WEBVTT - Renting vs Buying a Home #015 0:00:00.040 --> 0:00:02.720 Welcome to How the Money. I'm Joel and I'm Matt. 0:00:03.080 --> 0:00:17.799 Today we're talking about renting versus buying a home. So 0:00:17.880 --> 0:00:20.319 today on the show, we're gonna challenge the assumptions that 0:00:20.360 --> 0:00:22.640 buying a home is a good quote unquote investment. We're 0:00:22.680 --> 0:00:24.440 going to talk about things that you need to consider 0:00:24.520 --> 0:00:27.120 before buying a home, the pros of renting, the pros 0:00:27.120 --> 0:00:30.639 of buying, and give our final thoughts on what's better 0:00:30.760 --> 0:00:33.440 renting or buying. Yeah, Joel, I think this will be 0:00:33.520 --> 0:00:36.000 a good conversation first of all, because I have good, 0:00:36.040 --> 0:00:38.520 like fond memories of renting, so just like the emotions 0:00:38.680 --> 0:00:41.800 that I have towards it are negative. Yeah, I don't 0:00:41.800 --> 0:00:44.440 have the most fond memories of renting. I think it 0:00:44.520 --> 0:00:47.199 was kind of fun when you're younger, living with you know, 0:00:47.280 --> 0:00:49.680 like three dudes in a two bedroom of oar bet 0:00:49.760 --> 0:00:52.680 or something like that. Yeah, not my favorite times. How 0:00:52.760 --> 0:00:55.240 much for owning a home right now, and just kind 0:00:55.240 --> 0:00:56.640 of the stage of life. I'man I think it's way 0:00:56.680 --> 0:00:59.320 more fun to be in your thirties than it is 0:00:59.360 --> 0:01:01.400 to be in your twenties in a lot of ways. 0:01:02.120 --> 0:01:03.880 That being said, I think there are so many good 0:01:03.880 --> 0:01:05.720 reasons to be a renter, and we'll get into those 0:01:05.720 --> 0:01:07.080 in just a minute. I wanted to let you know, 0:01:07.640 --> 0:01:10.240 speaking of running, we have rental homes and last night 0:01:10.440 --> 0:01:12.679 I had a fridge crap out at one of my 0:01:12.680 --> 0:01:14.800 rental homes and so I had to replace it. So 0:01:14.840 --> 0:01:17.000 we're trying to get me to it. I know. I 0:01:17.080 --> 0:01:18.600 was sparking up the tree to see if you wanted 0:01:18.600 --> 0:01:21.040 to help. Got another friend, Colin, to help me move 0:01:21.040 --> 0:01:24.520 a fridge. But he's got muscles too, so that's good. Yeah, 0:01:24.520 --> 0:01:26.399 he's stronger than you are, so that's that's why I 0:01:26.400 --> 0:01:28.960 reached out to him. I got the best deal I 0:01:29.160 --> 0:01:31.840 looked on Craigslist, which is we talked about, you know, 0:01:32.040 --> 0:01:35.319 where to buy certain things. It's great for appliances. Craigslist 0:01:35.360 --> 0:01:37.720 is an awesome place to buy appliances. Uh you know, 0:01:37.760 --> 0:01:40.560 it's much harder to find stuff on Facebook or whatever, 0:01:40.600 --> 0:01:43.040 but Craigslist is an awesome place for that. I don't 0:01:43.040 --> 0:01:45.520 want to buy your fridge on eBay, have a ship 0:01:45.560 --> 0:01:47.720 to you. The shipping would have cost more than the 0:01:47.720 --> 0:01:51.320 fridge because I paid seventy five dollars that is for 0:01:51.360 --> 0:01:54.240 a six year old fridge. YEP, So I think this 0:01:54.280 --> 0:01:56.559 thing will be nice. I loaded it in the back 0:01:57.200 --> 0:02:00.960 of the mans to five strap strip it down, I 0:02:01.000 --> 0:02:03.800 mean not all the way, but well enough. Yeah, and 0:02:03.840 --> 0:02:06.520 I bought it from another dude named Joel. Oh really 0:02:06.960 --> 0:02:09.000 around there. So I met a new neighbor. I got 0:02:09.000 --> 0:02:11.360 a seventy five dollar fridge in the neighborhood close by 0:02:11.480 --> 0:02:14.040 r Yeah. So he was literally like three or four 0:02:14.080 --> 0:02:16.440 blocks away from me. Oh no way. Yeah, that's awesome. 