Renting vs. Buying a Home: The 5% Rule

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Title	:	Renting vs. Buying a Home: The 5% Rule
Lasting	:	10.36
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Views	:	5 jt

It's not comparable except that literally every renter would kill to own a home My house took 6months to go up over 100000 in value Just own a home my guys, don't be an idiot
Comment from : @mikeandrade586

This guy could easily be a Poker Player or a Western Gunfighter
Comment from : @davidwhyman1189

Rent (flat) almost always includes water and heating within the rent and also stove/oven, washing machine, refrigerator etc are covered by the landlord Electricity is payed by youbrRent is usually quite high thoughbrbrBuy (flat) You need to pay 15 out of pocket and the rest can be a loan You pay a monthly rent that is often very cheap and covers water, heating, common areas such as laundry room etc Electricity payed by you Often a better deal than renting an apartment in the long run but you need to pay a lot of money out of pocket You will also be responsible for everything inside your flat (refrigerator, stove etc) brbrBuy (house) needs 15 payed out of pocket, the rest can be a loan You also usually need to pay for title deed You will pay for water, electricity, heating by yourself And you are responsible to maintain everything yourself etc usually a great deal but a lot of money is needed out of pocket to get it and it will cost a lot to maintainbrbrRent (house) isn't really a thing in europe, but it can be done but it is rare Usually you have to pay heating, electricity, water by yourself together with really high rent But maintenance etc is covered by landlord brbrNo matter which you choose you will struggle rents are high and keeps getting higher brPrices on flats and houses keep rising To buy a house or flat you need to save money but rents are too high to save much money
Comment from : @johanfagerstromjarlenfors

2025: Rent VS Buy VS Live under the bridge by the river Decisions, decisions
Comment from : @ronniebx4664

Interesting approach but that is a very static assumption Because the absolute figures of financing and monthly share purchases are very different That means you have to look at it in a more dynamic way Example: in 2025, a house is bought for 500,000 and in 2035 the value of the property is 750,000 That is 250,000 gross profit on the property If I use the 5 rule, ie calculate 20833€, also 10 years of annual increase in value of around 5, I have 325,000€, of which 75,000€ is gross profit For the people who see my 50 assumption as too much, in Germany between 2010 and 2020, prices rose between 65-81, depending on the statistics
Comment from : @yusufbenli5433

Can you put in a word regarding one time unrecoverable costs, such as closing costs? And a word regarding risk of depreciation in a leveraged context (buying) vs an unleveraged context (renting) (regarding the property or the stocks portfolio)
Comment from : @yoavmor9002

AI
Comment from : @BernyBanton

3 lol
Comment from : @LuxDeLune

Interesting to see this in 2025 looking back at 2019 There are a couple of major problems with your analysis however: First - you say people won't sell their home if they know it will be worth more in the future (say a year) This is absolutely wrong The reason people still sell their homes, knowing full well that it will be worth more in a year, is that they are buying another home with the proceeds, which will appreciate at the same or greater rate Almost no-one sells a house and doesn't buy another property, or doesn't invest the money in a different income producing asset Second; you fail to account for the opportunity cost of paying rent for 25 years (typical mortgage amortization) or even longer Each month your rent disappears from your bank account, you have lost the ability to invest that money Your down payment opportunity cost and mortgage interst cost pales in comparison to that lost capital
Comment from : @sandor2960

South Africa br20 rule
Comment from : @andrieslouw6588

Bought at 350k, the same year the price went up to 440kbrHad taken a 401k loan out for the mortgage The next month the stock market dropped 20brbrI'm not saying this is a good idea for everyone, but my net worth went up quite a lot by devesting from stocks and investing in real estatethe month before covid hitbrThis is one millenial who made it from dumb luck
Comment from : @OccasionalHaHa

In ma opinion one element that you are not considering is the increase of the rent over time while the mortgage remains stable
Comment from : @marcovatta5102

Stocks typically fall 90-99 quickly after buying I'd rather real estate that doubles every couple years
Comment from : @DesmondReed-y7e

It’s crazy how the advice in their video is 100 useless now only 5 years later
Comment from : @W333L

What a bunch of bs What's the next video gonna be about? Selling the house your inherited from you family and gamble that money in the casino? 🤣
Comment from : @LucaBerg22

In UK landlords and property agents simply pass the maintenence costs to the person who is renting
Comment from : @artjomsrimdjonoks2938

I stopped listening because you said inflation is 17 and interest is 3 brbrHow about 5 and 12 in normal countries its only the US that has abnormal interest rates
Comment from : @on_the_saddle

I bought a house, rent it out Rented myself a simple hobbit hole
Comment from : @theblackneon5396

The 20 down payment is an investment, NOT an opportunity cost Investing in a home and paying it off is much more valuable than a stock
Comment from : @DanielDuhon

There are things to take into account other than value comparison to decide whether you should buy or rent A few has the financial skills and risk appetite to grow their savings So for average human, it's way safer to get into a mortgage deal
Comment from : @NapoleonBonaparte92

This video doesn't make sense for non investors brbrThe value of this video is for portfolio managers looking to increase capital Not for people who actually have to live and work in the property
Comment from : @MaksimY_

