prop Tax $ 3,636 - (1/3 the tax of CA)
The property in Henderson is 70 years newer, twice the size, the lot is twice the size and the taxes are 1/3 of the Torrance property.
Californians are "frog in the boiling pot" mesmerized. Over time things have degraded so much they simply don't notice.
Not to mention, the crime, the traffic, the cost of living, the cost of entering the housing market, no cash flow, and the crazy politics. The state of California taxes your wealth, lifelong no matter where you move. Look it up.
I love the California weather and the water and we just got back from Leguna Beach (which we frequent) along with Newport Beach and Santa Barbara.
But, I would not invest there. There are too many unpredicables about the future course of CA.
By the way, your appreciation and $5.00 will get you a cup of coffee. You can't eat appreciation, you can't invest appreciation, you can't guarantee that appreciation will be there next year.
Those taxes in Vegas will continue to rise as the values increase. In Torrance prop 13 keeps this from happening. I should have been more specific on what I meant by low taxes. Lower in the long run because they don’t rise proportional to the property values.
He doesn't get it and he never will. Prop 13 is a very foreign concept to many folks. The bottom line is that when compared to market value, it allows for Californians to pay some of the lowest property taxes in the nation.