0:02:16.520 --> 0:02:18.720 So it's kind of fun to meet a new neighbor, 0:02:18.840 --> 0:02:21.440 get a seventy five dollar fridge, hung out with Colin, 0:02:21.600 --> 0:02:24.040 you know. Yeah, so it was good times. I live 0:02:24.080 --> 0:02:26.720 being thrifty man, Yeah I did. I did too. That 0:02:26.800 --> 0:02:28.960 being said, the last fridge that I bought, I didn't 0:02:28.960 --> 0:02:32.280 have time to to scour Craigslist, and so I just 0:02:32.360 --> 0:02:36.720 went to Low's, our local hardware store, and just kind 0:02:36.720 --> 0:02:38.720 of got a cheaper model there. It was I think 0:02:38.720 --> 0:02:42.959 it's everybody's local hardware store. Yeah. Uh, but this is 0:02:43.000 --> 0:02:44.920 before we had a larger vehicle, and when all we 0:02:44.960 --> 0:02:48.079 had was our Vida Volkswagen. But we had the bars 0:02:48.080 --> 0:02:51.760 on top, like uh, what is it totally rack? You know, 0:02:51.840 --> 0:02:53.919 like the bars that go across the top make you 0:02:53.960 --> 0:02:58.200 look like you're like an outdoorsman, but in our case, 0:02:58.720 --> 0:03:02.720 that's where I put my fridge, so literally yourself. Yeah, 0:03:02.720 --> 0:03:04.680 the the guy, the guy at low it's helping me 0:03:04.720 --> 0:03:06.280 to get it up there, but he's just like, wait, 0:03:06.320 --> 0:03:09.280 we're putting this whear because it wouldn't fit inside the 0:03:09.320 --> 0:03:12.720 back of the wagon. And yeah, man, through a fridge 0:03:13.040 --> 0:03:15.200 up on top of our volks wagon, strapped it down 0:03:15.400 --> 0:03:17.480 and drove it back to the to Uh. It was 0:03:17.480 --> 0:03:19.560 actually the house that we're moving out of that we 0:03:19.560 --> 0:03:22.240 were converting into a rental because the fridge that was 0:03:22.280 --> 0:03:26.440 there was in poor, poor shape. So and by the way, 0:03:26.480 --> 0:03:28.760 if you want to know why that's the best method 0:03:29.040 --> 0:03:32.320 of starting owning rental homes, moving out of it and 0:03:32.360 --> 0:03:34.880 running that out, go back and listen to our Investment 0:03:34.880 --> 0:03:38.400 Property Basics episode and you'll find out why. Oh and man, 0:03:38.440 --> 0:03:40.240 I wanted to tell you one more thing, Emily and 0:03:40.280 --> 0:03:43.600 I did the budget right before biking over here tonight 0:03:43.600 --> 0:03:45.040 to do this episode. What do you mean when you 0:03:45.080 --> 0:03:46.640 say when you say you did you did the budget? 0:03:46.840 --> 0:03:50.560 Are you recapping the month essentially? And how did things go? Yeah? 0:03:50.600 --> 0:03:53.720 Where did we overspend? Underspand how can we do better? 0:03:53.760 --> 0:03:57.720 Where did the actual inside of those specific categories where 0:03:57.720 --> 0:03:59.920 did the money go? And that helps us know better, 0:04:00.080 --> 0:04:01.720 you know, was it a one time thing? I guess. 0:04:01.720 --> 0:04:03.520 I was just check. I was wondering if you were 0:04:03.640 --> 0:04:06.800 setting a new budget for this coming month, because for us, 0:04:06.800 --> 0:04:09.200 it's basically the same budget from last month, like we 0:04:09.280 --> 0:04:11.400 al really changed things. No, we're just checking in. Yeah, 0:04:11.640 --> 0:04:13.760 where we're at the recap. But I want to say, 0:04:14.120 --> 0:04:16.400 it looks like I'm retiring after this episode because I'm 0:04:16.440 --> 0:04:20.040 that filthy rich. Congratulations, yes, thank you, and so podcast listeners, 0:04:20.080 --> 0:04:22.320 I'm sorry we won't be back next week. No, I guest, digest, 0:04:22.320 --> 0:04:24.919 I stick around. Let's stick around. Please, even if you 0:04:24.920 --> 0:04:27.200 were retiring, this is I mean, let's be honest, this 0:04:27.240 --> 0:04:28.919 is what you'd want to be doing. So this is 0:04:29.400 --> 0:04:31.320 having a good time because we get to drink beer. 0:04:31.360 --> 0:04:34.039 Because we get to drink beer. Yeah, and so today's beer, Matt, 0:04:34.080 --> 0:04:37.120 you picked this up for us. It's from a local 0:04:37.160 --> 0:04:40.760 brewery that we're huge fans of, huge fans of Wrecking 0:04:40.800 --> 0:04:44.200 Bar Brewpub. Honestly, Matt, if I had to say a 0:04:44.400 --> 