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My friend was about to buy a million-dollar house with no research

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Note: I’ve created a new category called “Real estate” (see the other categories on the right side of the blog).

One of my friends is 28 and she’s looking to buy a house in San Francisco pretty soon. Now, as you know, I’m not a big fan of real estate for investment reasons, but because I’m not an expert, I’ve been researching it more and more (see my links here). So when she mentioned wanting to buy a house, I asked one question: “Why?”

This is where things fell apart.

Her responses included things like:

“I don’t want to waste money paying rent.” I’m convinced this awful phrase was invented by Realtors BECAUSE IT’S SIMPLY NOT TRUE FOR EVERYONE. YOU ARE NOT WASTING RENT IF YOU LIVE IN AN EXPENSIVE AREA. Here’s a good article with more details.

I asked what she thought about the real-estate market right now, considering many of the ARM resets are still coming. One response: “The market is already bad, so there’s upside potential when I sell? what do you think of that logic? Prices are supposedly lower right now as a result.” I don’t think logic is enough to justify the biggest purchase of your life.

I also pasted a couple of the best articles on real estate: This one (Yahoo Finance) and this one (New York Times).

The result was interesting. She hadn’t seen these, so she asked me what I would do with my money. At this point, I was at a coffee shop and one of them lived near me, so she came over to talk about this in-person. I looked over her finances and realized she had tens of thousands of dollars just sitting around, earning hardly any interest. Even putting it in a Capital One 360 (formerly ING) savings account would have gotten her hundreds of dollars a month (open a Capital One 360 savings account in 10 minutes).

The first thing I did was suggest three books to her on investing (more books I recommend). We talked for a while, and I suggested some things she could do to improve her finances and start earning more. After about 20 minutes of back-and-forth, I asked her what she was going to do for her next steps. “I’m going to be honest,” she said. “I’m not going to read those books.”

I thought this was really fascinating. Here’s someone who has tens of thousands of dollars earning 0.5% interest and she’s so resistant to the idea of reading investment books that she almost bought a million-dollar house instead. Five years ago, she had a significant amount of money. What if she had invested it in the stock market?

And five years from now, wouldn’t she be happy that she spent 5-10 hours reading a few books to get her finances in order?

Why young people still think of real-estate as an investment
One of the best things to happen from the real-estate bust that we’re undergoing is to make people think twice about real estate as an investment. That’s right — to actually consciously think about why they’re making the biggest purchase of their lives, rather than just buying a house because “it’s the next thing to do.”

And yet, I’m still stunned when I hear about my friends “investing” in real estate, especially in the Bay Area. (Yes, real estate can be profitable and great, but in some areas of the country there are far better investments).

I thought about it over the weekend, and I think there are a few reasons why real estate still seems to appealing to my friends:

1. They have some money lying around and know they should be doing something
2. They don’t know anything about investing, and the barriers to knowledge seem high
3. Real estate represents something tangible — and something their parents probably keep reminding them about
4. Society still explicitly and implicitly rewards homeowners (just think about a young friend who owns a home — are others impressed?)
5. THEY HAVE BEEN IGNORING EVERYTHING IN THE NEWS EVERY DAY FOR THE LAST 1 YEAR ABOUT REAL ESTATE (???)
6. It’s easier to do new things than to look back at old things, like reading books or handpicked articles about real-estate (Seriously, how many people will click and read through those links?)

Research for gargantuan purchases = good
Here’s the point: Buying a house is the biggest purchase you’ll ever make. When you do it, you need to understand exactly why. That means an extensive amount of research. When I bought a car, for example, I spent months learning about every trick under the sun. I had 17 dealers negotiating with each other to get my business. And that was to save a few thousand dollars! Now, I’m Indian and I’m weird, but I did that for buying a car. When I buy a house, I expect to enlist the help of several third-world researchers for months of research and, when I walk into the final negotiation, I will be accompanied by a large hairy man, a metal baton, and a chimp. IT’S THE BIGGEST PURCHASE OF YOUR LIFE. WHY WOULDN’T YOU SPEND TIME UNDERSTANDING THE PROS AND CONS OF IT?

You know, on one hand, much of this site is about getting started and not spending too much time doing endless research. But there’s a balance, as I describe in my article on conscious spending — you need to know the basics, and you need to know much more for real estate, which you can’t just sell the next day if you decide you don’t like it. When I pointed out sites like Patrick.net to my friend, she had never heard of them.

