Adam Says why Home Ownership is a Terrible Investment
45 replies, posted
[video]https://youtu.be/YHU_KLYhibI[/video]
I'm gonna disagree with this one. Once you get past the initial deposit, often mortgages are cheaper than renting (of course this depends on the house and area/country). And then at the end of 20-30 years you actually have something for all the money you've put in.
I see the point he's making and I don't know how different things are in America compared to the UK, but here a house that you rent that costs £600/m would probably cost you around the £300-350/m mark with a mortgage, which is a drastic saving. Then of course there's the fact that you actually OWN the house when you have a mortgage. Renting is just dead money. You may be able to move around more freely by renting, but then your landlord could easily sell up and require you to leave the premises with little to no notice.
[QUOTE=lew06;51122304]I see the point he's making and I don't know how different things are in America compared to the UK, but here a house that you rent that costs £600/m would probably cost you around the £300-350/m mark with a mortgage, which is a drastic saving. Then of course there's the fact that you actually OWN the house when you have a mortgage. Renting is just dead money. You may be able to move around more freely by renting, but then your landlord could easily sell up and require you to leave the premises with little to no notice.[/QUOTE]
Renting sucks dick in the UK, and you should pretty much never do it voluntarily. No idea if it is different in the US, but no reason to rent here if you have the option and the deposit to take a mortgage. Gives more security (landlord can't just sell and throw you out, costs are less volatile), gives you some kind of asset rather than throwing your money into a black hole (even if house prices do go down - thought the chance of that happening in the UK due to supply constraints and growing population is tiny at the moment - you still get something rather than nothing), is usually cheaper and you can actually change stuff about the home and improve it.
I rather own my own house/apartment than rent one.
If you actually look into the shit he says, half the time its ideas/theories that have never been substantiated or he turn it into a clickbait.
See: His debunking of generations because in the first 5 minutes he misquotes the two men who named the Millinenial Generation.
[QUOTE=lew06;51122304]I see the point he's making and I don't know how different things are in America compared to the UK, but here a house that you rent that costs £600/m would probably cost you around the £300-350/m mark with a mortgage, which is a drastic saving. Then of course there's the fact that you actually OWN the house when you have a mortgage. Renting is just dead money. You may be able to move around more freely by renting, but then your landlord could easily sell up and require you to leave the premises with little to no notice.[/QUOTE]
Mortgage for my family was killer, my parents were paying 3x as much for what is a pretty shit house, when we sold it to a mortgage rescue scheme and then to a housing association we pay a lot less and got our house renovated for free up to modern standards.
You don't even own the house if you buy with a mortgage, they'll go through proceedings to take it from you if you can't pay that.
Renting privately is bad, but renting from a housing association isn't plus you do have protection as a tenant and your landlord isn't as much of an overlord as you may think.
[QUOTE=Thomo_UK;51122418]Mortgage for my family was killer, my parents were paying 3x as much for what is a pretty shit house, when we sold it to a mortgage rescue scheme and then to a housing association we pay a lot less and got our house renovated for free up to modern standards.
You don't even own the house if you buy with a mortgage, they'll go through proceedings to take it from you if you can't pay that.
Renting privately is bad, but renting from a housing association isn't plus you do have protection as a tenant and your landlord isn't as much of an overlord as you may think.[/QUOTE]
In the US its a huge investment, most people purchase a house for life.
[QUOTE=AG;51122222][video]https://youtu.be/YHU_KLYhibI[/video][/QUOTE]
I paid $815 a month renting, now I pay $912 a month for my mortgage. Renting does nothing for your net worth and your money literally pays someone elses mortgage off. I live in STL area (on the IL side) and all houses I have looked at renting are $1100+, when I can get the same square-footage and bedroom/bathroom amount for my $912 mortgage, which includes taxes and insurance.
This is incredibly true in Canada. People who spend their life savings on property here in toronto are idiots.
The only way to make money in Toronto is to make business relations and invest in private stocks.
[QUOTE=Thomo_UK;51122418]You don't even own the house if you buy with a mortgage, they'll go through proceedings to take it from you if you can't pay that.[/QUOTE]
Uh yeah that's kinda the point of a mortgage, if you can't pay it off of course the bank that lent you all the money is going to get it back.
Depends where you live. I live in Victoria which is like the 3rd most expensive place in Canada behind Toronto and Vancouver. a shitty 2 bedroom 1 bath house will run you anywhere from $400k-600k depending on location and condition. But you won't find anything much cheaper than that. After the initial $50k~ deposit, you are paying about $1k per month which is technically cheaper then renting. But like I said it's all about location.