0:04:46.520 gun to my head, what's the best brewery in Georgia 0:04:46.640 --> 0:04:50.120 right now? Wrecking Bar Brewpub? I think so. I think so, man, 0:04:50.560 --> 0:04:52.760 I was, Yeah, that's they're I mean, they're rushing it 0:04:52.880 --> 0:04:55.040 right now them, I'll be honest with you, and we 0:04:55.120 --> 0:04:56.560 might have one of these beers pretty seen to you. 0:04:56.560 --> 0:05:00.560 But Monday Night, yeah, they have been stepping up their 0:05:00.600 --> 0:05:03.240 game and making some incredible stuff too. Those are literally 0:05:03.279 --> 0:05:05.039 that the two places I would tell someone if they're 0:05:05.040 --> 0:05:07.560 coming into Atlanta and they wanted to find out where 0:05:07.600 --> 0:05:11.159 to get good beers, Wrecking Bar and Monday Night, go 0:05:11.240 --> 0:05:13.200 to those two places and you will have awesome beers 0:05:13.240 --> 0:05:16.360 and awesome experience. Yeah, Wrecking Bar has it's a restaurant 0:05:16.400 --> 0:05:18.560 as well, and they've got a farm, uh not that 0:05:18.640 --> 0:05:21.440 far from Atlanta and do Their food is so good too. 0:05:21.560 --> 0:05:23.440 That's why Kate and I both love going there. We 0:05:23.440 --> 0:05:25.640 can get just amazing food and at the same time 0:05:25.680 --> 0:05:29.120 they're making some awesome, awesome beers. They're doing such a 0:05:29.120 --> 0:05:31.279 good job with all the beers too. It's not like 0:05:31.279 --> 0:05:33.920 they're only specializing in amazing I pa is like, we're 0:05:33.920 --> 0:05:36.440 gonna have tonight. That Russian Imperial style that they have 0:05:36.880 --> 0:05:39.280 that they put out every month. It's like the Mexican version. 0:05:39.360 --> 0:05:41.200 So it's got the peppers in it. I guess that's 0:05:41.240 --> 0:05:45.080 mind blowing. And then they've got all these different farm arritles, 0:05:45.120 --> 0:05:48.200 their different stays ons and and obviously all a lot 0:05:48.200 --> 0:05:50.280 of their I pas are fantastic too. So yeah, that 0:05:50.360 --> 0:05:53.839 stout I think is probably I think that's like one 0:05:53.880 --> 0:05:56.120 of the best deprobably the best out in Georgia. It's 0:05:56.120 --> 0:05:57.800 one of the best outs I've ever had. Yeah, and 0:05:57.800 --> 0:06:02.479 it's phenomenal every single yeah. So yeah, So if you're 0:06:02.600 --> 0:06:04.320 coming to Atlanta, and we need to write a post 0:06:04.360 --> 0:06:06.600 on this at some point on the site, just introducing 0:06:06.600 --> 0:06:08.479 people to our town and where do you like, like 0:06:08.520 --> 0:06:12.320 a local Georgia or a beer guide? Yep, alright, righte 0:06:12.320 --> 0:06:14.080 it up, Joe done? Can you do that? All right? 0:06:14.080 --> 0:06:19.760 So let's crack this one cause I'm thirsty. Nice it's 0:06:19.760 --> 0:06:23.480 got that deeper crack. These are sixty ounce cans for 0:06:23.839 --> 0:06:25.760 the trained listener out there. You may have picked up 0:06:25.760 --> 0:06:28.240 on that, but not as deep as the crowler that 0:06:28.279 --> 0:06:30.640 we had. That that's like opening up. It's like a 0:06:30.640 --> 0:06:34.960 shotgun drum of oil. So we didn't even introduce this style. 0:06:35.480 --> 0:06:38.200 But this is the Juice Bar Pale Ale Yeah, and 0:06:38.200 --> 0:06:41.000 the and Wrecking Bar has this essentially this juice series 0:06:41.040 --> 0:06:43.040 where pretty much every time you go the B series 0:06:43.160 --> 0:06:45.400 Juice Bar series, and they essentially every time you go 0:06:45.440 --> 0:06:47.719 they have a pale ale or an I p A 0:06:48.240 --> 0:06:50.600 or double I p A on tap that's part of 0:06:50.640 --> 0:06:55.200 this series. And really they're just incredibly juicy, delicious beers. 