As usual, there are lots of ads and media influences to buy, but ultimately we make the decision on how much to research our real-estate purchases. I’m not saying it’s a bad decision — although my real-estate colors are clearly showing — but when I read a real-estate blog like SocketSite, I realize I’m not nearly as knowledgeable about real estate as others.

The 3-Book Solution
For many, what seems like an intimidating amount of research can be broken down by buying 3 books and reading them. Instead of coming in with a blank slate, you go to Amazon, find the highest-rated books in your area, and read them in a couple of weeks. I’ve done this with books on marketing, venture capital, and psychology. I keep a notepad and write down my questions. After 3 books, you’ll have very targeted and specific questions to ask someone. (Instead of “what should I do???” you might say, “Should I choose a Roth IRA or Roth 401(k)?”)

In July, I wrote about how asking targeted questions can get you targeted answers. To get the right answers about investing, pick up a few books — whether these ones or other ones — and get started by asking the right questions. Here are the three best books to get started investing.

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102 Comments on "My friend was about to buy a million-dollar house with no research"

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RealestateMaster
8 years 7 months ago

A possible limitation of this approach is that you have to be aware of MLS rules about advertising other peoples’ listings if you use this formula, so you may want to talk it over with your broker first. On the other hand, most listing agents would undoubtedly give you permission if you call them.

Benjamin Bach
8 years 7 months ago
Hey Ramit First, The area I live in (Waterloo, Ontario Canada) has housing prices that are about, say 25% of prices in the San Fran area, and I understand what you’re saying about really expensive housing. I agree that people should research before they do any sort of investing, or a large purchase. As Buffet has said, education mitigates risk significantly. Personally, I strongly favour real estate over stocks or mutual funds as an investment vehicle. Here in my area I can invest in a condo for $130K that has steadily appreciated year after year, and rents at a rate… Read more »
Melanie
Melanie
8 years 7 months ago

Hi Ramit,

What do you think about buying a place with the specific purpose of renting? I am in New Orleans, where a large amount of properties are doubles. I am currently renting 1/2 of one in a more expensive neighborhood (my rent and water is $900/month), and have been thinking of buying one down the street from me — my thought is to live on one side, and then rent out the other. I would love to hear your opinion on this — my money smarts are non-existent.

JC
8 years 7 months ago
Hey Ramit, I also think another reason why people are into real estate is probably Kiyosaki’s influence. His get rich books are very real estate focused so I would assume he had some sort of influence. Also, real estate is a very traditional thinking. Most of our parents probably groomed us that way. A lot of the older generation people I talked to had the same thoughts such as, “renting is a waste of money,” “home is the best ‘investment’ you can make because of equity and tax deductions,” and so on. So those types of thinking is part of… Read more »
pt
pt
4 months 17 days ago

JC, did you ever consider those old people know from seeing and doing what you don’t understand? Instead of a lengthy post of explaining all the misconception by people that don’t own, I’ll just say everyone buys a house, it’s just a matter of who they are buying for.

Charles
Charles
8 years 7 months ago
Hi Ramit, There are three reasons why real estate might also be a good investment: 1. It allows you to leverage yourself in a way very few other assets can. Thus even a small gain relative to stocks is multiplied by the leverage of your mortgage. 2. It has attractive tax benefits. 3. Many people feel more secure and happier in their own home given that they cannot be forced to move and can alter it as they please. Note: I don’t think these imply that it is a good investment. I am grappling with this problem now myself with… Read more »
Silicon Prairie
8 years 7 months ago
Great post! In spite of all the news, I’m actually thinking about getting a house in the next year and will probably be considering sub-prime mortgages – I have a good credit but haven’t had time to save up a 20% down payment. I’ve run a few scenarios in excel and the cashflow doesn’t look like a problem – just the down payment. The biggest reason I’m considering it is that my rent is going up very fast, and will probably be more than a mortgage on a small house in a nice area. Between payments lower than my rent… Read more »
Tyler
8 years 7 months ago
Ramit, The major point that you are missing about Real Estate is that it is not likethe stock market. Real Estate is very regionally oriented. Thus, the broad strokes that the news paints may apply in San Fran, Miami, etc. but may not apply in Minot, North Dakota! In addition, Real estate has more power to compound wealth due to the simple fact that it offers leverage to the average person. Sure, many stock investors may have the opportunity to go on margin or become a Prop trader to increase thier leverage for investment. However, the average person has no… Read more »
Traciatim
Traciatim
8 years 7 months ago
Here’s a different way to look at it. I purchased a house for my family moving from an apartment. Our expenses are a lot higher now (if you include the basement, our new place is near 3.5 times the size of the apt). Over the past two days I’ve been in my back yard shoveling all the snow from the grass in to a 7 foot sloping pile right beside my deck. It probably took me around 6 hours work total. Last night, my family (kids 6 and 3) spent the evening sliding from the deck, in to my back… Read more »
Kuwaiti Woman
8 years 7 months ago

