Buying vs Renting the home you live in? Please explain why
Hello All,
I am trying to make sense of something that keeps being brought up on numerous investment media I have listened to or watched on youtube, but I just don't understand the reason behind it that makes it better. Last night I was watching one of the latest youtube videos from Morris Investing on FIRE movement and he brought up in the live stream that it's stupid to own the place you live in, that it makes more financial sense to buy rentals and rent the place you live.
Can someone explain the math or reasoning behind this please.
Most Popular Reply
Hey - first of all - don't buy anything from Morris Invest. Look him up here in the forums and you will find out why.
There's a lot of math that goes into whether you should buy your home or not. What this is probably referring to is the RTV (rent to value). It all really comes down to opportunity costs and if you could do better investing your money out of market vs in your own home. You really have to do the math on your own individual market.
For me for instance, I live in the Bay Area where I could buy a home for $1M+ with a $5k+/month mortgage, or I could rent that same home for $4k/month. The opportunity cost is that gap in how much I'm spending on a monthly basis to buy my home (in addition to the down payment). I could get a significantly better return if I were to invest that money outside of the Bay Area and continue to rent here.
The other factors involved are how mobile you want to be. Is there any chance you want to move? Do you want to potentially be forced to incur a 5-6% agent fee when you do?
Just some things to think about.