0:06:55.240 --> 0:06:59.560 And so this one wasn't cheap, but I mean their 0:06:59.560 --> 0:07:02.560 beers are good. This this one was worth it. I think, Matt, 0:07:02.600 --> 0:07:04.560 you paid fifteen bucks for a four pack, right, yeah, 0:07:04.600 --> 0:07:07.880 fifteen for a four pack. And honestly, though, to be 0:07:07.920 --> 0:07:11.640 able to pick up a beer that's that fresh, canned 0:07:11.800 --> 0:07:14.840 days before we picked it up, it is hard to beat. 0:07:15.680 --> 0:07:19.680 So Jill, that poured a nice golden It's not perfectly filtered. 0:07:19.720 --> 0:07:21.600 It's not meant to be super cloudy, I don't think, 0:07:21.640 --> 0:07:23.160 And I know I was supposed to sniff it first, 0:07:23.160 --> 0:07:24.600 but I kind of went straight in for the sip. 0:07:25.080 --> 0:07:28.080 I was just that thirsty. And this is delicious. At 0:07:28.120 --> 0:07:30.640 five and a half percent, it's um and being a 0:07:30.680 --> 0:07:32.840 pale ale, it's a little light, but man, it's like 0:07:33.040 --> 0:07:36.560 all hops. Like there's no malt backbone almost it is 0:07:36.640 --> 0:07:38.840 all hops, and I'm all about that. Yeah, they've got 0:07:38.880 --> 0:07:41.240 to set up to be a session nail. And for 0:07:41.280 --> 0:07:43.480 those who may have heard that term before, but maybe 0:07:43.760 --> 0:07:45.400 I don't know, you don't know exactly what that means. 0:07:45.400 --> 0:07:48.320 It's just a lighter beer um that you can maybe 0:07:48.320 --> 0:07:50.720 have more than one in a sitting, which we're not 0:07:50.800 --> 0:07:54.240 going to do tonight. But yeah, that's the idea behind it. 0:07:54.600 --> 0:07:56.320 And I'm getting more and more into these lower A 0:07:56.400 --> 0:07:59.000 BV beers so that I can have a couple in 0:07:59.040 --> 0:08:01.400 an in an evening for once in a while. And 0:08:01.640 --> 0:08:04.880 it's Yeah, it's really nice because usually if you want 0:08:04.880 --> 0:08:07.280 to have three beers in a night, you're drinking Budweiser 0:08:07.320 --> 0:08:08.880 if you don't want to be hung over the next day. 0:08:08.920 --> 0:08:11.240 But there's so many good beers weighing in it, you know, 0:08:11.320 --> 0:08:14.680 five four and five percent now that are full of flavor, 0:08:15.120 --> 0:08:17.000 so you can actually have a couple. Yeah, and this 0:08:17.200 --> 0:08:20.040 is full of flavor, man, like you said, just hop forward. 0:08:20.360 --> 0:08:22.360 There aren't a ton of beers that I've had that 0:08:22.480 --> 0:08:25.680 have this much like hot presence but without sort of 0:08:25.720 --> 0:08:28.360 that thicker body. It's different. I guess I'm just not 0:08:28.440 --> 0:08:31.560 used to that, but I yeah, I like it. This 0:08:32.120 --> 0:08:34.760 juice bar pale Ale from Wrecking Bar is delicious. It's 0:08:34.800 --> 0:08:38.719 like a cumulus cloud on my tongue. I'll take it. Yeah, 0:08:38.800 --> 0:08:40.760 So this is a beer that I mean, they can 0:08:40.960 --> 0:08:43.400 they're on site, but they don't distribute or anything like that. 0:08:43.440 --> 0:08:45.280 So this is an example of one of those local 0:08:45.920 --> 0:08:49.079 breweries that are kind of filling the void of local 0:08:49.120 --> 0:08:50.800 beer for folks to kind of come by and get. 0:08:51.200 --> 0:08:54.080 And even when they do release it's a very small amount, 0:08:54.200 --> 0:08:56.480 there's usually a line that's built up. They'll announce it 0:08:56.760 --> 0:08:58.880 day of over the day before. Hey, we're releasing it 0:08:58.960 --> 0:09:02.240 eight pm tomorrow and I it or noon on a Friday, 0:09:02.400 --> 0:09:05.800 and it's sold out within an hour. So if you're 0:09:05.800 --> 0:09:08.280 passing through town and it's great to get a beer 0:09:08.320 --> 0:09:10.199 on draft there, but you're probably not going to get 0:09:10.240 --> 0:09:12.880 any cans to go at least at this point. Yeah, 0:09:12.920 --> 0:09:15.640 but hopefully there's a local brewery that is doing something 0:09:15.640 --> 0:09:17.839 similar to this near wherever it is that you are. 0:09:17.960 --> 0:09:19.600 I mean, like we said last in the last episode, 0:09:19.600 --> 0:09:21.280 that's one of the things we're excited about with the 0:09:21.600 --> 0:09:23.560 industry as a whole, is just sort of that move 0:09:23.640 --> 0:09:26.440 back to to more the local local brewery that you 0:09:26.559 --> 0:09:28.559 that you go and hit up. Yeah, your neighborhood spot. 0:09:28.960 --> 0:09:31.800 All right, Matt onto the topic at hand, renting versus 0:09:31.800 --> 0:09:34.160 buying a home, and this is one of those topics 0:09:34.200 --> 0:09:39.560 that has captured the minds of personal finance experts everywhere. 