I came across your blog through blog hopping and loved your book recommendations. I am putting in an order in to Amazon as soon as my salary comes out. I’ve just started thinking about saving money seriously and haven’t got the first clue when it comes to investing.

Fabulously Broke
8 years 7 months ago
I *REALLY* don’t like Suze Orman, but I do think her book is a good starting point.. although she does grate on my nerves. For me, the book that changed my life was The Millionaire Next Door. The path to life, is smart spending (frugality), and smart investing (not buying into the hype)… so I hope she takes some kernel of your advice and puts it in an interest account earning 4% a month.. at the very least. I’ve since come around from the idea of buying a house too. I’m saving up for one just in case, but I’m… Read more »
pt
pt
4 months 17 days ago

Suze and Dave are OK to help people that are a total train wreck fix the obvious, but aren’t really strong advising people beyond that. If you are staying in the same place, why not lock into low fixed rates that won’t go up as rents will and continue to go up. The next great depression will be this generation not only saving enough for retirement like previous generations, but also worrying about how to quit their job and still pay the rent

Rob
8 years 7 months ago
Ramit, Right on about doing your research! You are wrong, however, about real estate in the long-run. 1. Please make the distinction between investment real estate and a personal residence. Investment real estate has a number of benefits over stocks and bonds and should be considered. Real estate is not a bad investment when it really is an investment as opposed to a residence. Further, commercial real estate offers a means of diversifying across different property types, such as multifamily apartments, office buildings, retail space and industrial warehouses. When you combine the cash flows (dividends), the appreciation in the long-run… Read more »
J Harrison
J Harrison
8 years 7 months ago

Nice post.
I didn’t see you mention the NYT’s “rent vs. buy” tool, which is the best one I’ve seen. It’s at: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

Also, given your psych background, I would have thought you’d include “Why Smart People Make Big Money Mistakes (by C. Belsky)” in your 3 book list. It’s a great summary of insight on the psychology of personal finance.

Rick Francis
Rick Francis
8 years 7 months ago
I think a $1Mil purchase demands a LOT of research and even MORE research if you are borrowing to make that purchase. Of course a foreclosure a few years down the road where you lose all of your home equity can “save” you the trouble of doing some research before the purchase. If your friend won’t do it now, she may have to learn the hard way. Real-estate can be a good investment- but it may NOT be a good investment where you want to live! Also, I can’t see having to sell my stock investments because I want to… Read more »
rkt
rkt
8 years 7 months ago
Hi Ramit, Having never been through the home buying process, let me tell you – even when you think you have done your homework, many purchaser will still be thrown a curveball when they sit down to sign at closing. when is your interest rate not your interest rate (APR)? mulitple $k of fees that you had never seen before added to your statement. etc. It’s like going to the car dealer – and after you haggle your price you think you are done, but then they hand you off to the finance guy who tries to sell you alarms… Read more »
Financialgal
8 years 7 months ago
I echo one of the earlier comments regarding the distinction between investment real estate and a personal residence. In areas like San Francisco and Washington D.C. (where I live), there is a tendency to think of a personal residence as an investment. It’s NOT. I’ve seen people buy houses and renovate the heck out of them because they want to reach a certain selling price so they can retire in style. The bottom line is that a roof over your head is just that, a roof. While your home provides many benefits, it should not be viewed as an investment… Read more »
HD
HD
8 years 7 months ago
The problem here is that one’s home is not, can not be earmarked as an investment. A home is an expense. It is an expense that has the potential (but not the guarantee) to appriciate in value and offer a return in the future. Home ownership also creates a number of liabilities besides the mortgage (death grip) including taxes, insurance, and maintenence. These negative impacts to your cash flow must be calculated when making the decision to rent or buy. I live in Miami, and am a home owner, and probably older than the typical reader of this blog. When… Read more »
Meister
Meister
8 years 7 months ago
Those interested in further reading on this topic should hunt down “Irrational Exuberance” by Yale economics professor Robert J. Shiller in their local library. The latest edition contains an excellent analysis of long-term trends in the U.S. real estate market. Many people will be surprised to see than on average, U.S. real estate has, as Ramit has pointed out, produced minimal returns since such information has been recorded. The only exception has been during this last decade, which appears to be based on speculative pressures subject to inevitable market corrections. Ramit, have you seen this book? Although Schiller is a… Read more »
Meister
Meister
8 years 7 months ago

I forgot to include the link to the book.

