Should I Rent or Buy a Home

Hey there, real quick before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Is the American dream of homeownership dead? I don't know, but we're going to find out in this episode of the Affluent Entrepreneur Show. Listen, buying a home is one of the biggest investments that most people will make, and it's one of the biggest financial decisions that you're going to make. So why not understand the ins and outs and the numbers that drive the decision and whether you should make a buy decision or a rent decision. Let's break it down for you. I'll see you in the episode. This is the absolute entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an affluent entrepreneur.

Welcome to this episode, the Affluent Entrepreneur Show. This one, we're going to break down the American dream, the American dream of home ownership. Should you be buying? Should you be renting? Here's the thing. We're going to look at some stats, we're going to look at some data, and we're going to actually do a calculation on rent versus buy. And I'm going to give you access to a tool so you can do the calculations on your own based on your geographic area, based on the house you're looking to buy or the place you're looking to rent so you can be informed to make the right decision for your financial future. So let's get to it right now. Let's just look at. Why does this even matter from a perspective of your life? Well, 74%. This is from Bankrate.com, 74% ranked home ownership as the highest gauge of prosperity, which is really interesting. The fact that they owned a Home is their gauge for prosperity, and they ranked it above having a career. Okay, 60% said having a career was a measure of prosperity, but 74% said said homeownership was children is down at 40% and college education is down at 35%. The fact is, is that homeownership is seen whether right, wrong, indifferent is seen as one of the key metrics of prosperity in the US Today. So what I want to do is kind of break down some of the aspects of homeownership as best we can, because it's not just a money decision. So we're going to jump to the iPad here, and for those of you that are just listening, I'll describe it to you and we'll make sure that we can get you access to the graphics that are in play here. So we're going to jump to the iPad and understand the elements of homeownership go far beyond just the numbers. Now, I'm going to talk a lot about the numbers here because the numbers matter. The idea here is this. In anything that we do in the affluent entrepreneurship, my work, my speaking around the country and around the world, my upcoming book, all those things, I'm never going to tell you. Very rarely am I going to tell you, don't do something, don't buy something. What I am going to do is say, let's make sure we have all the information so we're making the right decisions for. For the right reasons, based on the numbers and based on the vision we have for our life. Because for some people, they might look at it and say, homeownership is the thing that we want. For others, they might say, I don't need it. There's people that are living in the van, living the van life. And that's cool, that's good. I had a dear, dear friend for over a decade. Him and his wife traveled the country in an rv. He ran his business out of the rv. She ran her business out of the rv. Now they've settled down, they bought a home, they're remodeling and building in Arizona and doing those things. But understand that nothing is like set in stone. It's set in stone by the vision you have for your life. Look, building wealth, building riches, building accounts, and having that is only.