0:09:40.200 --> 0:09:43.400 And I think there's something we can add to the debate, 0:09:43.440 --> 0:09:45.200 and I think there's some really important things that we 0:09:45.200 --> 0:09:47.760 need to clarify for people on both sides of the 0:09:47.760 --> 0:09:49.920 aisle when it comes to this topic. And I think 0:09:49.920 --> 0:09:51.679 the first thing that we really need to talk about 0:09:52.080 --> 0:09:54.680 we need to challenge the assumption that buying a home 0:09:55.160 --> 0:09:57.440 is a quote unquote good investment. That's kind of been 0:09:57.480 --> 0:10:00.679 the long standing traditional thought that buying home, well, yeah, 0:10:00.760 --> 0:10:02.199 of course you got to do it. It's an American 0:10:02.280 --> 0:10:05.200 dream and it's a good investment. But I think there 0:10:05.240 --> 0:10:07.880 there is a large element where people have run with 0:10:07.920 --> 0:10:10.480 that thought and made really poor choices when it comes 0:10:10.480 --> 0:10:12.640 to buying a home instead of running edual. I mean, 0:10:12.880 --> 0:10:15.760 that's my goal right for this specific episode, is that 0:10:15.880 --> 0:10:17.920 by the end of the conversation that we've caused you 0:10:18.000 --> 0:10:20.240 guys to think about this sum and that it isn't 0:10:20.280 --> 0:10:22.120 just sort of like this assumption that it's not an 0:10:22.160 --> 0:10:24.679 assumption that your home value is only going to continue 0:10:24.720 --> 0:10:26.720 to increase, you know, like we were just talking about 0:10:26.760 --> 0:10:29.679 back in uh two thousand seven, Like people, we know 0:10:29.760 --> 0:10:32.840 that that bought back then, and that was the assumption, 0:10:33.480 --> 0:10:35.880 and that didn't really pan out too well for a 0:10:35.880 --> 0:10:37.720 lot of folks. And if you're buying for the wrong 0:10:37.760 --> 0:10:40.480 reasons in two thousand seven, oh yeah, then there's a 0:10:40.480 --> 0:10:44.560 good chance that that that purchase led to heartache. But 0:10:44.640 --> 0:10:47.040 if you made a purchase for the right reasons, you 0:10:47.320 --> 0:10:50.280 likely could have weathered that storm even though your home 0:10:50.400 --> 0:10:53.959 dropped in value, you know, unless you suffered something terrible 0:10:54.040 --> 0:10:56.520 like a job loss and a bad economy or something, 0:10:56.600 --> 0:10:58.800 or you know, or some other major devastation happened in 0:10:58.800 --> 0:11:02.280 your life. If you're buying at home under the right pretenses, 0:11:03.120 --> 0:11:06.120 like we'll discuss here, I think you probably still could 0:11:06.120 --> 0:11:09.200 have weathered that storm of your home just being worthless essentially. 0:11:09.480 --> 0:11:11.280 And what you mean by like buying for the right reasons, 0:11:11.360 --> 0:11:15.080 is you mean buying for reasons other than just purely financial, right, yeah, 0:11:15.080 --> 0:11:16.959 And I mean I think a lot of people at 0:11:17.160 --> 0:11:19.440 specifically at that point in time, with the way the 0:11:19.440 --> 0:11:22.600 real estate was appreciating, they assumed they could buy something 0:11:22.640 --> 0:11:24.880 one month and sell it the next for a much 0:11:24.960 --> 0:11:27.880 larger gain, and that is just not and that that's 0:11:27.880 --> 0:11:30.440 just not typical when it comes to real estate throughout 0:11:30.440 --> 0:11:33.760 the history of real estate. Essentially, it appreciates roughly at 0:11:33.760 --> 0:11:37.960 the rate of inflation. So buying a home with the 0:11:37.960 --> 0:11:41.520 thought