This meeting could've been an Excel spreadsheet Would make it much easier to apply to other countries and inflation scenarios
Comment from : @maroxesen1

Doesn't apply anymore Houses are 8-12x income
Comment from : @bruce7244

I bought a home in 2020 I now pay a fixed amount in mortgage payment based on the purchase price Since buying the house property values in my area have doubled and so have rents I now pay around 25 in mortgage payments than I would need to pay if I was renting saving me more than $12,000 per year and that number will increase every year by the rate of inflation If I were to sell the home I would be ahead by about $100-150K Not everyone hits the right time and place but this example shows some flaws in his arguments
Comment from : @rolandstockham1905

You are wrong Mortgage cost is partly recoverable when you sell the house later Second mistake you make: fixing your house will increase its value in the long run Someone who rents just loses everything and will never make a profit
Comment from : @Flazz007

This is a grossly distorted analysis, framed to make renters not lose their minds I’m a retired CPA and longtime homeowner
Comment from : @DanSme1

This is so informing and at the same time such a useless way of rationalizing this subject You CAN'T put down on number and calculations a subject so subjective A friend is renting in Brooklyn, he's happy with his decision, everything is working out in a mathematical way for him and his family Now, the owner decided to sell Let's set aside the stress and everything that comes with it, now is gonna have to drain all of his savings of years because the market is crazy, to move him and his family with 4 children's There it is, that's why thinking that way is useless In finance we always forget about the philosophical approach in the rational thinking process of putting numbers together
Comment from : @ilcasti

You need to take into account, that the investment in the house has a leverage, so your borrowed capital also returns gains in the house price Also many countries have tax breaks for interest paid on a mortgage, and also with tax gains on stocks much more than gains on a house, when selling Makes it more complicated, but works highly in favor of buying the house
Comment from : @olliedk12

Your "definition" of an unrecoverable cost only makes it way harder to understand
Comment from : @stipeslol

but some of us can get loans for a house, but NOT for investing that changes things quite a bit if we don’t actually have that same opportunity cost
Comment from : @TheRealStoryWeaver

I think that renting has many risks if we assume that owner of the house decide not to rent any more, you have to move it's has many unrecoverable costs, searching for a new place is also an unrecoverable cost, and in our country we have deposits equally to 3 months of rent and again most of times they cut it because they say that we accrued maintenance costs, so they should cover it by our deposits So for me the best safe is owning Sorry for my English
Comment from : @АбубакрХатамов-в3ш

Let me tell you why you're wrong and should remain a permanent consumer and never own a property
Comment from : @cgjoh

I think I 'm not following something The 3 is on the down payment So it can't be applied to the full house price If you put 20 of down payment, the investment cost is less than a percent
Comment from : @pierregranet

What a legend this guy is
Comment from : @DarceG-jh1ik

Interesting, a portfolio manager telling you to put money into stocks rather than buying a stable roof over your head
Comment from : @user-yb8fh1lv2q

Something that's missing here is at some point you pay off the mortgage and the cost of homeownership (and risk incurred from economic shocks) lowers massively Renting forever isn't viable
Comment from : @murrayhowell2154

A LOT depends on the nation you are living In Italy, you have a very low registration fee if that is the only property you own, plus you don't pay property taxes on it it just leaves the cost of debt (which, again, if it is your only property, is partially covered by the State) and maintenance on structural part/plumbing (since you need to account for some maintenance costs also if you rent, at least here in Italy) Of course, equity costs are always there, but you need to include some costs related to the investment, too: 26 of taxation on the plus values, plus the portfolio holding fees and the commissions 😅 Easy win for buying under those conditions
Comment from : @alessiozamboni4694

"Property taxes are generally 1 of the value of the home" bcries in Illinois/b
Comment from : @fortnern

Stock are much “liquid” than a mortgage
Comment from : @rumifede

You're not considering leverage Yes you put that deposit down but it's leveraged multiple times As an extreme example, we put a 5 deposit down on our house in 2019 ($11,000) If that was invested in stocks we'd gain a couple grand But the house has appreciated $160,000 in 6 years There's no way we could've invested $11,000 and gone up 15x using stocks
Comment from : @doctormoobbc

Absolutely cooked yourself at 4:55
Comment from : @ltmaid

You can sell the house once you paid your mortgage (or even earlier for lower price in fact) You can't sell anything when renting A quite big thing to skip in such analysis 😁
Comment from : @qrdemole

6:08, the 357 expected difference is seen as the cost of capital Therefore it is NOT conservative to round it down to 3
Comment from : @harpoon2445

Good video but i think you are making one big mistake The 3 real estate return must be calculated on the entire 100 property value You only calculate it on the 20 equity So your home owner case will be lots more interesting when you do take this into account You get 3 capital gain on total real estate value In other words: the 3 mortgage rate in your example in fact cost you nothing when you asume a 3 real estate value increase I asume you want to calculate the total gain or loss of capital I hope you can explain why you did not take this into account Only looking at costs and not at total capital gain looks not like a valid case for comparing the 2 options
Comment from : @nielsthegreat3091

