Renting vs Buying A Home: Which Is ACTUALLY Cheaper?

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IS IT CHEAPER TO BUY OR RENT A HOME?

DOWN PAYMENT:
In most situations, lenders will require you to deposit 10-20% of the purchase price in order to get approved.

MORTGAGE INTEREST RATE:
The cost of borrowing money the highest it’s been in more than 20 years, at just over 7%.

PROPERTY TAXES:
This ranges from 0.3% if you’re in Hawaii to as high as 2.5% per year if you’re in New Jersey.

INSURANCE:
According to Bankrate, the average home insurance costs $1428 per year for a $250,000 home - but, when 66% of homes are said to be underinsured, expect that you’ll pay more like $2200 for a proper policy.

REPAIRS AND MAINTENANCE:
Over the long term, it’s recommended that you budget 1-2% of the property’s value, every year, for doing these normal repairs.

RENTING A HOME:
This is fairly easy to calculate: The price you pay is the price you pay - there’s really nothing fancy about it. However, according to a new analysis, in all but 4 major US Cities - renting is cheaper than the cost of buying.

After doing the math, here are the overall stats:

If you intend on living in your home for less than 10 years, then renting is likely the cheaper option. If you want to manage your cashflow without coming out of pocket a sizable amount of money, then renting is better. The same also applies if you want the flexibility to move on short notice.

However, if you plan on living in the same home for MORE than 10 years - buying is typically the better choice. If you want to remodel or upgrade your home - buying is better. And if you want to lock in your payments to invest in the area - buying is better.

My personal preference is that - if you’re going to buy something, get something that needs work, fix it up so that it’ll be worth more than what you paid - and then, use that as a buffer so you won’t come out of pocket in the event you need to sell on short notice.

Every situation is different and every area will have slightly different numbers - but, for the most part, this rule of thumb should hold true.

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[NicholasBall]

Purchasing a home is already a very difficult thing to do, unless you pay cash or don’t get a loan from the government. If only my minimum monthly house payment, over the course of 30 years I’ll pay more than double what my home is worth. I purchased before things got crazy so I got a good interest rate. I couldn’t imagine trying to rent or buy right now.

[tatianastarcic]

Great video! For 2024, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.

[noel]

I’ve been moving every 2-3 years exploring different states for the last 10 years. I would love to own but renting has made it easy to move where the jobs are. I’ve nearly doubled my starting salary doing the same job in different places.

[gamesilver]

Im DCAing in ZRT55H$ as well. ETH heavier DCA and ALGO. Im taking your advice and starting Google tomorrow with a 50 dollar purchase and continuing Microsoft and Apple. VTI and VOO on another app and longterm portfolio. Here we go family!

[matturner]

I remember in 2007 when I was working in real estate seeing people buy homes new from builders with the intention of selling before close of escrow to a new buyer for profit. The crash was so brutal and fast that I remember seeing a lot of these units foreclosed on with the builder plastic still on the carpet.

[farhank]

I owned all my life and sold it and renting now.

soo much peace of mind knowing I can get up and leave anytime. and Not worrying abouy repairs!

[opbluestreak]

I just turned 18 and your content has given me massive value in establishing myself financially. Thank you, Graham.

[moneycessity]

Renting vs buying should be mostly a lifestyle decision as opposed to an investing decision. Consider factors like size requirements, location, cost, and duration.

[wealth.harvest]

Renting’s like dating: No long-term commitment, but you never really get your deposit back

[SMLYTPMovies]

I’m currently renting. I’ve found that at least for a couple years, renting is better. If you’re looking for a much longer term investment, buying would be better. I’m 21, and don’t know where I’ll end up being at in 2-3 years. So right now, renting is best. Once I come to figure out where I want to be, I’ll be making a down payment.

[tarashrynchuk]

I want to rent forever! I pay $1700 a month for an ocean front apartment vs $5500 average monthly mortgage payment for some creepy house out there in boonies. I live off one paycheck and save the second. Maxed out on my 401k and built a decent QQQ portfolio. Why to own and be broke?

[MortgageTalkwithgeorgeneufeld]

The key is definitely how long you plan to own the home. Short-term ownership really doesn’t make sense because you can't really expect quick appreciation. But I love the tip at the end. Buy a home that needs some work, use a purchase plus improvements mortgage to create some equity.
Great video.

[mayaleex]

Thank you soooo much for doing all of the research and breaking down the numbers in a realistic way to make it easier for us to visualize and understand :)

[fatguy]

The nice thing about buying a home though is after 30 years when in retirement you wont have to worry about rent increases since youll probably be on a fixed income, also you can pass it on to your kids as a going away gift

[lesliesmith]

And when you rent you need a security deposit, first and last months rent, and the rent can be raised every time you renew your lease, which is getting ridiculous around here

[DemisDays]

Beautiful video Graham!! So many people are still stuck in the old mindset that buying is always good, but there’s so much data to show that’s not necessarily the case!!

[nathongknight]

Just got hit with a broken AC, fridge, and multiple leaks. So far 6k in and I still have a leak. Still prefer home ownership though.

[absentmindedprofessor]

We just closed on our first home! We decided to buy for a few reasons. Rentals are nice for the reasons you’ve mentioned but we’ve had to move every few years as the our lease has gone up significantly when it’s time to renew in this area (our last place wanted a $500/month increase!) Buying means our monthly payment stays about the same and we are building equity. One thing you didn’t mention that surprised us at first is how much additional money you need to bring to the table when buying a house for closing costs! We had enough saved up for a 20% down payment but weren’t ready for all those surprise costs at first.

[eleternocat]

IT DEPENDS WHERE YOU LIVE FIRST, SECOND THE INTEREST RATES AT THE MOMENT. RIGHT NOW IS OBVIOUSLY NOT THE TIME TO BUY A HOME

[marcusgilmore]

What a tough decision in these times. The deciding factor for me would be whether the property is uniquely investable. If price, curb appeal, and age are good and you’re not in a bidding war. Basically if you can find a amazing deal buy and if not rent.