that it's going to appreciate rapidly that's just not 0:11:41.600 --> 0:11:43.720 normally the case. And so if you buy a home 0:11:43.920 --> 0:11:47.720 with that rationalization behind it, and you're using very little 0:11:47.720 --> 0:11:50.520 money down, then that, to me would be an example 0:11:50.640 --> 0:11:55.200 of someone that's not being thoughtful about the purchase of 0:11:55.200 --> 0:11:57.959 that home. Yeah. Man, honestly, that's just that's what freaks 0:11:58.000 --> 0:12:00.120 me out right now. Like seeing the way that the 0:12:00.160 --> 0:12:02.360 markets continuing to I mean, it's been climate for the 0:12:02.400 --> 0:12:04.840 past seven years or something like that, and and the 0:12:04.960 --> 0:12:06.640 natural tendency is just to think that it's going to 0:12:06.679 --> 0:12:08.760 continue to do what it what it's been doing. Like 0:12:08.840 --> 0:12:11.600 that's just for whatever reason sort of what people think. 0:12:11.679 --> 0:12:13.839 And I get caught into that sum too, but I 0:12:13.920 --> 0:12:15.920 think I just get freaked out more like when I 0:12:15.920 --> 0:12:18.160 see that, it kind of I'm just like, oh man, 0:12:18.200 --> 0:12:20.000 it can't feed this good forever, you know, like I'm 0:12:20.000 --> 0:12:22.720 always writing maybe maybe that means I'm more of a pessimist, 0:12:23.200 --> 0:12:24.760 but I'm like kind of waiting on the other shoe 0:12:24.800 --> 0:12:26.480 to drop, you know, I'm just like you know that 0:12:26.520 --> 0:12:28.719 it's not going to be able to continue this, you know, 0:12:28.760 --> 0:12:30.600 at the at the rate that has been and and 0:12:30.600 --> 0:12:33.880 when I see folks that are buying and maybe spending 0:12:33.880 --> 0:12:35.679 more than they can have, you know, afford or like 0:12:35.720 --> 0:12:38.760 you said, expecting that appreciation and expecting that equity growth, 0:12:38.800 --> 0:12:41.200 that makes me nervous. I completely agree. And actually, but 0:12:41.240 --> 0:12:43.320 I think actually it doesn't make you a pessimist. It 0:12:43.320 --> 0:12:46.760 makes you a realist because the same thing, right, because 0:12:47.040 --> 0:12:49.280 when you look at for instance, you know what's happening 0:12:49.280 --> 0:12:51.400 with the stock market right now, we're having a bit 0:12:51.400 --> 0:12:54.000 of a correction. We'll see if we have even more. 0:12:54.840 --> 0:12:57.400 It is natural human tendency. Though you're completely right to 0:12:57.679 --> 0:13:00.520 say it's going up, and it continues to go up up, 0:13:00.559 --> 0:13:03.880 and any bump in that completely shakes us for the 0:13:03.920 --> 0:13:05.959 most part. In vice versa, if it's going down, it's 0:13:05.960 --> 0:13:08.120 only going to continue to go down exactly, which is 0:13:08.480 --> 0:13:10.199 the exact time that you need to be buying because 0:13:10.240 --> 0:13:13.040 things are on sale. Yeah, and so it's hard for 0:13:13.080 --> 0:13:15.800 us to time those things and to know. But ultimately 0:13:15.840 --> 0:13:18.400 that's why you have to go with some of these 0:13:18.440 --> 0:13:24.040 time tested reasons and methodology and mathematics ultimately behind buying 0:13:24.040 --> 0:13:26.600 a home to make sure that you're buying something that 0:13:26.679 --> 0:13:28.960 you can't afford over time and granted, things happen, right 0:13:29.040 --> 0:13:31.679 like in two thou seven. Like if you bought in 0:13:31.679 --> 0:13:33.160 two thousand and seven and then and then you're you're 0:13:33.200 --> 0:13:35.240 going up towards the recession that hits a No. Eight 0:13:35.240 --> 0:13:37.000 and you lose your job, that's a different story, right, 0:13:37.040 --> 0:13:40.240 you can't plan for that all the way. But for 0:13:40.280 --> 0:13:41.719 the most part, there were a lot of people that 0:13:41.840 --> 0:13:44.080 got caught with their pants down, you know, their hand 0:13:44.080 --> 0:13:47.680 in the cookie jar essentially, and that's what we want 0:13:47.760 --> 0:13:49.920 to avoid. That kind of mentality when it comes to 0:13:49.960 --> 0:13:52.400 buying a home, paints down and handing the cookie jar 0:13:52.440 --> 0:13:55.040 at the same time. Who knew, what are you doing? 