[QUOTE=RudeMcRude;51122615]Depends where you live. I live in Victoria which is like the 3rd most expensive place in Canada behind Toronto and Vancouver. a shitty 2 bedroom 1 bath house will run you anywhere from $400k-600k depending on location and condition. But you won't find anything much cheaper than that. After the initial $50k~ deposit, you are paying about $1k per month which is technically cheaper then renting. But like I said it's all about location.[/QUOTE]
btw, he's talking about my shitty house.
Why are they using the Sims soundtrack for their music?
[QUOTE=RudeMcRude;51122615] it's all about location.[/QUOTE]
Pretty much this. Although I will play Devil's advocate for a moment, most of what Adam says does ring true. I've rented forever and only 8 months ago became a homeowner. I bought a single bedroom condo in a gated community in an upscale area with an association for a $109K, and once those papers are signed you take on a ton of responsibility. Rent IS better than owning in the sense that you're more of a free spirit. You give your landlord/front office 30 days notice and you're free to go (provided you leave a clean unit you can grab your security deposit as well so don't shit on the floor before walking out). Also when shit breaks in your unit, you have no responsibility, again your landlord or complex's maintenance crew are there to repair and replace anything. Which is also a feather in the cap of renters.
As a homeowner you are your landlord/maintenance crew. There are exceptions however such as any issues outside that cause inside damage (which I'm dealing with now actually) etc. Also Being tied down to a 30+ year mortgage doesn't sit well for a lot of people, it certainly didn't for me. But in the end, rent is only going to go up. And mortgage payments are cheaper in some cases. I was paying almost $1100 a month for a 1 bedroom, I'm paying $719 for roughly the same amount of space and in a nicer area, and that'll decrease 100 bucks next year since I applied for homestead. Even including my HOA dues, I'm still under $1000 a month. Another hurdle is the down payment. I was lucky since I had money in the bank, but a lot of people don't.
There are upsides as well. As I said before your cost of living can decrease, plus you can always upgrade and really make your home your own. Having a mortgage and making timely payments for your first 6 months to a year and beyond can also make you look good to lenders and can improve your credit, since you have whats called "responsible debt", having a large investment and making timely payments, similar to owning a Car.
Anyway, sorry for the wall of text. These are things I've learned in my time as a rookie homeowner, and thought I'd share. Adam's video isn't wrong, but remember that there are two sides to the coin and everyone's situation is different.
I mean he says it's not ideal for millions of us, but he doesn't specifically say how many millions he means, and there's like 300somethingmillion people in the US. The reality that he's not presenting here (because it's more flashy if a broad, generalized statement like the one he's making applies to "everyone") is that it can't be generalized that much. If you're wanting to move around a lot, then yeah, no shit, don't buy a house, it's a huge obligation that is the antithesis of mobility. But if you've got the job you want, in the area you want to be in, and you find the home that you want to own, there's nothing wrong with going for it.
Source: I have a mortgage and have worked in financial services (including RE loans) for 4 years.
I think someone posted this before which is more in depth.
[video=youtube;KAMeI4uHAFE]https://www.youtube.com/watch?v=KAMeI4uHAFE[/video]
Adam is almost right except for the wrong reasons. Home ownership is not an investment. You are not getting money out of your purchase. While you have an house as an asset, you also have the property value with interest as a liability in form of a mortgage; which brings down the equity.
On the other hand, renting is simply a liability.
Where he goes wrong though is that paying off the mortgage is often cheaper than renting. You are also not tied down since you can sell the property and settle the mortgage with the payoff.
Also, the mortgage owners can only kick you out with just cause which provides good security over renting.
From what I can tell, renting only saves you money if you can't settle down due to a kind of job or lack thereof.
[editline]28th September 2016[/editline]
[QUOTE=chumchum;51122979]I think someone posted this before which is more in depth.
[url]https://www.youtube.com/watch?v=KAMeI4uHAFE[/url][/QUOTE]
Oh hey, this explains it better.
Just googled the median house price in the city I live.
$1,021,968
Don't think I'll be purchasing too soon.
In fact, housing is such a bad investment that the house I'm in right now has nearly quadrupled in price over fifteen years!
Housing is the most guaranteed investment there is. It is government policy to increase house prices, always, because that is where people have their pensions. Why else would obviously shit policies that increase housing costs and house prices exist, like the green belt (which is almost entirely not beautiful rolling green English hills, but instead is a load of golf courses, damaging farming and otherwise land that should be built on), bizarre height restrictions, and 'protected views' which can be literally miles away and in entirely unremarkable places. It is government policy to make housing a good investment if you are sedentary.
Okay but even if you are paying more for your house, you're paying more to outright own it and houses come with far more than an apartment does.
You are paying for a plot of land with a nice building on it that you can do [i]almost[/i] anything you want to.
