Capitalist Investor

Renting or Buying: Property Ownership in Changing Generations, Ep. 241

• Strategic Wealth Partners

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Title: 5 Hot Topics from "Renting vs Buying a Home" - Capitalist Investor Podcast

1. Shifting Trends in Homeownership**: The hosts discussed the changing landscape of the American dream, noting how younger generations are leaning towards renting over buying. Factors such as flexibility, cost considerations, and lifestyle choices were highlighted as reasons for this shift.

2. Financial Considerations: The conversation delved into the financial aspects of renting versus buying. They emphasized that owning a home may not always be a guaranteed investment, especially considering factors such as property taxes, maintenance costs, and market fluctuations in interest rates.

3. Generational Differences: The hosts explored how the mindset towards homeownership differs across generations. They discussed how societal norms and priorities have evolved, impacting decisions related to buying a home, starting a family, and overall lifestyle choices.

4. Wealth Building: One key topic was the notion of homeownership as a means of building wealth. While traditionally seen as a way to accumulate assets over time, the hosts highlighted the importance of financial discipline and investment strategies for renters to also grow their wealth effectively.

5. Timing and Market Dynamics: The podcast touched upon the significance of timing and market conditions when considering buying a home. With current high demands and supply constraints in certain markets, the discussion underscored the complexities and challenges involved in entering the housing market.

Overall, the episode provided valuable insights into the ongoing debate of renting versus buying a home, shedding light on a range of factors that individuals should consider when making this crucial decision. By addressing shifting trends, financial implications, generational perspectives, wealth-building strategies, and market dynamics, the hosts offered a comprehensive analysis to guide listeners in navigating the complex world of real estate investments.