0:13:56.040 --> 0:13:57.599 My mom would find me like then they kitchen and 0:13:57.640 --> 0:14:01.480 I'd be like, I'm just hungry, sleeve lock. But I 0:14:01.480 --> 0:14:04.559 guess the first thing that we need to dispel the 0:14:04.720 --> 0:14:08.560 common myth is that renting is throwing away money, and 0:14:08.559 --> 0:14:10.520 so yeah, sort of going back to the same assumption 0:14:10.600 --> 0:14:14.559 where buying is a smart move as a smart investment. 0:14:14.760 --> 0:14:17.880 Just as prevalent is the notion that renting is throwing 0:14:17.880 --> 0:14:20.160 all your money, and that's just not true. Renting can 0:14:20.160 --> 0:14:23.600 be an incredibly smart decision and a wise financial move 0:14:24.120 --> 0:14:26.000 and just a great move for a lot of different reasons. 0:14:26.040 --> 0:14:28.560 But yeah, that's just always the sort of mentality people 0:14:28.560 --> 0:14:31.680 are like, just every month, just throwing away money. It's like, no, 0:14:31.840 --> 0:14:33.520 like there's so much that gives you. And we're gonna 0:14:33.520 --> 0:14:36.320 get into that later, uh in this episode, but just 0:14:36.520 --> 0:14:38.320 kind of write that off in your mind. That is 0:14:38.360 --> 0:14:42.640 not the case. Yeah, you're still getting something for your money, right, 0:14:42.760 --> 0:14:46.560 a place to live and and and flexibility. So we'll 0:14:46.560 --> 0:14:48.200 talk about the pros and running in a little bit, 0:14:48.240 --> 0:14:51.000 but but just no dispel the myth running is not 0:14:51.360 --> 0:14:53.760 throwing away money. So, Matt, before we get into the 0:14:53.800 --> 0:14:57.000 specifics of running versus buying pros and cons, let's talk 0:14:57.000 --> 0:14:58.840 about some of these overarching rules that we need to 0:14:58.880 --> 0:15:02.080 follow whether we're renters or buyers. And first, you just 0:15:02.200 --> 0:15:05.400 don't want to overspend on housing no matter what the 0:15:05.400 --> 0:15:08.200 whether you're renting or buying, you want to make sure 0:15:08.240 --> 0:15:12.640 that you're living by at minimum that rule yeah, which 0:15:12.680 --> 0:15:15.400 is you don't want your housing expenses. So like you said, 0:15:15.400 --> 0:15:17.960 renting or buying, you know, so whether it be like 0:15:17.960 --> 0:15:20.440 a rent check every month or your mortgage, you don't 0:15:20.480 --> 0:15:23.200 want that to be more than of whatever your take 0:15:23.240 --> 0:15:25.800 home pay is and not so not your salary, but yeah, 0:15:25.840 --> 0:15:27.800 this is your take home pay. So this is after 0:15:28.400 --> 0:15:31.240 taxes have been taken out by employer um any amounts 0:15:31.280 --> 0:15:34.040 that are that's going towards retirement savings like your four 0:15:34.040 --> 0:15:37.120 own k. This is what shows up in your checking account, right, 0:15:37.120 --> 0:15:40.320 so every month when you get paid that amount, that 0:15:40.440 --> 0:15:42.320 is the rule. That's what you want to divide that 0:15:42.320 --> 0:15:45.520 out by. And your rent or your mortgage payment does 0:15:45.560 --> 0:15:48.440 not need to be any larger than that. Yeah, And 0:15:48.520 --> 0:15:52.480 it's easy, I think, depending on where you live and 0:15:52.480 --> 0:15:55.800 and who you're who you're hanging out with, to say, well, 0:15:55.800 --> 0:15:57.320 I need to live in this kind of house or 0:15:57.360 --> 0:16:01.240 I need to live in this neighborhood, and those kind 0:16:01.240 --> 0:16:05.400 of choices can balloon your monthly rent or mortgage payment 0:16:05.400 --> 0:16:08.360 really quickly. And so don't be fooled by the way 0:16:08.680 --> 0:16:12.280 people around you are living. If you want to ultimately 0:16:12.320 --> 0:16:14.920 have financial independence one day, if you want to live 0:16:15.000 --> 0:16:17.480 a rich life where you're not house poor. You need 0:16:17.520 --> 0:16:20.240 to think not about what everyone else around you is doing, 0:16:20.640 --> 0:16:23.080 but what you need to do to put your finances 0:16:23.160 --> 0:16:26.360 in right order. And the biggest piece to this puzzle 0:16:26.960 --> 0:16:30.600 is how much of your income every month do you 0:16:30.640 --> 0:16:33.640 spend on housing? That is the biggest piece to the puzzle. 