Rent Your Way to Freedom
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About the Book
We’ve been conditioned to believe that “the house is our greatest asset.” Indeed, over 60% of people own their home and “shelter” is the base of Maslow’s hierarchy of needs. Indeed, housing is vitally important and indeed good quality housing is proven to positively contribute to personal success in life.
But, what if what we’ve been led to believe, that houses are a great investment, isn’t so true. What if the house is not necessarily a means to riches, but rather a place to spend them? Is it he Porsche which got the man rich; or, is it the riches which got the mane the Porsche?
What if owning is not as financially beneficial as our perception wants to justify it to be and what if renting is not as bad as it is made out to be?
Think of Romania, Slovakia, and Cuba … what comes to mind? A rich population, thriving or poor people struggling? Well, consider that those counties (former communist countries by the way) are all in the world’s top 5 when it comes to rate of home ownership – each posting home ownership rates at 90% or above. Yet only one of those countries ranks in the top 50 (Slovakia is 50th and Romania 73rd, Cuba doesn’t make the top 100) of the “Top countries with the highest average wealth per adult in 2017.”[I]
Perhaps just coincidence, but it would lead one to wonder: is homeownership a ticket to wealth?
Why is that soon after George W. Bush pushed to increase home ownership rates up to a high of about 68% that we soon found ourselves in a economic housing crisis? Housing is supposed to make us rich, but yet it almost broke the country.
Is ownership the path the riches? Or, might renting be an equally viable means of attaining housing and even better alternate path to larger and more liquid wealth over the long term?
A simple $119,900 house will appreciate in value to $385,698 over 40 years at 3.5%. However, that same amount of money, $119,900, if left to compound at the market’s average rate will grow to over $3.765M. The difference in absolute value is enormous.Yet, what’s even more interesting is that buying a house gives us a place to sleep and some bricks and mortar, while choosing investments makes you the proud recipient of interest income of over $338,939 in year 41.
If the long term is what we’re looking for with our investments, clearly there are better places to invest than in bricks and mortar.
But, despite those figures, people (and their innate desire to want to own something) will commonly object:
· My (sister, bother, aunt friend) made millions on their house, they are great investments?
· But what about buying at the bottom?
· If renting is so good, why does everyone buy?
· But why would I let a landlord make money off me?
· There aren’t any good houses for rent. Where do I live?
· What if I’m already in a house and can’t get out?
· Where do I invest to get that kind of return?
· Why would I throw my money away (on rent)?
No doubt these are all good and reasonable concerns, reasons to buy. But, what if buying and the tax credit the government gives are doing more to benefit the bankers (who write the loan), the construction industry (which builds the house), and the government (who collects property tax and underwrites). Does our taking a loan do more to help support the fiat currency or more to help us build wealth?
What if we could, in renting, find a why to save (and then invest) an additional $500 per month. If invested from age 45 to 65, at just 4.7% (the difference between the average return on a house and average higher return in the market) and you’d have $199,324.That’s $49,000 more than the what people have as their average home equity $150,305.
Rent Your Way to Freedom explores not only the financials, but also the various personal factors that drive the rent vs buy decision.It considers advice from finical guru’s who are found on both sides of the housing investment augment, as well as stories and examples to consider in the rent vs buy debate.
If nothing else, the information provides deeper perspective and sheds some light on why 60% of all new households being formed these days are opting to rent.
Home ownership is current at 63% on its way to about 60% by 2025. Why?
Are people wising up to alternate investments? Is a house just housing, rented or bought? Might the house be a different investment than what it once was a century ago – in a different economic environment?
[i] (Top countries with the highest average wealth per adult in 2017 (in U.S. dollars), 2017)
After setting out into life with an economics degree, Eric Nies found himself living in a “rental only” housing market. Contrary to the ownership mentality with which he was raised, he become a "renter by choice" over time.
He found the rent vs buy decision is not so cut and dry. and concerned with the logic (or illogic) of his preference toward amid the litany of typical objections from friends and family, he took to research the issue - originally for himself. The resulting analysis shows that renting may be viably better decision than owning - contrary to what conventional wisdom would have us believe.
The American Dream is no longer inextricably linked to ownership. Renting can be a positive path to freedom!