Let me guess, buy land if you’re rich? The land value tax would solve that
Comment from : @maxclark5496

“you could have used that 20 down payment to instead invest in stocks”brbrmy dude
Comment from : @deepennyway3844

This aged well, thanks for the info
Comment from : @jimzarate3242

That's a solid amount to get started with The first thing that comes to mind is either putting it toward a down payment on a rental property or looking into real estate investment trusts A rental property can give you consistent cash flow, but REITs are more hands-off
Comment from : @Lindgren-h7k

After 25 years of renting you don't own the property So, unless you're investing the difference between rent and mortgage payments, rather buy
Comment from : @mjribes

I think you need to also account for the TIME wasted in home repairs and add it as wasted opportunity cost That was the biggest frustration for me as a homeowner, not only locking my money in the form of repairs and renovations but the thousands of hours wasted forever while doing them
Comment from : @dimitardonev9349

Paying cash upfront is a meaningless comparison
Comment from : @PeterStinklage

You are forgetting capital appreciation in property value which matches the stocks ROI
Comment from : @hamzaz4763

I think you messed up by not using the entire home value to compare your 20 down invested in real estate vs the market
Comment from : @jacktietz7815

Quite interesting and squaring with what I have observed for myself, far from Canada It’s not that choosing a home is perforce a question of return on investment but, as I’m used to saying : always try and know the cost of the amenities of life to determine which you can afford and which you can’t It’s my definition of reasonable pleasure
Comment from : @michellaboureur7651

Mmm according to my calculations ::Pushes up glasses:: if you had put 20 down on a house, paid it off in 20 years, and the remaining 20 years put and amount into stocks equal to what your mortgage payment used to be, you would have more asset value total than if you would have put that 20 into stocks and rented for 40 years, and also you'd have been living in your own place on your own land able to do whatever you want to with it the entire time
Comment from : @ArcSolaire

Maintenance cost is to keep the price, not to increment the price
Comment from : @RobertoRezaOrozco

Great video!
Comment from : @sandmangreen4

I lost over $80k when everything started to tank Not because I was in an exchange that went belly up I was just stupid to hold and because that's what everyone said I'm still responsible It just taught me to be a better investor now that I understand more of what could go wrong It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly Thanks Suzanne
Comment from : @AlexHunte98

Well, I do the math and it's looks that buying my apartment was a good call Thanks
Comment from : @GellAdolfo

actually, the oppotunity cost calcination is wrong: for the real estate investment, you should calculate your 3 on the whole price of the property, vs the 65 stock return is only on the down payment brbrlet's see an exemple of a 500 000$ house with a 20 down paymentbrbrIf you put the 100 000$ cash in the stock market, the 100 000$ at an annualized interest rate of 65 will be worth $187,71375 after 10 years when compounded yearlybrbrvs the 500 000$ house, with an 3 increase, also compounded yearly, will be worth $671,95819 after 100 years There's no opportunity cost in this case, the house is making more money (equity)
Comment from : @mengyanw2395

This is the most important video i have ever watched
Comment from : @okikeure7422

House value appreciation needs to be taken into account
Comment from : @mericusta1988

Watching in 2025
Comment from : @Patw520

Today in 2025, this has become the 10 rule
Comment from : @PureAwesomeMess

En Argentina compramos zapatillas en cuotas (crédito) y casas en efectivo Jajajjaajaaja No lo entenderían 😂
Comment from : @CompositorArmonicoEnFuga

Interesting perspective Our interest is just much much higher, but the rest makes it easy to replace just that value into the calculation Making it a 9 rule for me
Comment from : @schalklubbe8311

Why he is not blinking at all?
Comment from : @DanielJustus

in Russia we have more than 20 mortgage interest at this point 😂
Comment from : @MrGiotto

Nothing beats these calculations as buying at a good price with a mortgage that is cheaper than renting!
Comment from : @Andre-fl5wt

Are we forgetting that a 20 down on a house is actually leveraged at 5x, as you are exposed to the value of the entire property Further reducing equity opportunity cost? Or at least I think this is the case with UK mortgages
Comment from : @Cameron_Drummer

What about homeowner insurance too?brbrvs renters insurance?
Comment from : @badoman5000

Watching in 2025
Comment from : @juanstevan325

Do you take into consideration the price increase of a rented apartment through the years? On the other hand , the mortgage payment is more or less similar unless the interest rates change drastically
Comment from : @vasilisadi6738

3 interest 😢
Comment from : @HBRDynamics

Man I'd be screwed if my job were to have me come up with these formulas and definitions
Comment from : @gooooblaster1800

Rent is always higher than the mortgage?
Comment from : @zacharytuttle5618

This hasn’t aged well ain’t it?
Comment from : @liquidhydrogen5012

The thing is, you assume everyone has a down-payment to consider But the average person is not going to save up the down-payment money Most people will save up money to get the down-payment but otherwise don't save period So the investment thing isn't really considered for most people Most people rent, save nothing, don't invest, and don't buy a house
Comment from : @steven3837

PROPERTY TAXES ARE DEDUCTIBLE Mortgage interest is also deductible If you bought a home that has incime property attached, there's depreciation
Comment from : @sherrieludwig508