Historic Low Interest Rates | Buying a Home is Dumb

Buying a home isn’t a good investment. There I said it. Even with interest rates being at historic lows!

Not only have I said it, but Billionaire Grant Cardone has said (CLICK HERE),

 “I rent where I live. I treat houses like hospitals. You get in you get out.”

“Houses were built for banks, they weren’t built for people. And people were lied to and said a house was a good investment.”

“The house is one of the dumbest worst investments a human being can make.”

“You got to pay the house the house doesn’t pay you and if doesn’t pay you it’s not a good investment.”

When it comes down to buying a primary residence, we’re taught that it’s a good investment. In the video with Grant, he said that since you pay the bank and the house doesn’t pay you, owning a home for the purpose of living in it, IS NOT a good investment.

All in all, real estate is a great way to make money, as an INVESTMENT PROPERTY. Just not using your home and lying to yourself that it’s a solid way to make money over the course of time.

Here is an example showing you why a home (primary residence) isn’t a good investment. Real estate for rental properties is a different animal…

If you don’t want to go through all the math, here’s the short version:

Using a 20% down payment for a primary residence vs. investing your 20% down payment plus $100/month into an investment, you will find the investment option will make you 400% or greater than buying a home.

Here is an Example:

Home Purchase Price = $200,000

Interest Rate (estimated) = 3.00%

Down Payment (Assuming 20%) = $40,000

The Value of Real Estate after 15 years (Assuming 3% rate) = $311,593

The Value of Real Estate after 30 years (Assuming 3% rate) = $485,452

The amount of Interest Paid on a 30 year mortgage = $102,797

The amount of Interest Paid on a 15 year mortgage = $47,989

The amount of Taxes you will pay each year (1.25% property value of $200,000) = $2500

The amount of Taxes you would have paid over 15 years (Assuming no increases) = $37,500

The amount Taxes you would have paid over 30 years (Assuming no increases) = $75,000

Your Insurance cost each year (National Average) = $1200

The Insurance you paid over 15 years (Assuming no increases) = $18,000

The Insurance you paid over 30 years (Assuming no increases) = $36,000

Your Total Costs (15-Year) = Interest + Taxes + Insurance = $103,489.

Your Total Costs (30-Year) = Interest + Taxes + Insurance = $213,797.

This isn’t including any repairs, maintenance, upgrades, etc.

Your Total Profit 15-Year (Value of Real Estate minus Total Costs).

311,593 (Value of Home) minus 103,489 (Total Costs 15-year) = 208,104

Oh…plus we have to account for the $200,000 you spent on the mortgage…which leaves you with a $8,104 (profit).

Oh…and we didn’t include repairs, maintenance, furnishings, time spent mowing the lawn blah, blah, blah.

Your Total Profit 30-Year Mortgage (Value of Real Estate minus Total Costs).

$485,452 minus $213,797 = $271,655.

Oh…plus we have to account for the $200,000 you spent on the home…which leaves you with a $71,655 (profit).

Oh…and we didn’t include repairs, maintenance, furnishings, time spent mowing the lawn blah, blah, blah.

The Investment Option (Using Your 20% Down Payment).

The 15 Year Option

You decided to invest $40,000 & save an additional $100/month at 7% interest rate over 15 years = $145,654

Profit of $87,654 ($40,000 + $18,000 contributions taken out). After you pay taxes, the worst-case scenario using 2020 tax rates (20% Long-Term Capital Gains) would be $70,123.

Oh…and this doesn’t include any dividends you would receive over 15 years…

The 30 Year Option

You decided to invest $40,000 & save an additional $100/month at 7% interest rate over 30 years = $446,657

Profit of $370,657 ($40,000 + $36,000 contributions taken out). After taxes, the worst-case scenario using 2020 tax rates (20% Long Term Capital Gains) would be $296,525.

Oh…and this doesn’t include any dividends you would receive over 30 years…

I rest my case…

Happy Slacking,

Josh, AKA “CHACHI”

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