Jason
Jason
8 years 7 months ago
We’re buying a home now, but we’re buying it to live in it, not to invest in it. We can afford the home, we’re not relying on appreciation for our financial success, and perhaps when we move into a new house, we’ll keep this one as a rental, and then it will become an investment. Regardless, we focused on a few things when buying this house: a monthly payment (tax, insurance and maintenance inclusive) that we could afford, and buying something we would be comfortable living in for as long as possible. The first one was non-negotiable, the second one… Read more »
jen
jen
8 years 7 months ago

good post. I’m sure your friend will do research when she is truely serious about buying a place (crazy if not!), unless she literally has all that money in her bank and need not worry about anything else. However, I doubt that that is the case; otherwise she wouldn’t be talking to you and going over her finances with ya. 🙂

Mario
8 years 7 months ago
Great post Ramit… Real Estate is one of those areas where there’s a lot of mis-information regarding investing. The best way to make a decision, in my point of view, is to look at rents. In a normal market, what you pay for rent and what you would pay for principal, interest, taxes, and insurance (PITI) with a traditional loan should be pretty much the same. If, on the other hand, you can rent a place for $2k/month but would have to pay $5K in PITI, well, that should tell your friend something about that “investment” (you would be subsidizing… Read more »
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[…] Buying a home when it doesn’t make sense There are many sites that talks about this. I’ve talked to many people that bought their house too early […]

Justice~!
8 years 7 months ago

>I asked her what she was going to do for her next steps. “I’m going to be honest,” she said. “I’m not going to read those books.”

So when you asked her why this was, what was her response?

Jennifer
Jennifer
8 years 7 months ago
rkt: “when is your interest rate not your interest rate (APR)? mulitple $k of fees that you had never seen before added to your statement. etc.” If this happens then you are not dealing with a reputable lender. The APR or Annual Percental Rate is NOT the interest rate. It is another way to disclose the fees that are being charged to you. It is a tool that borrowers can use to shop different lender and compare apples to apples. For example one lender may charge a 6.00% interest rate and very few fees giving you an APR of say… Read more »
Writer's Coin
8 years 7 months ago

This is why blogs play such a huge role in the world of consumerism today: it is allowing people who are averse to reading books about things like finance a chance to learn about these topics in an accessible way.

It’s one way of breaking down that barrier of entry that so many people have. Blogs like this one speak to people and allow them to “get into” these kinds of topics, educating them and eventually improving their financial IQ.

JT
JT
8 years 7 months ago
Ramit, you are missing a very key point. As others have pointed out, a personal residence vs. investment real estate are two different things. Buying a home for a personal residence is nearly always better than renting because, for most people, housing is our largest expense. If you rent, your largest expense if fully exposed to inflation. For example, you may be paying $2000/month now in rent, but in 30 years it will not be $2000…it will likely be much higher than that. Even worse, after you retire, your largest expense continues to be exposed to inflation. When you buy,… Read more »
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[…] a great commentary on the importance of doing research before deciding to buy a house — or any other investment! Your housing decision has to be based on your individual financial […]

Rob
8 years 7 months ago
Ramit, I am not sure why you are telling JT he is wrong. He said in the long-run owning is better than renting, which the NYT rent. vs. buy simulator proved (when I inputed realistic figures). Unfortunately, the simulator still does not take into account after-tax returns. Please keep in mind that there are many tax benefits to owning a home in America that are not realized when you are paying rent. We must take this into account so we can really compare true costs. Going back to my first comment, I would encourage you to take a look at… Read more »
morganchaser
morganchaser
8 years 7 months ago
I think there are some assumptions and conventional wisdom about real estate that BADLY need to be understoon by anyone considering buying a house. 1. The dollar is nose diving. Any investment not making a profit is in fact going down in value. 2. “At least I’m getting equity for my money rather than getting nothing from rent.” : This conventional wisdom assumes that Real Estate doesn’t crash, which it is. IF YOU DON’T SELL FOR AS MUCH AS YOU PAID: YOU LOST MONEY! Buying real estate right now is like maxing out your credit cards to buy Enron stock.… Read more »
Jonathan
8 years 7 months ago

I don’t understand why some people have no problem spending years in college and spending a lot of time to earn their money, but they won’t bother with reading a couple simple books to protect it, and even make it grow. Boggles my mind.