For the purposes of making sure that you're living true to your vision. Not. Not what society wants, not what your parents want, not what your siblings want, not what the expectation, not what the media is. What's your vision? It's one of the first steps that we take when we start to work with people, when I work with people in my elite level or in my master's level, where we're helping them, one of the first things to do is say, let's define the destination. Now if your destination includes home ownership, who am I to judge that? Okay. But understanding the numbers of homeownership become important in the process. So let's just look at some of the considerations that are financial and non financial when it comes to owning a home. So if we jump to the iPad, the first thing is this is there are financial considerations to owning the home. There's actually four different things that are categories, if you will, that I think come into play. Financial considerations like mortgage. I mean you're going to, unless you're paying cash for the home, which would be cool to do, you're going to have a monthly mortgage. Typically, most people are getting 30 year loans. I am, I'm pushing people to 15 or 20 year loans depending on their situation, get it paid down quicker. But at the same time we're in a rising interest rate environment. So there may be some other issues there. But it's not just the mortgage. And this is the thing that a lot of people will forget about. There's maintenance, home ownership comes with some bills. You got, you got, you know, the gardening, you've got the water, you've got the utilities, you've got the roof that might go bad, the leaking windows. I mean we, so we bought our house here right on the beach in Laguna. And these are things that you, you can't make this stuff up. So we got some heavy, heavy rains here in California the year after we bought. And we're sitting upstairs now. We have this grand room upstairs that overlooks the ocean and everything. But I'm looking at the wall and there's water that's just, it's like a waterfall just coming down the wall, coming down the wall, coming down the wall. And I'm like going, what? What is going on? What we didn't realize because you couldn't see it from the street and, and the inspector never picked it up. I mean that's a whole different discussion with the inspector and all that stuff. But what there was, was there was a chimney stack that was at the top of the roof right where the water was coming down. And evidently the sellers took out the fireplace because there was no fireplace there when we bought it. But I had the old plans of the house and I saw that there was a fireplace there. What they did is they took the fireplace out Remodeled the upstairs and rebuilt, but they never took the chimney stack out or sealed the chimney. So we have this basic bucket on the top of the roof, collecting all the water from the rain and then letting it soak right down the walls. Okay. Certainly not planned for, certainly not normal maintenance. But we had to get people in here to fix it, make sure there was no mold, take out the drywall, fix all of it, seal the seal and cap the chimney stack that was up there. I mean, we have since completely reroofed the roof and took the chimney stack away, so we don't have that issue. But understanding that there's upkeep costs, there's taxes, okay? And here's the other thing that I think people don't realize. Like, if this house were paid off, you know, yeah, the house is paid off, but your real estate taxes will never go away. And so that is an expense that will be an ongoing expense on over and over and over again for the rest of the time that you own the home and then insurance and those kinds of things. So there's financial considerations beyond just the buying that come into play that too often we don't think about. And understanding what those can be becomes important in the financial decision. So that's the first aspect or category of considerations when it comes to home. The second is that it is an investment. Okay. You are buying into a home. Now, I know with some of the stuff that I talk about that when I talk about assets, I talk about investable assets. When we talk about your path to financial freedom, the important thing is to build your financial freedom on what we call investable assets. Investable assets will leverage your time back. In other words, the idea is this, is that I want to pay for my lifestyle with income streams that are coming from assets that don't require my effort to generate the income. That way. All the work I do is work optional but not work necessary. I get to choose each day because I have a group of assets, the investable assets that will generate the income. Well, I. When you use the definition of investable assets, those are assets that increase my net worth by providing additional cash flow when I have access to the value. A residence isn't really an investable asset because if I'm living in it, yes, it gives me a place to live, but it is not going to. I don't have access to the value. It doesn't allow me to pay my bills because it's not generating cash flow. In fact, it is a bill. It's a negative in there. Now, I Don't mean that the house is. Now we'll talk about why I purchased a house, why we purchased a house that was expensive and what was the reasons for it when we get to that point. But understanding that a home purchase for many people is the largest single purchase in their lifetime. So things like location matters. We looked at in different places. We looked in Washington, we looked in Nevada, we looked in Austin, Texas, we looked in different places. But you know what, my wife and I like living by the beach, so we stayed here. So it's a personal investment. But there's other things that, that come into play. The other thing is that when you are thinking of buying a home, how long are you going to be in it? You don't make a home purchase if you know you're going to be in it for just a year or two. Then this is a long term investment. So it's an investment of dollars, it's an investment of time, it's an investment in a geographic location. All those things come into play as we look at it from an investment standpoint. Then the other part of it is down payment. It's going to cost you to get into a property and you're going to put anywhere from 3% to 20% or more down. Now if it's a personal residence, I like to see people put as much down as possible. Keep that home loan payment as low as possible, especially in a higher interest rate environment. But I get it, if you're first coming to the game and you want to get into a home, it's sometimes harder to come up with a 20%. So you may have to come up with a 5 or 10%. And I get that's okay as long as you have some parameters around the debt you're taking on and your overall debt that you have and obligations on an ongoing basis. This is why using a cash resource plan as we set it in place becomes really important to make sure that you're not burying yourself and putting yourself in a huge amount of debt. So you have this house wealth but cash flow poor in that perspective. So that's the second consideration. The third consideration is this and what I call personalization and what I mean by that is this. When you rent a property, you don't have the full latitude to make modifications or create it. So it is your own. We went through a remodel here. Okay, well, we own the place. So we could do whatever we wanted to do to make it our own. If we rented the place, we would have had to get permission. There would have been limitations, we wouldn't have been able to do some of the things that we wanted to do. And here's the thing, a lot of leases would require you to put the property back in its original form when you got it. So if you removed a wall or if you, you changed a bedroom, you might have to change it back. So when you own a home, you have the ability to make it your own. And there's this pride in ownership that comes into play. And then the fourth thing that I think comes into play that isn't about just the money side of it is lifestyle. Lifestyle considerations are really important. When you start to look at lifestyle.

You need to think about what really starts to drive things. Renting gives you a ton more flexibility because you can rent for a year and decide, oh, I'm gonna, we're gonna take off, we don't like this area, we're gonna go to another area. You have a lot more flexibility. But buying a home is a long term decision, minimum five years. And with higher interest rates, you're looking at seven to 10 year decision that if you don't think you're going to be in the house for, you know, seven, eight, nine years, it's probably not going to make financial sense to do that. And you got to think about your life.