As opposed to an apartment which is some rooms and and thats it.
Hell even if you rented a house, there would never be a point in time where you'd stop paying something each month, while a house you own, eventually you'd not have to worry about it.
Buying a house is not the same thing as taking a mortgage loan.
[QUOTE=TK 421;51122462]I paid $815 a month renting, now I pay $912 a month for my mortgage. Renting does nothing for your net worth and your money literally pays someone elses mortgage off. I live in STL area (on the IL side) and all houses I have looked at renting are $1100+, when I can get the same square-footage and bedroom/bathroom amount for my $912 mortgage, which includes taxes and insurance.[/QUOTE]
I rented a house up near the Wisconsin border (Antioch) for 1100, was just short of raising rent several hundred bucks when I decided I'd rather move, thanks to half the utilities dying and needing replacement, and the wall that was a new year lease coming up- pretty sure increasing rent to make the renter pay for obligatory repairs is illegal but whatever. Friend recently bought a house in the same area, but is paying 900 after taxes and insurance, and his deposit was like, 5 grand, sounds pretty easy in retrospect
While at that house, I was driving 45 miles to o'hare every day to be in my office. (when I said I couldn't afford the increase in rent and continue to survive work the landlord just kept telling me when she lived there, she'd drive to chicago all the time for work, blissfully unaware of the fact the house probably cost only $20-30k back in the day, and gas was under a dollar, while now the house was valued ~$100k and gas was pushing 4 in the area). I began renting a 1-bed apartment (just over 700sqft) with my wife for $1030 down toward work last year. After a while I came to the realization I needed more space to have a proper home office and do more of my own work (as my office job was slowly but surely dying and I wanted to bail sooner than later), so I upgraded to a 2 bedroom (850sqft), for $1350/month. Now that I've officially left (correction: wrongfully fired to save on not paying insurance/severance when they wanted to downsize my shit),
I'm waiting to land a job that I'm currently working with as a contractor (work from home in both cases), so I can nab a house just over the wisconsin border, as taxes/insurance will be cut nearly in half and I can probably get a 'big' middle class kinda house for ~900-1100
fuck renting in complexes, there's a severe lack of that feeling of home. It's like a familiar hotel room, and can feel extremely stressful living in one for an extended time. There's a high degree of uneasiness/uncertainty as landlords tend to increase rent, or find reasons to not pay for repairs on shit they're obligated to repair, there's the potential you can get kicked out because someone offered to rent the house for more, not have your lease renewed, or have the lease renewal behind an increased paywall that you didn't expect.
banks may be heartless, but at least they're consistent and ideally isn't going to put the house up for sale in the middle of your lease while you've been paying everything just fine.
the tl;dr response to this is situations are incredibly varied and while it's understandable that you're kinda stuck to an area if you buy a house, but rent is covering the cost of owning a place, plus profit for the owner, and being a hermit crab isn't always a viable lifestyle either
[QUOTE=The Janitor;51123166]Just googled the median house price in the city I live.
$1,021,968
Don't think I'll be purchasing too soon.[/QUOTE]
Christ on a crutch, it's $100,407 (AUD, 77k USD) here. What kind of area do you live in?
Thanks, but no, thanks. I'm currently renting a small apartment for myself, but sometime in the near future I'll be looking into going for a loan and getting my own house.
I *want* to have my own place!
good to know he's using fair, common, and up to date sources for his research
[t]http://i.imgur.com/n3nBYhA.png[/t]
(note: this is the one source in the entire video, the rest is what real journalists would call an 'opinion piece')
renting and buying aren't black and white and no option is better than the other. and it all depends on actually finding a. a good, trustworthy realtor and b. a good home without all the problems he mentions here and c. a good bank. plus, if you're really worried about being 'tied down' to a house, don't buy a fuckin house. there are plenty of options available for every type of person, whether you're low, middle, or upper class, move around a lot, want to be in a specific location. it's not as easy as renting but shit dude, i'd hope it'd not be that easy to spend upwards to a million dollars on somewhere i'm gonna spend 60% of my daily life in. this is a clickbait bullshit opinion piece.
Adam seems like a worse version of freakenomics.
The best part about owning a home is having no overhead when you retire.
glad my parents have promised me their property when they decide to downsize, makes my future less stressful to think about.
[QUOTE=Zillamaster55;51123354]Christ on a crutch, it's $100,407 (AUD, 77k USD) here. What kind of area do you live in?[/QUOTE]
Just googled London average house prices - AUD$968,277 median, and a lot more for a reasonably nice and a somewhat central one (ie. somewhere like Lambeth or Southwark rather than Croydon).
- removed for being bizarre and very confusing about a confusing situation -
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