4 Reasons Renting & Investing Beats Buying & Owning—Hands Down

4 Reasons Renting & Investing Beats Buying & Owning—Hands Down
2020-02-23 14:53:07

On a daily basis, I speak to people who are caught up in living the “American Dream.”

Want more articles like this?

Create an account today to get BiggerPocket’s best blog articles delivered to your inbox

Sign up for free

The storyline goes something like this:

  1. Finish college
  2. Find a well paying 9-5 job
  3. Get married
  4. Buy a highly leveraged house
  5. Have kids
  6. Find a better paying 9-5 job
  7. Up-size to a bigger house and bigger mortgage
  8. Send kids to college
  9. Down-size to a smaller property
  10. Hopefully live and enjoy life for another 20 years without having a mortgage forcing you to get out of bed every morning

Does this sound like you and your future plans?

In this article, I would like to challenge the above status quo.

Food, clothing, and shelter are the three basic requirements of human beings. After food and clothing have been looked after, most of you start looking for a house to call your own. There’s no question that buying a house makes sense for some people, but it’s certainly not for everyone. Owning a house gives you stability. That’s what people say, at least.

So, when you’re looking for a place to live, a lot of people will tell you about the many reasons why you should buy your own house. However, some people would say that home ownership as a path to wealth generation is nothing but a marketing ploy of the real estate industry. And they do have a pretty good case.

With that thought in mind, renting habits have changed in the last few years, as many people consider this as a viable option. Financially speaking, owning a house is not always the best bet. I’d go even further and tell you that if you’re looking to make money, buying a house to live in is a terrible waste.

Let’s look at the four best reasons why renting is better than owning a property.

Why Renting & Investing Beats Buying & Owning

1. You don’t have to get a mortgage.

This one is the most obvious but often misunderstood. Although some people are able to just buy a property with savings they have ready to spend, for most, a mortgage is considered the only way to buy a home. Most people don’t have all that money just laying around, and getting a mortgage is the best way to attain it.

So, even when a property is more than what the buyer has in his bank account, they can still spend it on a home of their own. It’s easy to think of a mortgage as a safe option to consider since it gives people the ability to spread that huge cost over a period of say, 25 years.

And that makes it easy, right? All you have to do is make a monthly payment, pay the bank a little extra on top of the original cost, and you’re done.

That small percentage you have to pay in addition to the original sum adds up to a pretty huge amount over this long period in spite of a mortgage interest deduction. Taking the interest into account, it’s easy to have paid twice the amount of the original purchase after 25 years. But all that is pretty well understood.

There’s one thing that’s always forgotten, though. A mortgage is a debt.

So what? You’re making your monthly payments, and they’re possibly even lower than what you would be paying for rent. But rent is an expense and not a debt. And that’s the one thing that makes all the difference.

Buying a house against a mortgage will only increase the debt to the income ratio you already have. This has one major consequence: If you need to borrow money for other essential things like, say, a student loan or a car loan, you’ll find it way harder to get one.

Related: Debunking the Buying a House is a Bad Idea Myth

This means that all that money you had access to for your home is just sitting there and costing you more money. There’s nothing you can do with that money, and you definitely can’t use it to invest and earn more money.

Owning a home will usually cost you more per month than renting anyway. To this day, I still rent and use all of my personal funds for investment purposes.

I like to joke around by calling my personal funds “little soldiers.” They are always out fighting and making me more money instead of being stuck in a bunker (mortgage) and not able to move anywhere.

eental agreement form with signing hand and keys and pen

2. People borrow more than they can afford.

When you’re out to buy something, you simply look at the price attached to it and depending on how much you can spend, you’ll buy it or you won’t. What you can spend in this case is usually whatever you have in your wallet or on your bank account. However, when you’re getting ready to buy your own house, things change. By getting a mortgage, a slight increase in monthly cost can get you a tremendous increase in budget. It’s easy to go too far and get lured into paying more than what you should.