At one point. Do you have children? Are you going to have children? If all of a sudden you're getting into. There's a number of these beach properties, we have one of the larger properties here, but there's a number of these beach homes here that are literally one bedroom, two bath, under a thousand square feet. Well, that's great if you're a single person or a couple. But what happens when you start having children? So lifestyle considerations come in play. If you're a young couple and you plan on having children, you might have to grow those kinds of things. And the other thing to realize is that.

The other thing happens, that you have a bunch of children, you have this big home, and now you become empty nesters and they're gone. Now what do you do? All right, do you need the large home? I know my mom, we downsized the house because one, it was just, we were living, we grew up, mom and dad, we had the same house since I was born, just the one home, but it was this ranch style house with a huge yard. Just back in the day when houses weren't built on top of each other and it was an older house. I mean, they bought it in 1980, 60, something like that, 61, 62, something like that. So it was an older house, had a lot of deferred maintenance that was going to need to be done, but it was just too much for my, you know, my mom at the time. You know, it was five years ago that we ended up selling it because it was just too much upkeep, because there was too much deferred maintenance. There was too much maintenance because it was older and it would take a lot and it's too much for her on the yard and all that stuff at her age. So you got to think about the lifestyle impact on that. And then the last piece of this lifestyle consideration is that location matters. If you're not in love with the location and you can't stomach being there, then it becomes a problem. Say the first beach house we had, we actually had a beach house in a community just a couple miles south of us. And this was 51 homes in this community. The problem was, is that the community, we didn't know this going in the community was awful. The people were awful to each other. They were all up in each other's business. We had an HOA association that was financially not run well. We had deferred maintenance that were going to be passed through to everyone. But the biggest thing was just the nature of the people and how intrusive they were and everything that we were in our homes but not feeling comfortable coming out and of the homes and like we walk around here with Budo and everyone's friendly and it's welcoming and it's enjoyable. There it wasn't. And so if you don't love the location or you don't love the community or, you know, those kinds of things are considerations that need to come into play. So buying a home or renting a home has more to it than just financial. Now, I'm saying that because the next piece I want to talk about is I'm going to run through some numbers and show you how I would look at buying a home simply from a financial perspective, then talk about why I still think that homeownership may be the right thing for certain people if you do it for the right reasons and what to consider. All right, so let me jump to the iPad. Let's do some math. All right, But I'm going to do the math for you. I'm going to give you a tool. This is a rent versus buy template, an Excel spreadsheet. I'm not going to. I'm not going to run through the Excel. I'm going to run through a print out of the Excel that gives you an idea of whether you should or shouldn't from a financial perspective only. So let me be really clear. When we talk about this specific piece, I am only looking at the numbers, but there are far other a whole bunch of other reasons to buy a home versus rent a home that we will talk about. So if we're looking at numbers only, then this is the way to look at it. But homeownership, especially if it's a primary residence, is not just a numbers only decision. But let's just look at it. So I'm going to give you some assumptions and you'll be able to get this tool. We'll hook it up in the show notes and in the description so you can download the tool and use it for yourself and everything it is for education illustration. You know, look, there might be a formula error in here. Who knows? I don't know, but there isn't. We've checked it. So let's just look at it. Let's assume for a moment that you're actually going to buy a home. It is cost $500,000. You're going to do a traditional down payment of 20%. That means you're going to put $100,000 down. If you put $100,000 down on a $500,000 home, that means that you have a $400,000 loan that you need to put in place. Now, at the time of us recording this, average interest rates were approaching 6%. So we're going to use a 5.95% interest rate for 30 years. That means that a $400,000 loan for 30 years at 5.95% interest rate, your payment, principal and interest is $2,385 a month. Okay, so that's your payment. That's only the loan. Remember, there's other costs associated with. So we used a 1% real estate tax, so that's another $400 a month. We used a 0.6% insurance. These are national averages, so they could be different in your area. So that's another $250 a month. And then we estimated a repairs cost of half a percent of the value a month, another $200 a month. Now, if you're buying an older home, that could be higher. If you're buying a newer home, that could be way lower. So all told, we look at the monthly cost of homeownership in this case was approximately $3,300 a month. $3,260 a month. Now, we assumed a tax rate of 25% and an inflation factor of 3%. Okay? So that will come into play in this next piece because we're going to hold the home for a period of time, and then we're going to sell it, and we're going to see what we get out of the sale. And I'm going to show you where I think people make the mistake in doing that. So let's say that we come down the road.

And.

And you start to understand that.