Beating the market or being an “expert” investor takes a lot of knowledge and probably a bit of luck. But just doing the basics and making your money work for you is SO SIMPLE.

Ronnie (TRM)
8 years 7 months ago
This was a great post. We have a mutual friend that told me to come check you out. I am in the Mortgage Banking industry and I do agree with you in the many points you make on researching before buying. Why would anyone ever want to go $1,000,000 in debt without knowing what they are doing? A home is a huge investment but also a secure investment. I am not being bias when I say this. Some of the most successful people around invested and still invest in real-estate. I totally agree in what you say if it is… Read more »
Mark
Mark
8 years 7 months ago

Ramit, you mention the 3 books that you like in the fields of Marketing, Psychology, and Venture Capital. What are they??? Thanks…

Peter
Peter
8 years 7 months ago
While I agree with some of the comments concerning real estate for investing versus personal residence, the thrust of the article is that many people still consider the purchase of their primary residence as a really good investment,. The problem is a blind belief that this is always the case and that it is a good deal for everyone, everywhere. People and articles are comng forward to challenge this idea and using some of the tools on the web you can see if in your area if it’s better to buy or sell from a strictly financial point of view.… Read more »
Christopher Rockey
8 years 7 months ago

One thing to keep in mind about buying a house for an investment, certainly right now is NOT the time. But keep in mind, if your “friend” is looking for a primary residence,
LONG TERM. Nobody has ever lost that gamble in California Real Estate.

JT
JT
8 years 7 months ago
Ha ha, Rob, JT is a she…but no way you could’ve known that so no worries…but you’re correct, the short term is where the statement breaks down. Clearly, if you’re not sure you’re going to be in a location for the long term, than renting is a much better situation. But if you have settled on an area that you want to live in long-term (I would define this as the foreseeable future, 7 + years) buying is nearly always better long term. And thank you for pointing out the tax benefits, I neglected to point that out. They are… Read more »
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[…] Will Teach You To Be Rich: Why do people decide to buy homes without much research? I’ve got a friend who got so excited about becoming a landlady that she bought a duplex in […]

conservative
conservative
8 years 7 months ago
Just think if I had invested my $5,000 4 years ago it would now be worth about $6,000, instead I bought a $280,000 house with only $5,000 down and just sold it for $390,000. Does anyone know what the rate of return is when you make $110,000 over 4 years on a $5,000 investment? Oh yeah I also got to live in a pretty nice house for 4 years. And also I had gotten a Home Equity Line of Credit loan that allowed me to buy a Porsche Boxster and a F-150 free & clear, and I used the rest… Read more »
JP
JP
8 years 7 months ago

There should be more talk on here about the leverage that purchasing your home affords. Lets use the assumption of 6% annual appreaciation, vs 12% for stock. If I have $40K, I can buy the equivalent in stock or put 20% down on a $400K house. After 1 year, I made $4,800 with stock vs. making $24,000 in the appreciation of my house.

trackback

[…] Siwal article is brought to you using rss feeds.Here you will find the latest real estate news for buying and selling homes.Now, as you know, I’m not a big fan of real estate for investment reasons, but because I’m not an expert, I’ve been researching it more and more (see my links here). So when she mentioned wanting to buy a house, I asked one question: … […]

trackback

[…] itching for some good discussion, you can read a great debate on this subject at Ramit’s I Will Teach You To Be Rich and a breakdown of the financial decision to Buy vs. Rent from Jim at Blueprint for Financial […]

Brad Parker
Brad Parker
8 years 6 months ago
Ramit, I have to agree with you that one needs to truly understand what they are buying when they purchase a home. But there a few things that you have said that are just not true. First you mentioned that you are not wasting money by renting if you are renting in an expensive area. You are ALWAYS wasting money if you rent!!! When you own a home every dollar you pay towards that house you will get back when you sell the house or at least part of it. When you rent you are spending money that you you… Read more »
Benjamin Bach
8 years 6 months ago

Ramit, you are missing Brad (and JT’s) point. Real Estate is a legitamite option for most people to build substantial wealth over the long term, and you are fairly ignorant of how you could do that. Until you educate yourself on the topic, don’t tell people about it.