Many folks who are associated with getting you across the line with purchasing a property, like your real estate agent and mortgage broker, can play on your emotions and get you to commit to something that you really shouldn’t. And in any case, you think it’s a good investment, right? Well, reality presents a different picture. Currently more than 10 million homeowners in the US are under mortgages worth more than the actual values of their houses. And they continue repaying these mortgages for years and years. I’m guessing these people no longer think they made a good investment.

With renting, you know what you’ll be paying next month, and you don’t have to worry about paying too much for a property. If for whatever reason you can’t afford to pay the rent anymore, you can find another property with cheaper rent as soon as your lease is up. Another benefit is that the lease is fixed as long as the lease is still active, and if a landlord decides to increase the rent, they’ll have to give you notice. So, no surprises and no headaches.

3. You’re no longer mobile.

With globalization, people have become more mobile. But even when you’re not leaving the country, people shift jobs a lot more than in the past. This is even more the case for the latest generation that has hit the workforce. With all these people switching jobs comes a whole lot of relocating. Many people choose a specific area simply because of how close it is to either the workplace or to the children’s school. If you’re one of those people, it makes a lot of sense to remain flexible with where you live. If you buy a home, that mobility is gone.

This is certainly not the case when you rent. You’re almost as mobile as you want and that has its advantages, probably more so for the younger generations. When you want to make the most out of your life, you need to be able to seize every opportunity you can. When you’re tied down to a home you own, you’ll have to pass on a lot of possibilities. When you’re renting, a whole world of opportunities just lies there for the taking. Look at me, for example. I packed my bags and left Sydney, Australia to move to Kansas City. All this happened within two weeks after making a few minor arrangements.

Related: Are Extra Mortgage Payments Worth It? A Look at the Numbers

4. Houses have operating costs and maintenance.

While the value of a house increases over a certain time period, the life of the equipment present in the house does not. Since properties are valuable assets, the owners try their best to keep their houses well-maintained. That means that owners will spend money on repair, modification, redecoration or annual common service fees in order to keep that property value up.

The cost of ownership is usually something that is overlooked, but it adds up to a considerable sum. A leaky roof, frozen pipes, a pool to take care of or just simple home improvements are some of the expenses that are always on the homeowner’s mind. Apart from this, owners also have to pay annual property taxes and a variety of other miscellaneous expenses.

Now, don’t forget that if you become a landlord and put your little soldiers (money) to good use, you will still get hit with all kinds of expenses, but in this scenario, the properties you own will be tenanted and should be producing large sums of cash flow. In return, paying for expenses shouldn’t have a direct effect on you, as they will be covered by the rent you have received from your tenants.

Despite all this, it is still very common for people to push you to buy instead of rent. Here’s a good way of looking at it. If you’re planning to stay where you are right now and if you’re not looking for financial growth and more freedom, then buying a house might be for you. Everyone else should really reconsider—because owning a home might be costing you way more than your monthly mortgage payment.

And don’t forget about those little green soldiers marching and fighting day and night for you.

Do you agree or disagree? Why?

Leave a comment and let’s discuss!

Selling vs Remodeling

10 Must-Dos Before Listing a House for Sale

10 Must-Dos Before Listing a House for Sale
2020-02-04 16:40:05

Selling your house is exciting! It marks the close to an exciting chapter in your life. And it can take months, so many homeowners are ready to get their house on the market and finish the whole process as soon as possible.

Want more articles like this?

Create an account today to get BiggerPocket’s best blog articles delivered to your inbox

Sign up for free

Don’t rush to list your house if you’re not ready to sell. Unfinished repairs, neglected maintenance, and a bad first impression can all keep your house on the market for a longer period of time.

Use these suggestions as a checklist to complete before you list your house for sale. Some are DIY and some require a call to a professional. Either way, they’ll prepare your home and you for a quicker close at a higher value.

1. Take Professional Photos

Want to reach more potential buyers? Hire a professional to take photos of your home.

Want to sell your home faster? Hire a professional to take photos of your home.

Want to sell your home for more money? You get the picture… (Pun not intended.)

More and more buyers are heading online to look for homes, and if they aren’t impressed with the photos they see, they’re going to start clicking elsewhere. Home listings with professional photos sell 32 percent faster than homes without them.

