So today we're going to talk
about where in the United States you should be renting or buying.
Be sure to wait till the end because we're going to do pros and cons of each.
So the first thing that you always need to look at is affordability.
And I think there has been no time other than right now
as people are talking about affordability, meaning what is it cost in rent
and what does it cost and mortgage, plus all the other things that it might be
if you actually buy a home.
In addition to that, you have to take a look
at your individual wage growth, your income potential
and the cost of living in an area that you might be considering.
So one of the things that I know a lot of you like
I love are these graphs, and Adam did a great job specifically
going through the affordability from year to year.
You can go back and look at 2021 and they have the exact same chart.
You can see how it's moved to 2022.
Essentially, this is a chart that shows where it's best to buy
and where it's best to rent by city, by state, by county.
And as you can see from these concentric circles
that the smaller the circle, the smaller the population.
So if you want more detail in an area that you're considering, just go to Adam
and take a look at what represents the data behind that circle.
And you can get specific information.
The one thing I want to point out is that everything from the mid
United States West is basically
says to rent and everything
from the Midwest, United States East basically says to buy.
With the exception, of course, as some of these coastal cities
which are still green and say to rent.
So as you're looking at this chart, you're either looking at it
from two different points one as an investor, buyer, homeowner
or two as a renter.
And you need to understand that people look at things very differently
from their own individual point of view.
So let's first look at it from a viewpoint of an investor buyer
because it's going to be very different from that of a renter.
If you're an investor, the key to your entire property is income.
You also have to look at expenses.
But it's always going to be rent and occupancy.
What's clear to me,
if you focus on the western United States and focus on some of these areas,
then most of the people in these areas are probably going to be looking
at renting versus buying because of affordability issues.
What you're looking for here as an investor
is a big difference between homeownership or mortgage price and rent.
You want as big a gap as possible because the ability from a renter
to go from a renter to a home
is harder in these particular areas because of affordability.
So now let's look at it from a renters viewpoint, because they're going to
look at this map very differently than an investor would look at it.
So if you're a renter and you want to buy a home,
you're probably looking at relocating to some of these areas for affordability
and being able to be a homeowner, maybe for the first time.
Yes, a lot of people rent by choice, but a lot of people
definitely want to buy a home or buy an investment at some point,
and they're going to be looking over here where it's more affordable to buy.
So just like we talked about it
on the last slide, if the rent and the mortgage are close,
let's say our rent is 15 hundred and a home mortgage is 16 or 17 hundred.
That's not necessarily good as an investor, but it's great as a renter
because their ability to move up is a lot tighter.
So if you're an investor, you want to buy in areas that have high job growth
and there's a big disparity between the mortgage and the rent.
If you're a renter, you want to also be in areas that have high job growth
where there's a smaller gap between the mortgage and the rent.
Now this is all very, very different right now
because of the work from home scenario that you have.
You could literally buy and own and invest
in the middle of the country and actually work over here as an example.
Now a couple of things you all know.
This real estate is, of course, local,
which means that we do not have a nationwide occupancy.
We do not have a nationwide rent growth.
We do not have a nationwide expense.
No, it's all individual and it's all very, very local.
So if you drill down a little bit deeper in that chart, you can see that home
prices are growing faster than rents and nearly 90% of the nation.
But prices still are more affordable and almost 60% of the US markets.
In other words,
renting remains more financially viable in most of the populous urban areas.
Just go back to the chart and look at the bigger bubbles that are located in green.
So, but before you go out and make a decision,
let's talk about the pros and cons of buying and renting.
On the buy side, we are now faced with interest rate risk
because the Federal Reserve has said that they're going to raise rates.
three to four times this year, what that means is that your mortgage payment,
if it's variable and not fixed, could potentially go up.
Also on the buy side, you're going to have property taxes,
and if you scour the country, you can see that governments are going
after homeowners and landlords or property tax increases.
The other piece on the buy side, of course, is all the capital work.
Think about roofs and landscaping and all those kinds of things.
Those are real things on the buy side.
Another one is, of course, property insurance,
which is very different on the renter side, which is more renters insurance.
one thing to pay attention to in 2022 is as mortgage rates
go up, the affordability to buy goes down and people will move
over to the renter side and those bubbles will get even bigger.
Now let's look at the pros and cons of the rent side.
one is flexibility.
You can have a six month lease and you can be somewhere else, too.
You can fix your rent.
You can ask the landlord for a long term deal at a fixed rent and hedge.
All of this inflation that's happening and you kind of have uncertainty
on what it's going to be. three.
You have no capital work.
In other words, the landlords on the hook for the roofs, the landscaping,
all those things for you should probably get renters insurance,
but it's not going to be as much as property insurance.
five.
No property tax that is the landlord's expense,
but all things being equal, this is lots more short term.
This is more long term.
And of course, if you can cover this with a renter,
then the renter can actually pay down your mortgage for you.
Hope you guys like today's video smash the like button if you like it.
See you later!