BenjaminBach.com

trackback

[…] the past several months I have been studying home buying (trying to be one of Ramit’s other friends), reading books, blogs and asking questions to people who have some experience in the area. […]

Douglas
Douglas
8 years 6 months ago
Hey, I personally disagree with you on this topic. I think no matter what, you should always buy a house if you can afford it. You can use it or put out for rent and have rent cover the mortgage. A better idea is to target students. If you are smart, you can build multiple rooms and have a community bathroom, kitchen and living room. For example, lets say we have a two story building and the top floor has like 4-5 rooms and we charge $500 per room. That’s $2000-$2500. Not to mention, you still have the bottom floor… Read more »
Douglas
Douglas
8 years 6 months ago

I know you can read this, I had a few typos in my previous comment. I would appreciate it if you can fix it for me. Feel free to contact me.

Shawn
Shawn
8 years 5 months ago
Doug – You have a point about “having a house to live in” even if the house’s value falls. That’s true for people that are already settled down in their chosen city and don’t want to move or will never experience having to move because of a job, significant other, or wherever the wind will take them. However, as a 25-year old, there’s tons of value for me in MOBILITY. What if I got sick of my job and wanted to move to take up a whole new career another city? Sure, I could sell my house, but that isn’t… Read more »
perry
perry
8 years 5 months ago

Hi all comming into a few millions 4 or 5 . I want to buy my first home. Just on out skirts of town .little country living.for sure 500,thousand for sure.would it be good idea to pay it right off on the spot , just wondering. Well come back after

dyanholla
dyanholla
8 years 4 months ago

Very interesting. I actually read the whole blog. Very good advice in short neat way. Perfect for low attention spanned. Good advice.

Shaun Rosenberg
8 years 4 months ago

Incouraging her to pick up an investment book is a really great thing to do. It is just that their are many different ways to invest.

If she wants to buy real estate she should learn how to make money in real estate. Real estate is an investment too. People got to live somewhere. .

I perfer the stock market myself but I also know people who live off their real estate investments.

http://www.stocks-simplified.com

CY
CY
8 years 23 days ago
I think buying real estate as your primary residence in the Bay Area (as long as you buy something you can afford) is still a good idea if your goal is to live in the place and have it paid off (or nearly paid off) when you retire. You will always need a place to live, but probably not always want or be able to worry about a housing payment. More than that, I read an interesting article a while ago that said the 19th century was the British Century, the 20th was the American, the 21st will be the… Read more »
MichaelF
MichaelF
7 years 11 months ago
Not paying rent IS a good reason to get property. Once you own a house you pay no rent – for enterity (until you die). As long as INTEREST on the loan ends up being LESS than rent (it will) you will have made money. Its funny you should a graph for the stock market that shows a 20% gain over 5 years, which is 4%. After taxs on your profits you would probably not even make inflation. If you buy the right property it can go up 25% or more PER YEAR. Do your research, but if you don’t… Read more »
Josh
Josh
7 years 10 months ago
Hey Ramit, A sad little sign of the Times: That graph of the Vanguard fund looks completely hilarious and out-of-place right now. You might want to consider using a snapshot in the future, since that graph now does very little to support your article (which is still fundamentally a very good one.) If you showed me that graph as a new investor, I’d seriously consider a hole in the back yard (or worse: a .5% checking account!) for my savings. Probably the incorrect decision, but some people might not be prepared to watch the profits from 5 years of wise… Read more »
Josh
Josh
7 years 10 months ago

Better. It’s still quite a gut-check no matter how you look at it.