Hello and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D, and the whole crew. Tony the tiger who hand Luke. What's going on, guys? I'm alive. I just want to say, every time now, still, still Lyme free. Every single podcast now. No, I feel like a camping trip. There should have been a documentary on it. I want to know what went on. Pictures, you actually. Timelines sleeping on the ground. Mine was very boring. Everyone else's was lit. Let's just say that word. Lit. Lit, huh? It's called Rave Cave. I have pictures, and we have. We made multiple signs. One was called Rave Cave 2024. Had, like, Jim Leahy from trailer park boys on there, zincs, Busch Light mill light, nanny light. It had like all that. And then the second sign was OJ Simpson in a truck with the 40 or 45 cop cars behind him. And the saying on there was, the juice is loose. So that was that they were doing. The juice was loose for me. I didn't drink, just relaxed. So it's very calm. Became drinking water. Right. Water fasting for 3 hours. I like it. Very deep within myself now. Very self reflective. Yeah, real grounded. You, right? Yeah, yeah. As he's shivering on the ground. Anyway, all right, guys, the pros and cons of renting versus buying. Yep. And this was a topic sent in by. It was one of our clients, I believe. Clients and listeners. Yeah, listeners. Rent or buy also goes and talks about how we need people to fill the houses as well. What's happening with people? This is actually a very big debate. It's kind of like buy a car or lease a car. Right? Exactly. That's where my mind went. And I think the game's changing, actually. Like, it's not the same because the american dream's changing. The american dream used to be go work nine to five. One guy worked nine to five when the woman never worked. And they would come home, feed the kids with the money they made, go to the grocery store, they would spend time with the family. They also had kids. They got married and had kids. Like, that was something I just didn't say. I just missed that. That's the most important part there. Married, got kids, and things like that. Raise a family. Now it's like younger people aren't getting married, aren't having kids, and for those generations below, like 40, 45 years old, the millennials and Gen Z's, like, the conversation, I think, is different. Should you rent our own? I think people are leaning more towards renting and not owning because they don't need to have a large, big house. They can have it operate in a small space. They also want to be free and flexible to travel around. From a cost standpoint, I mean, do you really even own your house? Property taxes, you know, always paying property taxes no matter what. Right. So, I mean, I'm sure we're gonna hit on a couple of those different pieces, but generally speaking, like, that's where I wanted to set up the conversation. Yeah, I, you know, I mean, just thinking about it today, if I was renting and I'm thinking of buying a house, I'd probably continue to rent because of what I just know is like, you know, interest, interest rates for houses went from three to 8% and when that happened, your mortgage payment went up two to three x. And who can afford that now? Now you're like trying to figure out, you know, hey, I had an idea of owning this type of house and I gotta buy a house that's half of that size and maybe not the area I want to be in. So, like, if I would have had this conversation two years ago, different conversation today, I would look in through a different lens. Yeah. But if we take a look from 2019, houses are up on average about 45%. In some areas it could be 345%, but on average. So one thing with the house, you can't. We, when we build a financial plan, we do not design it as an asset because the odds of you liquidating it to use it for retirement are very slim. Well, you don't want to. You don't obviously want to. Yeah. Or, you know, reverse mortgages and stuff like that. But I mean, you could also look at it saying, hey, I had this house. I had this 4000 square foot house when I was a family. I don't, you know, I'm an empty nester now and I need a 2000 square foot house. So there could, you could unlock the equity that way. I look at that as a pro, but at the end of the day, your house really isn't liquid unless you literally sell it and then where are you going to live? You know, you always have the, the battle of maintenance, you know, and I'm. Very bad at that. I have a lot of maintenance things. Cutting grass, you know, and fixing problem, plumbing issues. And like, there's a, I mean, that list could go on and on and. On or sump pump going out and then water coming in the basement. But you also brought it up like, there's always going to be real estate tax. Yeah. You know, so you're always gonna be. You know, I paid a good bit of money relative to the value of my house last year. I don't have, you know, huge house. I just have a very average house. What did you, what did you say? I paid a lot of property taxes. Like, I did math in my head. Like, I think it was like, 2% of, like, of the value of my house. Like, something around there. I mean, that's a lot of money, especially if you're over 60 years old, like, and you're retired. Like, that's a big expense that comes into your daily living, of paying property tax. You, government owns your home, you don't own your home. Yeah, absolutely. And, you know, I think, speaking of financial plans, I think we usually put in, like, a one to 2% per year calculation of just ongoing maintenance issues. So you have a $400,000 house. That's, you know, probably$4,000 a year minimum that you'll need to fix stuff or, you know, like me, I just. I've been in my house for just a little more than almost six years, I guess, and I already had to replace my hot water tank. Yeah. It's just like, you know, four grand out the door. No. So that is the stuff that. That you don't hear about, especially when I was younger and, you know, was, you know, looking to buy something, everyone's like, oh, it's a great investment. This is right before, you know, 2008. Right. So it is a very interesting conversation, the way that Luke set it up, because I would say, in general, you would probably want to buy a house if you wanted a home base, and, you know, you're going to stay there. Right. And, you know, that usually comes with, you