Is it Better to Rent or Buy a House in Anaheim Hills or Orange County
I wanted to talk about this topic because yesterday I talked to a young couple I had talked to about three years ago, and they were going to buy but then circumstances changed COVID hit or whatever the reason they decided not to buy, and here they are going to buy right now. And I nicely talked to them, the disadvantages of waiting, in general, to buy how much it would cost them by waiting any further. So here’s my discussion with them: I had the first thing I told them because you waited three years. And when I told them, it’s not about them in particular. But in general, if you’re a buyer by waiting three years, and if they were going to buy a house for $500,000.
Three years ago, as you know, the market has gone up 30%, let’s say in Orange County, maybe it’s even more, but let’s go for 30%. That means the house price they were gonna buy for $500,000 is now $650,000. So right off the bat by waiting for three years, they’re going to pay an additional $150,000. The second thing I told them about is their look, you rent it for three years. And if we take an example, they rent it for three years, at $2,500 a month, that’s 36 months. So they just paid $108,000, which is pretty much gone. In a sense, they pretty much lost their deposit. As soon as you pay the rent, it evaporates. And when you rent, and you pay $2500 A month or $3000 a month or $5000 a month, you lose that money. But guess what, the landlord gets richer. So the landlord is becoming rich by you paying the rent. If you’re paying $2500 a month. And when you buy a house, let’s say you pay $3000 a month in a sense, because of tax advantages, you may end up just paying $2600 or $2700 a month because of the tax refund you may get. But when you buy a house, you get a property tax deduction, you get interest rate deductions, you get homestead exemptions. Those tax advantages could save you $200 or $340 a month.
So that’s an advantage that you’re not getting right now, when you’re renting at this point, the couple was getting frustrated. And I could understand so I was trying to be nice to them. But I carried on with my conversation on why they should buy now and not wait another three years. And the other reason I gave them the disadvantage of renting is that they are not building equity. Well, how do you build equity? So as I mentioned earlier, if you paying $3000 A month rent, it’s gone evaporated, but if you pay $3000 a month in mortgage, the $3000 includes principle and interest every month that you pay, let’s say the $2500 goes towards interest, you are saving $500 every month. And as time passes, the $25 interest will become $2500 of principal towards the end of the mortgage payment and your $500 would become your interest. So every month that you pay, you are paying down your loan and building equity in your house. One of the biggest ways or the fastest ways to get rich is by buying real estate and paying it down. The other advantage of buying a house is you get the appreciation you don’t have anything going on. But let’s say you did not buy the house for $500, which is now $650. So if you buy the house today for $650. And after 10-15 years, that my house may be what $800,000 And here’s a chart. And the chart shows that in general, house prices increased anywhere from two to 4%. Nationwide, every year. There may be a dip here and there may in the long term, you will see appreciation. So that’s a very good reason to buy a house if there’s one reason you should buy a house is to build your equity. That’s how you become rich.
And here is the bonus tip, which is a nice bonus tip that I loved. I read about it way back when in the book called “The Instant Millionaire”. And that bonus tip is that once you buy a house or real property, you become frugal, and the way to riches is being frugal.
So what do I mean by becoming frugal when you buy a house?
Well, when you buy a house, you are going to become good friends with Home Depot because now and then you’re going to go and fix a leak fix a window fixer door as you’re doing that you’re building equity in your house, you’re going to go to Home Depot and other fix-up shops and buy little things and fix up your house. So you’re keeping track of your housekeeping. So as the time goes up, you’re gaining 2% -3% per year so you’re building again equity and appreciation, and one way to do it is becoming frugal by cutting back on your Starbucks, cutting back on your movies, and cutting back on other things. I remember when I bought the house I was pretty much broke when something broke. I had to wait for five or six months because I couldn’t afford it so I stopped cutting other things movies outings driving around for nothing wasting gas but that made me frugal now I’m a homeowner for 25 years and I’ve got a lot of equity in there hope this helps please wait for the next video it has tips on how to save money or how to save a down payment for your next house.