AC
AC
7 years 10 months ago
I agree with Ramit. If one buys a house its just not the mortgage payment that’s there. There are additional expenses like taxes (Which is money gone down the drain), maintenance, higher energy bills etc. If you add this up that itself will come to I guess 50 to 70% of the rent. I think one should buy a house based on the amount one is able to save. If you can save a lot after affording an expensive house then go for it. If not buy a cheaper house. Before purchasing a house do a 10 year and a… Read more »
Madeline Benham
Madeline Benham
7 years 9 months ago
Ramit, you’re right in thinking that real estate can be a bad investment, but it depends on the market. Here in Oklahoma, where the median house price is $125,000, buying a house makes sense for most people. Not a McMansion – just a house. I bought a 2BR house for $43,000 in 1995. it hasn’t appreciated greatly, but so what? I acquired a place to live that costs very little and has good neighbors and a wonderful yard. My monthly payment is $150-$250 less than rent. Even when you factor in repairs, taxes, and interest, purchasing this house was a… Read more »
(Maha) Raj
(Maha) Raj
7 years 8 months ago

Ramit, yet again you’ve shilled ING in one of your posts. How much are they paying you for your integrity as a writer?

Sean Terry
7 years 8 months ago
Hello Ramit, how do you feel about the real estate market now that a year has passed? We have seen the stock market and real estate values collapse. We all know the real estate market will come back, the questions is when. So should we buy now or wait until the market corrects. I can tell you I got rich by buying weakness and selling into strength. Right now the real estate market is weak and right now is the time to buy as along as the properties cash flow you can hold on during the down turn. Just my… Read more »
Married Homeowner
Married Homeowner
7 years 6 months ago

“When the only tool you have is a hammer, every project looks like a nail.” Meaning: f your one-track mind considers nothing but ROI, then every situation in life becomes an investment. The point: a house isn’t always an investment; for some people it’s actually a place to live.

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[…] if you’re making the largest purchase of your life, you need more than a slogan — you need to take the responsibility to do some research. (And note that you can’t advocate for increased homeownership and also argue for Americans to […]

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[…] itching for some good discussion, you can read a great debate on this subject at Ramit’s I Will Teach You To Be Rich and a breakdown of the financial decision to Buy vs. Rent from Jim at Blueprint for Financial […]

lee
lee
7 years 2 months ago

re: the patrick.net site, and the argument that owning costs more money than renting due to maintenance, taxes, fees, etc…

that argument is silly and specious: there might be anomalies in the short run, but in the long run owners rent to COVER THEIR COSTS, which includes things like maintenance, taxes, fees, etc…

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[…] David Bach believes that owning a home is a big component of building wealth. He presents his six reasons why owning a home is a great investment. Ramit Sethi may argue that not everyone benefits from homeownership, you have to run the numbers.  […]

figer
figer
7 years 2 months ago

What about purchasing to rent when you know that rent already covers the mortgage, insurance and taxes, plus a little return and then once the mortgage is paid off in 20-30 years of your fixed rate you will have pretty good cash flow of $3500 a month.

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[…] to buy a house. Do you want a place to own or are you looking for an investment? He expects you to run the numbers thoroughly because this is probably the biggest purchase you’ll make. He argues that too many people rush into buying a home with being financially […]

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6 years 11 months ago

[…] renting. You have to run the numbers yourself. Spreadsheet templates are an excellent solution to running the numbers easily. Find out and don’t just fall into the common myths of […]

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[…] the illusion persists, whether it’s my friend wanting to buy a million-dollar house with no research, or people saying things like, “I wish I’d bought more real estate” after […]

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[…] the illusion persists, whether it’s my friend wanting to buy a million-dollar house with no research, or people saying things like, “I wish I’d bought more real estate” after incurring a paltry […]

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[…] « My friend was about to buy a million-dollar house with no research […]

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[…] buying a house is a huge financial commitment you can’t make on impulse. You might find this telling post of interest, as personal finance author Ramit Sethidescribes a friend who did little planning […]

Tena Lamb
Tena Lamb
9 months 24 days ago
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James
9 months 8 days ago

As a long time real estate investor I find words of wisdom in saying that renting is better than owning a house, its true that there are phantom costs as well as hidden costs at closing that makes the process shady. I can see why you would say at renting is better than buying. On the other side of that argument I would say that buying discounted properties is like buying discounted stock, if you know what your doing you make money when you buy.

Ronal
8 months 11 days ago
Na katathesw k egw tin asoppi mou.Sto Berolino, to Dekembrh, epatha sok, eilikrina, dioti o sidirodromikos stathmos den einai apla stathmos :)ws k ekthesiako xwro eixe. episis, to simadikotero, eixe toulaxisto 6 epipeda…. tosa toulaxisto mporesa k metrisa me ta matia mou. perpatousa stin apobathra k apo panw k katw mou diesxizan trena alles apobathres, ypogeis k ypergeies!!!k fysika i apolyth kathariothta pantou!!!as paw omws se mia pio ftwxi polh (k xwra), sth boudapesth. stamatimenos sto stathmo, xazeua to xwro atermona dioti h omorfia tou einai asygrith. enas allodapos foithths me plisiase na me rwthsei an exw xatheik thelw boitheia.… Read more »
James
James
8 months 3 days ago

You may have contacted 17 dealers, you did not have 17 dealers negotiating with each other. You are not “smart” for contacting 17 dealers. You have a clear disconnect in understanding value of time and money. Get some help.

p.s Come buy some glasses from my store.