know, a family. Right. You know, when I was younger, you know, maybe I would want to move to a different city, right. Maybe I want a new, new job. Maybe I would want to travel more. And that. That idea, I feel like it was pretty much our generation, like our age, me and Tony, where that kind of split. Right. And since then, there's been lots of statistics that. That say, you know, people are just not living like they used to, especially in their early twenties. You're early mid forties, so you're now early mid forties. Are your friends all married and kids? Primarily. I mean, greater. So it might just be greater than 50%. It might just be a cycle of life, maybe. Like, we're all the whole concept that those gen zs aren't having kids, aren't raising families, and that's not prioritizing. Maybe it's just the cycle of life. We're just talking about it more. Maybe it's like we're just too young and it's not. Maybe it's delayed by four or five years, but, like, maybe by the time you're mid. Our generation's mid thirties. Late thirties. Like then maybe that will be the time then people will actually. I mean, I started. I started my late. You know, I didn't have my daughter. She's four, I'm 45. Do the math. Right, right. Like, and when did you buy your first home? Probably five years before that. So maybe 30. Yep. Early thirties. Mid thirties, yep. But I also owned like a condo. But I didn't think it was. It was. It was kind of a house, but not really in my opinion. It was. It was. But, um. I mean, I don't know. At least I owned it and I got. I made money on it. Not much, but I bought my house three years ago and right after Covid happened. And it was a good decision financially just because it has appreciated so much and I did lock in a low rate. I really want to speak one to one other thing for the younger generations. I feel like the things I think about now that I have to worry about, like the maintenance, like you said, the cutting grass, the what if something does go wrong? Like keeping that in my head, like it takes away brain power. And I think as a young professional, like younger, like 2030 people that are younger, that aren't married, aren't raising kids yet. Like, it's more of a hassle to try to own a house and operate the house than it is worth it sometimes. I mean, it's not even about the money aspect. It's like, you know, if you're taking brain power away from work, like, whatever it be to focus on that, that's like less. I don't know. Like. Like I said, I'm trying to think about buying a house right now. If I did not own a house and I'm think like, I would have a hard time pulling the trigger. Cause I just feel like I'd be a maybe overpaying right now. Cause housing is an issue. Through Covid, it became a, you know, demands. Demand is low because interest rates are high. I think if interest rates were to come down, demand would be more available because people are like, okay, well, at least interest rates are 5% and not eight. I'm comfortable paying a 5% mortgage. And then there would be more supply, which would, you know, bring prices down, in my opinion. So if I were going to buy a house today. I probably wouldn't. I would wait, I would rent and just say, well, I was going to pay mortgage payment, blah, blah, blah. Like I would. I would be a little bit more cautious, but I'm a cautious thinker. I will sum up my thinking. I need to answer the question. I've been going a lot of different directions. To answer the question, I will sum it all up by saying that if one of the reasons why people say you should own a home rather than rent, that's kind of been the concept outside of what I talked about already, is because it's an easy way, should be technically, like, it's thought to be an easy way to generate some wealth, because if you get a 30 year mortgage, you pay it off. And it should appreciate with inflation, like you should have$200,000 house you buy today might be worth$600,000.30 years down the road, and it's all paid off. Now you have a$600,000 asset. So it's almost like a retirement account, even though you shouldn't treat it as such. It's kind of like a retirement account in a lot of people's eyes. You know, you kind of. You have an asset. I think you can do the same thing, if not better, if you're just disciplined and you save money somewhere else if you rent. The key is if you rent, you have to be disciplined enough to save money somewhere else in an investment account to grow an asset as well. The problem is people are very bad at saving money. So now that they don't, you know, having the maintenance costs, don't have the property taxes, all that stuff. Yeah, it's factored into maybe the rent prices a little bit, but not having that over their head, like, okay, I can just spend this money. And they never truly, you know, have that over their head. Hey, I need to pay off my mortgage. I need, hey, I need to build this asset. I need to make sure that I don't lose my house. You know, they don't have that necessarily stressed, so they don't build the same amount of wealth. How homeowners typically are wealthier than non homeowners because they always have that wealth asset. And most people that don't own homes don't build that outside somewhere else. So should you rent or buy? I think for the most part, eventually you should always buy at some point in your life. But if you don't buy it, I don't think it's a horrible concern. You just need to make sure you're disciplined. Yep. I think that sums it up pretty well. And, you know, I would say, you know, last thing, I feel like everyone has been told, especially, you know, ten years ago, that buying a house is always, always a great investment. Right. That. I think that is the concept that I want to say. That might not be the case. Right. There's lots of costs that go into it. Timing is a huge thing, as Tony just said. So more of a long term game to buy a house. And the supply and demand issues right now, especially on the lower price market, there's just way too many buyers for what's out there. So that's going to frustrate a lot of people trying to get that first home. So anything else, guys, on renting versus buying? No, I said my piece. All right, well, hey, thanks for listening this week. If you guys have any ideas for shows comments, hit us up at info connect.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.