Jim Collins Thinks Your House Is a Bad Investment | Rent vs. Buy Analysis | LIVE

Video Chapters (Click the time to the right of each question):
- What does a bad investment look like? 3:05
- Isn't it common wisdom that you should buy a house? 6:20
- What about building equity? 8:08
- But what about the tax deduction? 12:00
- So you should never buy your home? 15:10
- How does emotion factor in your decision? 17:35
- What if you want to plant roots and own your home? 19:49
- Recap of rent vs. own debate. 23:25
- What about roomates/AirBnb? 27:19
- Have your children followed in your footsteps? 28:24
- Are you considering moving to Ecuador? 32:54
- Do you still recommend 100% stocks to someone in their 30s? 37:25
- Why total stock market index fund? 40:35
- Upcoming blog posts? 41:38
- Plan for the Stock Series videos? 44:05
- When did you switch to bonds (post-retirement)? 47:53
- Aren't bonds a bad investment right now? 50:00
- Is your wife on the same page? 51:00
- Closing 53:00

Tonight we have a special guest, Jim Collins, who is going to talk to us about why he thinks your house might be a bad investment. Topics will include rent vs. buy analysis, opportunity cost, and a few psychological factors you may not have considered.

Be sure to bring all of your questions about renting vs. buying your home, or any other questions you have for the Q&A.

Be sure to check out Jim's blog:

His blog posts about the rent vs. buy debate:

His post about purchasing a house in Ecuador:

His post about bonds:

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[wesleyhahn]

Mike should do less talking, more listening, and more time preparing a well thought out interview. When speaking with an expert, show a little respect, do some research and find a way to ask a concise question and then listen to the answer.

[PidasianHippie]

I understand what Mr. Collins is saying and see why it is true.  However, I believe the important thing to remember, whether renting or owning, is to live in a dwelling that is far below your means.  The house that you (Mike and Lauren) live in is a good example.  This affords you the ability to invest much more than if you were having to put your extra money in housing.

[ArtOfMichelleP]

I totally agree.  Where I live, houses are expensive to buy.  I'd rather rent cheaply, invest and watch it grow than to tie up all my money in a house that I have to pay interest on a mortgage and maintenance/taxes on.

[nghtblur]

building your own home is the way to go. buying a home isn't an investment when it's overpriced to begin with.

[vermontmike]

I agree that one should below their means whether they are renting or buying. But the argument to rent does not work in places like Vermont. Rent for a good 2 BR apartment is 1200-1500 a month. The mortgage payment for a comparable house is about 800-1000. In this situation, it makes more sense to buy.

[YoungGrizzly]

Summary: it's about preference and long term mindset.

Buying a home in my opinion is like buying precious metals. It's not for you it's for your kids. It's to raise them, control housing costs (w/ fixed rate), and pass on to them. Doing anything else can potentially rob them of their inheritance. If they choose to keep the home after you pass it on to them or take the money from it to do as they please then it is their choice. HELOCs, extra mortgages, etc that use your home as collateral can be a way for others to steal the equity that should be given to your children.

If you're single, don't plan on having kids, or want to move frequently then a home is not for you. You should rent and pay someone else for that responsibility so you can be more agile. If you decide to buy a home for sake of stability then do so but you shouldn't indulge in housing speculation with your primary residence....my mom did that foolishness and it didn't work out for her at all.

So a home is an investment in my opinion but it's an investment in your children's future or your own stability. Sadly American culture will have you as a continued slave to some form of debt, moving house to house, small to big then back to small never owning anything watching your children make the same mistake because they couldn't be bothered with the ups and downs of owning a home.

[scottpepper]

Excellent topic, thanks for covering it so well. Jim, nice to finally see your face after reading your blog posts for the past year. We recently sold our house of 7 years because we're in the early retirement phase and have grown wings :). And I learned AFTER doing the analysis of everything we spent on the house, what we sold it for (excellent market in coastal Calif right now; we did very well), and all those other costs and benefits (like home business expense deductions, etc), that it basically cost us about $100 more per month to own the house than it would have cost to rent it. That was a shocker to me, because apparently I didn't do as thorough an analysis BEFORE buying as I thought I'd done, and was perhaps more under the influence of emotion and propaganda than I'd care to admit. On the one hand, if we'd owned it a lot longer, it might have been a better deal, but on the other hand, you ARE at the mercy of external conditions that you cannot control. E.g., we simply got lucky that the market turned back up so sharply in 2014, when we wanted to sell. And frankly, we chafed at the idea of paying nearly $600 per month in property taxes after paying off the mortgage completely. In that sense, my "old" self that thought I was "throwing money in the trash" by renting in California (and not owning) was sadly misguided. Because while that was happening, all that money that was going into savings (esp. maxing out my 401k each year) has turned into enough f* you money to allow me to retire at 53. 