If your home is valued at over $200,000, professional photos could help you sell for up to $11,000 more. Additional buyers will be looking, visiting, and bidding. It’s a fantastic investment in your property.

man photographer is making arhitecture photography with old film camera in spring,  home and building concept. top view.

2. Make Quick Fixes to Boost Curb Appeal

First impressions are everything—even when selling a house. What will buyers see first when they walk onto your property?

Curb appeal can boost a home’s value—70 percent of NAR members say that curb appeal is “very important” to attracting buyers. Simple fixes like adding shrubs, unclogging the gutters, and staging the front porch could make a home memorable before buyers even walk in the door.

A lot of these quick fixes can be done over the weekend.

3. Stock Up on Light Bulbs

Speaking of quick fixes, put light bulbs on your shopping list. (Many sellers forget this one.) Open houses require all lights to be on throughout the home. Flickering lights are spooky, and lightbulb replacements are an errand that no buyer wants to put on their list.

Have replacements ready to avoid putting buyers in the dark.

4. Call a Handyman for Repairs

You don’t have to call a professional to screw in a lightbulb. In fact, you can probably check a lot of items off your list if you need to tighten loose handles or change AC filters. But it’s important to assess your entire home for any necessary fixes and then do them.

Related: How to Sell an ‘Unsellable’ Home

Clogged gutters, leaky faucets, and squeaky doors only put items on a buyer’s to-do list. Make as many repairs as you can, but don’t hesitate to call in a professional for the rest.

5. Check to Make Sure You Have All Permits

If you did work on your property, you probably needed to get certain permits. If a buyer wants to do some work on your property later, they’ll need to get certain permits. Buyers who plan ahead will probably ask you about those permits.

It’s not only embarrassing to admit that you remodeled your home without the right permits—you might lose a buyer because they don’t want to put more items on their to-do list. Make sure you have all the permits you needed for remodeling that you did in the past and have permits for possible remodeling in the future.


6. Call the Kennel

As much as you love your animals, proof of them in your home doesn’t add value. The right buyer could have allergies or prefer a pet-free life.

Have a pet sitter or kennel’s number on hand for when you’re showing the home. Hide or clean any evidence of your furry friend, including odors.

This might mean calling the professionals for a deep clean of your carpets, but it’s an investment that pays off in the long run.

7. Hire a Housekeeper

While you’re at it, hire a professional to remove evidence of your odors, too. Animal lovers aren’t the only homeowners who should consider deep cleaning. After years in your home or on your property, you might not notice certain stains or smells.

Related: Should You Sell Your House or Rent It?

Buyers certainly will. Invest in a professional housekeeper or cleaner who will scrub everything down and shine every surface.

8. Stash Valuables and Family Photos

Buyers want to step into a house and feel like they live there. Pictures of your family remind them that they’re just looking.

This task kills a few birds with one stone. Removing personal photos and valuables sets the house up for staging. Even if you’re not staging your home, stashing away your stuff also prevents theft. You never know who’s popping into your open house and milling around your bedroom.

Packing these items could also save you time once you’re ready to move!

Girl packing books into a box in a brightly lit living room

9. Rent a Storage Unit

You’ll need to put your family photos and pet cages somewhere. Get a storage unit ready so you won’t have to stress about where to put the items that you’ve packed. If you decide last-minute to stage the house with different furniture or decor, this storage unit will be necessary anyway.

And if all goes well, you’ll be needing a place to put all of your stuff before you know it.

10. Make a List of Anything That Is Coming With You

Eventually, everything is going to go. That might mean light fixtures or curtain rods that might normally be left behind.

Make a list of everything that you are going to take with you and give it to the Realtor. If you’re not present during an open house, your real estate agent will be able to answer all questions that buyers might have about what stays and what goes.

Is there anything you’d recommend adding to this list? 

Leave suggestions in the comment section below!

Selling vs Remodeling

Which Renovations Will Increase Your Home’s Value (& Which Won’t)?

Which Renovations Will Increase Your Home’s Value (& Which Won’t)?
2020-02-04 16:36:05

Homeowners currently in the market are all too familiar with this question: Should you renovate or sell?

