Should I buy a house or should I keep renting? Which is better, buying a house or renting a house.
Should I rent or should I buy? If you are renting and if you enjoy renting and have no plans on buying a house or real property, this video is not for you. But if you are renting now and have thought about buying a house and did not know what to do or have in procrastinating to buy a house, you may want to watch this video. It’s for you
.Hi, I’m Mike Patel with First Team RealEstate and Christie’s International Real Estate right here in Anaheim Hills, Orange County, California. And thanks for watching my videos. So I wanted to talk about this topic because yesterday I talked to a young couple I had talked to them about three years ago and they were going to buy, but then circumstances change, COVID hit or whatever the reason, they decided not to buy.
And here they are going to buy right now. And I talk to them in a nice way about the disadvantages of waiting in general to buy and how much it would cost them by waiting any further. So here’s my discussion with them that I had. The first thing I told them is 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 $500,000.03 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 going to 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.Yikes.The second thing I told them about is that look, so they rented 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 if they had it. They don’t have that anymore because of the rent money, as soon as you pay the rent, it evaporates. And when you’re renting and you’re paying 2500 a month or3000 a month or $5,000 a month, you lose that money. But guess what? The landlord gets richer. So the landlord is becoming rich by you paying the rent. By the way, if you’re coming here for the first time or if you’ve been here several times before, I really appreciate it. So I would ask you to subscribe to my channel. I come up with videos like these informational videos, market updates, and house tours every Thursday. So if you can subscribe right now, I would really appreciate it. A really nice bonus tip.While you may not want to rent any further if you’re thinking about buying a house. So hang on till the last tip towards the end. So I continued my conversation with the couple and I said, look, by buying a house, you also get a tax advantage.
So what I meant was, 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 and 2700a month because of the tax refund you may get. Of course, I’m not an accountant, so please ask for your account on your CPA. But when you buy a house, you get a property tax deduction, you get interest rate deductions, and you get homestead exemption. So those tax advantages could save you 200 $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’re paying3000 a month’s rent, it’s gone evaporated. But if you pay 3000 a month in mortgage, the $3,000 includes principle and interest every month that you pay, let’s say the $2,500 goes towards interest. You are saving 500 a month every month. And as you go time passes, the $25 interest will become $25 principal towards the end of the mortgage payment and your $500 will 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 way to get rich is by buying real estate and paying it down.
The other advantage of buying a house is you get appreciation. Renting. 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 today the house for 650 and after 1015 years, that house may be worth $800,000.And here’s a chart. And the chart shows that in general, house prices increase anywhere from 2% to 4% nationwide every year. Of course, there may be a dip here and there. 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 really nice bonus tip that I really loved.I read about it way back when the book called The Instant Millionaire. And the 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 or other do it yourself self companies that sell stuff. Because every now and then you’re going to go and fix a leak, fix a window, fix the door. As you’re doing that, you’re building equity in your house.
So instead of spending that $20 or $5 on Starbucks or $30 on dinners or $50 on outings, you’re going to go to Home Depot and other fixup shops and buy little things and fix up your house. So you’re keeping track of your house, keeping it up. So as the time goes up, you’re gaining 2% to 3% per year. So you’re building again, equity and appreciation. And one way to do it is to become 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, and wasting gas. So 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.