Rent Versus Owning

rent vs owning


Do you think you should own a home or rent? Unless you have twenty million in the bank laying around you have no business buying a house.

Most people think the only way to save money is to buy a house. They have been misinformed and misguided by media, society and even their parents in thinking home ownership is a way to ensure their retirement and that when they’ve grown old that they’ll be financially secure. In most cases, buying a home means you will be paying it off for thirty years. Then to get that money out of it, you would have to sell it. What then? Where will you live?  You won’t be ahead.

A home is not an investment because it doesn’t pay you every month.  In fact, you have to pay for your home every month. Property taxes, easements, insurance, upkeep – plus the mortgage payment itself. That’s why a house is not an asset, it’s a liability. An investment is not a good deal if you are paying in and no cash flow is coming out.  Your equity is tied up and you don’t have access to it.

So, what are the other reasons for renting instead of owning a home? When you rent, you can leave and move when you want. You have flexibility in mobility. With today’s economy and job market it’s not a bad thing to be mobile. And why settle down? Invest the money in yourself or your business. Your money needs to work for you, not the other way around.

If you want a great opportunity to create income for yourself, realize that America is becoming a nation of renters. Apartments offer high cash yield, build equity, give tax advantages and let you use leverage. A $400,000 purchase can be bought with twenty-five percent of the price, allowing you to leverage $100,000 to control four times the value in physical property. Stocks or gold can’t produce that type of result.

A house, much like a 401K savings plan, has been fed to you as part of the American dream and making it. Really, it’s a middle-class myth perpetuated by outdated thinking, politicians and mass media. The middle class is dying. It cannot be sustained anymore by the money being earned by that class of people. Buying a house may have worked for previous generations but old ways of doing things aren’t viable today. We are not in the 1950’s, things have changed and people need to adjust their thinking about finances and creating financial security.

Instead of investing in a house right away, invest in yourself. Becoming better at your job, improving your skill set, networking – all those investments will pay off and improve your financial situation by giving you opportunities to earn more income. Becoming better will never fail you.

Whether you have a house or not is irrelevant to how well you are or, will be, financially. So many people are concentrated on savings but their real problem is they just don’t make enough money. Concentrate on increasing your income so you can save to make a real investment.

Only after you have enough income should you start to think about investing. Buying a home to live in is not going to pay you. Whether it be multifamily real estate or something else, a true investment will not cost you money. A home needs to be fed, it won’t feed you.

If you start investing in yourself, focus on growing your income and putting that growing income into an investment that will pay you, then you will be living like the rich do, not like the middle class.

Most Americans have been made to believe the myth that getting rich is almost impossible or not important. If you look at the world you will see that the only group of people that are safe are the rich. The rich didn’t get rich “buying a house”.

The wealthy will be able to survive inflation, housing busts, tight credit, high unemployment rates and whatever else is thrown at them. They have investments that pay them.

Don’t get caught in the idea that a house is your ticket to wealth. Home ownership has been fed to this country as a way to financial prosperity. It may have been true in the past, but today it’s all a myth.

GC, Cardone Capital.

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