Want more articles like this?

Create an account today to get BiggerPocket’s best blog articles delivered to your inbox

Sign up for free

When deciding whether to remodel or list a home “as-is,” there are multiple factors to consider. In fact, there will be a 1.8 percent drop in available homes this year due to high starting prices. While ensuring sellers in the market are receiving top dollar for their homes, taking buyers’ expectations into consideration can help when making the decision.

And although it’s no surprise some properties vanish off the market while others linger for months on end, there may be a cause.

Together, Porch.com and Homes.com surveyed nearly 1,000 homeowners to find which buyers are willing to go over budget for a move-in ready home, the most common renovations homeowners make to sell their property, and which improvements might add the most value to the selling process.

Buyer Expectations

The market is constantly changing. Buying a home, regardless of the condition, is a massive commitment. Porch and Homes.com found this year’s buyers favor a fixer-upper over a move-in ready home—50.7 percent of baby boomers and 56.7 percent of Gen X-ers favor an under-budget home in need of updating.

Overall, millennials prefer to do the renovating themselves, as only 37.6 percent would go over budget for a move-in ready home.

Ranking Priority Renovations

Since today’s buyer favors a fixer-upper, sellers should be inclined to focus on low-maintenance renovations to ensure the best investment. In fact, Homes.com finds 48 percent of homeowners suggest a kitchen remodel adds the most value to a home, with three in 10 homeowners agreeing a kitchen remodel is essential to get a home off the market.

On the other hand, homeowners also see importance in a bathroom remodel and retouching of interior paint. Survey respondents emphasized these renovations as best to increase the potential of a home sale.

Related: Survey Says: This Is What Today’s First-Time Home Buyers Are Looking For

Although homeowners believe a minor kitchen or bathroom remodel will give sellers an edge in the market, those renovations may not equate to the best return on investment.

Related: 6 Signs You Need to Lower Your Asking Price

Getting Your Money Back

Overall, doing smaller renovations to your kitchen could get you the biggest bang for your buck. A minor kitchen remodel can end up costing homeowners an average of $22,507 and net a return of $18,123 or 81 percent. Although a bathroom remodel was referred to as a “must-have” for selling potential, an asphalt roof costing around $22,000 could result in more for your efforts (68 percent) compared to a bathroom remodel (63 percent), where you’ll likely see less return.

If you’re a seller in the market looking to speed up the process, focusing on worthwhile upgrades while staying alert on the changing trends among today’s buyers might be the key.

Which home upgrades do you think are worthwhile?

Share below.

Selling vs Remodeling
2020-02-04 16:36:05

The 9 Most Common Home-Selling Mistakes

The 9 Most Common Home-Selling Mistakes
2020-02-04 15:40:48

I have a confession to make… I used to be Realtor.

Want more articles like this?

Create an account today to get BiggerPocket’s best blog articles delivered to your inbox
Sign up for free

Phew! Glad I got that off my chest. 
Now, I invest in real estate, coach new investors, have a tech company… blah, blah, blah. But I used to be a pretty good listing agent.
You’re here to learn about home selling mistakes though. Man, do people make a lot of them! Let’s dive in.

