- To buy or not to buy.
If you rent you're making somebody else rich.
You're paying someone else's mortgage.
You've heard that growing up.
Now, coming from an Asian background
we always were taught at a young age
you want to own your home.
You want to have a roof over your head no matter what.
Now, I was born in Hong Kong.
In Hong Kong, a lot of peoples dreams,
their entire dream in life is to own a home.
So, should you buy or should you rent?
Now, I believe it is a stupid debate.
Here's why.
Because it depends on where you are at in life.
It depends on your income and also your goal.
It's like asking
well should I buy a condo or should I buy a house?
Well, it depends.
Do you like garden?
Do you want to have facility?
Do you want to have a gym?
Do you want to work out in the morning?
Do you want that condo lifestyle so it's less maintenance?
Or you want to have a place, a garden, or something,
or you want your kids run in the background?
What is it you want?
So, it's a stupid argument.
I understand that buying a home is such a major decision.
It is probably the most important investment
that you will ever make in your life.
So, what I want to do today in this video,
today I am going to give you some principles
that will help you to make these decisions wisely
and to think about this intelligently.
I'm going to share some insights with you
that you won't get anywhere else.
Question number one, can you really afford it?
If you look at a lot of theses charts,
you see the cost of rent versus the cost of housing,
and you can see that.
If you live in any major cities
you know prices of houses are so expensive.
Real estate is expensive.
So, with your current income
you may not be able to buy at all and that's okay,
because it might take you years and decades
to save up enough money just for the down-payment.
And then even then it is always a stretch
to make that monthly mortgage payment.
Then don't buy, rent.
Question number two, is it cheaper to rent than to buy?
Take Vancouver for example.
The prices of housing is so expensive.
It actually costs a lot of money to buy a home.
The mortgage payment is so high.
If that is the case,
maybe it is better to rent and then buy later.
Now, in real estate investing
let's say as a landlord I have a piece of property
and I'm renting it out.
So, if my rent that is coming in
is not even enough to cover my mortgage payment,
that's called a negative cash flow in real estate investing.
So, you look at Vancouver.
A lot of houses are actually negative cash flow.
If that is the case, you calculate.
If I took a mortgage,
let's say my monthly payment would be $3500.
But if I actually just rent the same place,
it may be only $2800 or even $3000.
So the landlord is actually losing money every month
for you to live there.
The landlord is counting on that appreciation,
but you, as a tenant, that's okay, you save a few dollars.
Then maybe you use that money toward something else.
Maybe starting your business or developing a side hustle.
Number three, rent if you are still earning and learning.
What do I mean by that?
Maybe you just graduated.
Maybe you are just starting your business.
You are trying to figure things out.
You are trying to figure what is your career,
what is your strength,
what is the ideal location for you to prosper.
You never know because there may be an opportunity
in some other cities that you may have to move.
You might have to travel.
For that I recommend you to rent.
Why?
Because you want to be mobile, you want to be flexible
especially if you are a millennial.
Save that money.
Instead of using it towards a down-payment
use that money to invest in yourself
or if you're an entrepreneur and you're starting a business,
invest that in your business so you can grow that business.
As that business makes you more money,
as you make more money,
then you can look into buying.
But for now rent if you are still earning
and you are still leaning.
Number four, buy if you are stable and established.
Let's say you are close to 30 years old
or you are over 30 years old
and you have a good career
and you have good income coming in,
then you can afford to buy a home in a good location,
in a good neighborhood and still have money leftover.
You buy.
Or as a couple and you're working together.
Maybe you and your husband or wife both have jobs
or you guys are working a business together, then you buy.
You buy because you are starting a family.
You want to have a place
where you can see your kids grow up.
Number five, buy if you are an entrepreneur
and not yet an investor.
Why?
Because I know you as an entrepreneur.
As an entrepreneur we like to take risks.
Sometimes the opportunity is right, you bet the farm.
I know you, comment below.
So, what happens is a home is not and investment.
It is a saving plan for you.
Think of your primary residence as your saving account.
If you look at it that way,
it is a force saving plan for you.
So in case your business goes through ups and downs,
you are putting money aside.
You are not betting everything you have in your business.
You notice that if you stop paying your mortgage
you'll be out on the street very, very quickly.
Somehow as an entrepreneur you'll be creative enough
that you will find the money.
Good.
So that every month you are putting money in your mortgage
that is just your savings account.
In case something happens to your business,
in case you experience that ups and downs,
at least you put a little bit of money aside.
You build up a little bit of equity in your business.
Yes, that is a little bit of buffer.
Believe me, I learned this the hard way.
Entrepreneurs are sometimes overly optimistic.
We think everything is going to be so good.
Everything is going so well, but sometimes you never know.
If you are an entrepreneur, buy.
Number six, buy if you are financially successful.
If you are stable and you are financially successful
yes, buy.
Why?
Because I believe from my own experience
when you have your own home
there is a psychological benefit to that.
That knowing that you've got a place.
And you can design your home exactly the way you want
just like I designed my home exactly the way I want
to maximize my productivity.
At the same time it is my sanctuary.
But knowing that it is not an investment.
I know that it is not an investment.
I don't look at it as an investment.
It is simply just my home.
It is my primary residence.
Now, it depends on where you are at.
If you are financially successful
I would recommend that you spend no more than 20%
of your net worth on that primary residence.
Now, some people may say 30%, I say 20%,
ideally less than that.
So, let's say your net worth is two million dollars.
You wouldn't spend more than 400 K on your primary residence
because your home is not an investment.
You use your extra money to buy more investments,
maybe invest in more properties,
more real estate investments.
Your primary residence is not an investment.
So, no more than 20%.
If you do that, just like me I spend a very tiny percentage
of my overall net worth for my primary residence.
That is my home.
I have my sauna, I have my massage chair.
I have my home theater, I have my library.
I have my man cave, I have my gym.
I have everything in one place
and I designed the ideal home for me.
That is where I feel relaxed,
that is where I recharge my battery
so I can be more and do more.
That is what I do.
So, comment below.
Those are the six principles
when it comes to should you buy or should you rent.
So, let me know.
Are you going to buy or are you going to rent?