0:16:33.680 --> 0:16:36.160 And if you can make changes there, if you can 0:16:36.240 --> 0:16:39.600 move someplace cheaper, whether it's renting or owning, that's gonna 0:16:39.600 --> 0:16:41.440 have a huge impact on how much you're able to 0:16:41.480 --> 0:16:44.640 save and invest for the long term. Yeah, Jill, I 0:16:44.640 --> 0:16:46.840 mean what we'd recommend is to think about we talked 0:16:46.880 --> 0:16:49.000 about in a recent episode like the your big why 0:16:49.240 --> 0:16:52.240 behind money. If housing is a priority for you, than sure, 0:16:52.480 --> 0:16:54.760 maybe that's something that you can might spend up too 0:16:54.800 --> 0:16:58.480 closer to But for most folks, I think you might 0:16:58.520 --> 0:17:01.000 even find that that percentage to even a lot lower, 0:17:01.080 --> 0:17:04.080 you know, like closer to fifteen or maybe I agree. 0:17:04.119 --> 0:17:05.960 The lower you can get it, the more you can 0:17:06.000 --> 0:17:08.399 stock away for the future, the more quickly you can 0:17:08.400 --> 0:17:11.720 actually be financially independent. That housing costs is the biggest 0:17:11.720 --> 0:17:13.800 line on them that's going to help get you there. Yeah, 0:17:13.800 --> 0:17:16.800 by far. So another overarching point things that you need 0:17:16.840 --> 0:17:19.560 to consider before buying home. And I think these are 0:17:19.680 --> 0:17:22.960 hard and fast rules that you need to have thought 0:17:23.000 --> 0:17:25.399 about this before you actually go through the process of 0:17:25.400 --> 0:17:28.760 shopping for a home, getting financing, and then making offers. 0:17:29.440 --> 0:17:31.240 You need to consider are you going to be in 0:17:31.280 --> 0:17:33.439 the home for at least five years, and if you're 0:17:33.440 --> 0:17:36.480 shopping for a condo even longer than that, probably seven 0:17:36.480 --> 0:17:38.640 to ten years. You want to explain to folks why 0:17:38.680 --> 0:17:41.639 this is the case. Sure, So it comes down to 0:17:41.640 --> 0:17:45.240 a few things. Just like if you're investing in stocks, 0:17:45.800 --> 0:17:49.719 you're not going to invest heavily today in a mutual 0:17:49.760 --> 0:17:52.480 fund knowing that you need the money next year, because 0:17:52.480 --> 0:17:54.920 there's a lot that can happen in a year. Same 0:17:54.960 --> 0:17:58.240 thing with a home not quite as volatile usually in 0:17:58.280 --> 0:18:00.920 a normal cycle, but don't know if it's gonna be 0:18:00.960 --> 0:18:03.600 worth more in a year or two years. You're you're 0:18:03.600 --> 0:18:05.480 hoping that in five years at least you've paid down 0:18:05.560 --> 0:18:08.119 some of the mortgage amount, although you're paying mostly interest 0:18:08.160 --> 0:18:11.000 in the beginning, and then ultimately you've created a little 0:18:11.000 --> 0:18:13.120 wiggle room. But more than that, the biggest thing that's 0:18:13.119 --> 0:18:16.359 gonna drain you is the transaction costs involved involved in 0:18:16.400 --> 0:18:19.040 buying real estate, and there's a lot of people that 0:18:19.160 --> 0:18:22.280 don't take that into consideration. When you're buying a home, 0:18:22.280 --> 0:18:24.320 you're not thinking about it at all, Like the transaction 0:18:24.320 --> 0:18:26.680 costs are usually all in the cellar. But when you're 0:18:26.680 --> 0:18:29.440 selling the home, you're usually giving up a huge piece 0:18:29.480 --> 0:18:32.000 of the profit if you haven't lived there that long, 0:18:32.440 --> 0:18:36.120