Greg O.
Greg O.
8 months 3 days ago

Agreed.

Ramit, you have a long way to go. Why do you feel entitled to hand out advise you know nothing about?

People have some nerve..

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6 months 29 days ago

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[…] buying a house is a huge financial commitment you can’t make on impulse. You might find  this telling post  of interest, as personal finance author Ramit Sethi describes a friend who did little planning […]

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[…] buying a house is a huge financial commitment you can’t make on impulse. You might find  this telling post  of interest, as personal finance author Ramit Sethi describes a friend who did little planning […]

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[…] buying a house is a huge financial commitment you can’t make on impulse. You might find this telling post of interest, as personal finance author Ramit Sethi describes a friend who did little planning […]

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[…] buying a house is a huge financial commitment you can’t make on impulse. You might find this telling post of interest, as personal finance author Ramit Sethidescribes a friend who did little planning […]

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5 months 16 days ago

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5 months 12 days ago

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comparecasa
4 months 24 days ago

If you are indeed planning to buy a new home for your own use you will have to take care of various things which are not only very important to know but also if you ignore all these things you will likely to be in harm somewhere in the almost biggest deal of your life.
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4 months 24 days ago

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kamp developers
4 months 24 days ago

In the event that you are undoubtedly wanting to purchase another home for your own utilization you will need to deal with different things which are critical to know as well as on the off chance that you overlook every one of these things you will liable to be in mischief some place in the practically greatest arrangement of your life.
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Linh
Linh
4 months 5 days ago

With “tens of thousands of dollars” putting in a capital one 360 account with 0.75% interest, you can’t earn “hundreds of dollars per month.” That sounded so wrong.

Says she has $80k, 0.75% annual interest would be $600/year, which is $50/month. =,=

auto insurance
3 months 5 days ago

sincer eu daca vad un SSL nu trag concluzia ca e sigur…. ca sunt destule metode de interceptare/copiere/clonare pe net dar, daca deja imi confirma 2 oameni m-am lamurit, multumesc frumos!

Jhoell
2 months 24 days ago

Oh. That is a big problem. In purchasing a property specially if it is a house you should’ve done your research. You must have to check the history of the place, if the location is good in terms of electricity and network, you have to check if this house settled in a flooded area and the previous owner of the house. These are just simple information that you need to search so that you will not getting any problem when you move-in to you r new home.

Jhoell
http://www.wannamovenow.com/

Jhoell
2 months 23 days ago

These are great tips for preparing your home for selling it. It is so important to get the clutter out. I love using Scrubbing Bubbles products for cleaning the bathrooms. Thanks so much for sharing.

Jhoell
http://www.homestagingmd.net

cashofferonhome
cashofferonhome
20 days 9 hours ago

I am not agree with this.

cashofferonhome
cashofferonhome
20 days 9 hours ago

I am agree with you for this. If any one want to purchase a new home research is really needed. It depend on the Real Estate Agent whom you choose. I buy my home from real estate cash offers without any hesitation.

Jason
Jason
19 days 16 hours ago
Hey Ramit – You’re taking a lot of heat for a re-post of this piece on Business Insider, mostly in the comments section of the associated FB post. Based on the comments here and the dates of the articles you’ve linked to, I’d say that the original post happened ~8.5 years ago and was recently updated with market data to show how an Index fund performed over the last 5 years. Maybe there should be some disclaimer that this article was originally published in a different market environment (although I think a lot of your points held true then as… Read more »
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Mr Lias Lebel
16 days 3 hours ago
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Michael
Michael
23 hours 51 minutes ago

I agree with you Ramit. It’s SHOCKING how common the phrase “I’m flushing money down the toilet by renting so I rather have a 15 or 30 year mortgage instead” is used by my Millennial friends. I have yet to hear my friends say “I ran the numbers and I know that I’m staying put for awhile so that’s why I’m owning.”

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