[InvestingBookSummaries]

Love when fellow youtubers reach out and collaborate.

[rudistorm]

Long term you are better buying. Short term better to rent. I base this on a 15 year mortgage. After 15 years house is payed off your cost of shelter is very low. Meanwhile the renter is paying much more year after year with rent going up due to inflation. Interesting discussion!!!!

[aaronhowell]

Thanks for covering rent vs. buy. We like to move at will, but have constant home investment FOMO...like we're poor decision makers or something. We are very financially responsible, but just don't want to own a him. Glad to hear these counter points.

[joekkl]

I am also an investor in the stock market, so I have both. Buying is better than renting. Why? Because mortgage interest is tax-deductible. That, alone, is better deal than renting. I'm not buying Mr. Collins' theory here. Net worth also includes home equity, and not everyone is doing standard deduction by the way.

[micheallumonde]

There are definite disadvantages to home ownership, as was nicely laid out here, it's not for everyone. A couple considerations to make, provided you're in a position to afford to buy a home; when you buy a house using fixed rate mortgage, your payment won't change unless you want it to. Your rent, just like stocks, is subject to the market volatility, your rent can go up with every new lease. When you have a home with a mortgage as Jim states, you are kind of stuck, but that's the trade off, when you have a home with a mortgage you won't be priced out of it, like can happen when you rent. Oh, one last thing, fees on buying are typically much better than selling (despite a sometimes larger initial outlay of cash for down payment), the seller customarily pays the 4%-6% commission on the sale. Great video, well thought out and reasoned arguments.

[yatessnyder]

anything that takes like 30 years of your life to pay off must be a bad investment. Build an awesome earthen house in a year or less and be done with it.

[welovelibraries]

Video is hard to watch visually. Listened to it. “Run the numbers” - 100% agree. You all should have SAID what “the numbers are”

[hmj]

I've heard people say that owning a home is like forced savings. Often you can rent cheaper than a mortgage, take the extra money (opportunity cost) and invest it. The growth should be more that the houses' appreciation. Buying a house is typically an emotional decision, not a financial one.
As a side note, I'm half way throught this video and I'm wondering if the female is anything more than eye candy.

[BFArchn]

$100k tied up in the house? How about $100k spent on rent....you will NEVER see that $100k again, however tying it up in a house means you can sell it for $100k cash, thats HUGE, no renter can do that....also you can do a 1031 exchange and pay no gains tax, ALSO you could do a HELOC on it and pull the money out for other investments while STILL living in it.

But yeah, just leave those facts out to support renting. lol

Yes, renting can make sense, but it's rare.

[joemomma]

I bought my house in 2009 for 60k and that shit was appraised at 185k last year. I'm in cali. Tripled its value.

[Xycopixie]

I live in New York City, I was wondering if it wouldn't be better to just get a condo. It's a bit restrictive but you don't have to shovel snow. Plus the mortgage is lower.

[MoonLiteNite]

For me, buying a house and having roommates have been great, basically paid around 85% of my mortgage.
I think for me, this was the best. Now i do regret the solar panels, those are about 20% of the cost of the house, then 10% after all the rebates came through.

edit: and going to fully own it by the age of 30!

[GuayoyoAzucarado]

We have to do the math/numbers. Sometimes is better to rent. Buying something to own it may help to pay as much as possible or pay it as quickly as possible. When I am older I hope to not owe anything in my house. Just pay taxes, services and repairs. If this become expensive (it should not) I might sell and start renting. It is a numbers game. One thing I can tell you I bought my house in 99 and I won't be able to get my money back selling it. There is no way my house is going to triple or more in the future. I think the new houses may cost less. Some people just buy houses to sell them later. I know people who have a few houses. Some they keep to rent to people and other for fixing and reselling for profit. These people are doing great.