Don’t Make These Home-Selling Mistakes

Mistake #1: Pricing too high

Some of the sweetest people on earth, who would give their last dollar to help a homeless person, have a huge ego problem when it comes to their house’s value. It’s always the same, old story: “But my house is SPECIAL!”
Give me a break.
While there is nuance to every house’s value, homeowners typically have a tough time remaining emotionally neutral on the issue. In fact, I’ve seen houses sit on the market for years (in hot markets no less!) just because the sellers had an over-inflated opinion of the value of their property.
Buyers are only willing to pay what they think a house is worth. End of story. If you want to save yourself the headache and hassle of being listed for months on end with no offers, please listen to your agent. They are usually your best friend in this situation.
Your Realtor is not the bad guy (or girl). If they say your house is worth X, then it is worth very close to X. The market is the market. If you want to blame anyone, please don’t blame your Realtor. Blame the market. It doesn’t lie.
There are a myriad of pricing strategies. The right fit depends on the type of market you’re in, price point, etc. Here are some considerations.
Needle in the haystack
If you price your home at the tippy top, you’re looking for a needle in a haystack. There might be one buyer out there. And you better hope they’re cash, because when your lender wants to appraise the property, there could be some tears or a cancelled transaction when everyone finds out it’s not worth what you thought.
Market price
This is a fair price, that which the appraiser would probably vouch for. This is fine, but in a seller’s market, there is a better strategy.
Under market
If you price just under market value, buyers feel like you’re giving them a deal. If that’s true for one buyer, isn’t it true for many? It’s possible in this scenario to get multiple offers, pushing the price above market value. Make “cents”?
young man placing sale sign in front of his house

Mistake #2: Hiring the wrong agent

Not all agents are created equal. Some are fantastic buyer’s agents but lousy listing agents. Some could be great listing agents but are stingy and won’t spend the marketing dollars (or the time) to position your house correctly. Make sure you get a Realtor with the combination of a good track record and marketing chops to match.
Related: How to Sell an ‘Unsellable’ Home

Mistake #3: FSBO (pronounced FIZBO) or For Sale By Owner

When selling their property on their own, I see people make tons of mistakes. Typically, they’re overpriced. And they are clearly under-marketed. There might be a picture or two (poor ones at that) and a phone number. Buyers want more than that people!
Sellers who try to sell this way put themselves at risk in other ways, too. Not knowing what disclosures are needed or how the process works puts the transaction at risk.

Mistake #4: Not giving access

This is especially true of investment property with tenants. If a buyer wants to see a property, he or she needs to gain access in a reasonable amount of time (usually 24 to 48 hours). Tenants can be problematic in this regard. 
Tenants have no say in the sales process, nor do they have much of a stake. So, why would they want to cooperate with showings? Make sure, if you’re the landlord, that your lease spells out the tenants’ responsibility when it comes to the sale of a property and showings.
Access can be an issue in traditional resale situations, as well. I’ve encountered sellers who only want to allow showings between 10 and 2 on Saturdays. How is that supposed to help anyone? Buyers typically get frustrated and move on to houses they can see in reasonable timeframes.

Mistake #5: Foul smells

I am not a scientist. But did you know that memory is most closely associated with smell? The first thing people unconsciously (or consciously, if it’s bad enough) pick up on is smell. Sometimes it’s more obvious. 
Make sure, if you’re listing your property, that you’ve cleaned the place thoroughly and that there are pleasant aromas emanating—not unpleasant ones.
Related: Want to Sell Your Home Fast—for the Most Money? Do This

Mistake #6: Offering low commissions

If listing your home in the MLS, make sure you ask your agent what a typical buyer’s agent commission is. Agents can see in the MLS what commission is being offered to them. How eager are they to show your home if you’re below average? And on the flip side, how eager will they be to sell your house if you’re offering a higher commission (or bonus)?

Mistake #7: Not making concessions

Most buyers are going to do a home inspection (which they should). And unless your property is perfect (no one’s is), you’ll need to concede to some items, whether offering a credit or fixing some issues.
Some sellers take it personally when buyers ask for things to be fixed. It’s an insult that they’d even ask! Instead, realize that no home is perfect and that you’ll need to take care of a few things. It’s not worth risking the deal!

Mistake #8: Staging disaster

Some homes are ummmmm… challenging to sell. Hoarder houses, messy tenants, nine kids in three bedrooms. It’s important to stage your house to put it in the best light possible. Pack up everything that’s a distraction. It’s moving anyway, right? People would rather look at a stack of boxes than your stuffed animal collection.

Mistake #9: Pro pics

And last but not least, make sure that professional photos are being taken of your property. Most consumers’ first glance at your property will be online, so make sure it’s a good first impression. Staging, lighting, professional equipment, and editing go a long way to making sure your property is shown in the best light.
Can you think of anything to add that can help a home sell?
I’d love to hear your feedback in the comments!

Selling vs Remodeling