The property will go up in value. The property will go up in value. Now, we used a 6% appreciation factor, which may be a little aggressive, okay? But we assumed that we would own the home for 10 years, so a decade. And we assumed that when we sold it, we would pay 6% in selling costs. Typical percentages, they make it maybe 5%. You might be able to get 4% and everything. But so that means that if the Property appreciated by 6% over 10 years, the $500,000 property that you bought is now worth 895,000. It's worth almost $900,000. 6% in selling costs, that's 50,000. So you're going to get $841,842,000 out of it. Okay? But you have to pay the loan back. Now, you've been paying on the loan for 10 years, the 10 years of owning it. So that $400,000 loan is now only $334,000. So you still owe $334,000. So if I end up with 840,000 and I pay back the loan of 334,000, I net money in my pocket at the sale of the property that I bought of $507,000. That's money in my pocket. Now, this is where people stop. They look at it and they say, well, I bought the house for 500,000. I sold the house for almost 900,000. I ended up with half a million in my pocket. Now, mind you, they only put $100,000 down, remember the 20%. So that's actually not too bad. Okay? But if we look at the overall cost, the costs over the life of the house, you held the house for 10 years. That means you bet that you paid the real estate taxes for 10 years, you paid the insurance for 10 years, you paid the upkeep for 10 years. If we look at all of that ownership costs, because you're going to have the same costs or similar costs on the rent side to compare apples with apples. If we looked at all of that, what does that look like? Well.

Over the Life of the house, of owning the house for a decade, we would have paid $57,000 in real estate taxes. We would have paid 34,000 insurance, we would have done 28,000 in total in repairs. And we would have also had cash go out for the down payment and the principal pay down. So total cash outlay would actually be $500,000. What that really means, now there's a tax savings here because the interest is deductible, okay, within certain limits, depending on how big of a house you get. But so the net cash is $451,000.

So we got to understand what that does because this is what we want to compare the rent side to. So that's homeownership. Let's look at the rent. What happens when it comes to renting? Well, here's what we did. And these are assumptions. And you can change the assumptions. And when you get the tool, you can play with the numbers. All of these, these yellow boxes are where you put the numbers in. All the green boxes are actual calculations. So we, we equated the rent to the principal and interest on the mortgage. So we said if, if the principal interest on the mortgage is 2385, let's assume that I can rent something for 2385. So we equated the rent to the mortgage payment. Okay, we used a rent inflation of 3%. So we use an inflation factor of the same 3%. We wanted to get renters insurance. You get homeowners insurance when you own, when you rent, you get renters insurance. The renter's insurance insures the contents, not necessarily the dwelling or the other structure, because that's on the landlord. But when you own the home, you want to ensure the structure as well as the content. So it's a little different, but we said 1.3%.

So your total rent costs, monthly rent costs at the beginning is $2,400. And at $2,400, what ends up happening is if we look at the 10 years of rent costs and present value, it then that's $337,000. Now remember, our total cash outlay on the ownership side is 451,000. But.

You also have the ability to take the difference in your homeownership costs and invest it if you rent. Now, here's where the problem is.

Most people don't do this. Where renting starts to make more sense is if you're disciplined enough.

To invest any savings between ownership and renting into investments so you can get all that investment growth over the Same time period. Okay, but if you just go spend it, ownership is going to be better because it's a forced savings account. Okay, we'll talk about that in a second. But, but here's what ends up happening with this, is that that the difference just in gross numbers, is homeownership cost 450,000, but renting only cost 337,000. So there was a savings of $100,000. Okay. If I saved 100% of that, that means that I don't make a down payment of 100,000. That's going to grow. And the savings on a monthly basis between the rent and the home ownership is going to be invested and that's going to grow. And so if we assume that, that you have an investment return of 8% long term. Now, these are all assumptions. You can change the assumptions. That's why I'm going to give you the tool to fit whatever you think is going to happen. And you use the same investment period of 10 years. If I hold the home for 10 years, I'm renting for 10 years. What you'll see is that the value at the end of the period of Your investing is $332,000, whereas the net value of owning is really only $50,000. So there's a net benefit to renting in this scenario by almost, by a little over a quarter million dollars. This is where we start to look at things like, God, does it make sense? Well, it does because of other purposes, other reasons. And so I'm not telling you not to buy a home. I'm telling you to be smart about why you're buying the home, where you're buying it, how long you're in it, make sure you understand the numbers. Now, if you just look at it and say, I'm going to just not worry about the monthly costs and the accumulated costs, yeah, homeownership starts to make a whole lot sense. But, but every year there's costs to owning the home that you need to think of. Every year there's cost to renting. And if you're comparing those costs over a long period of time, depending on the differential, it may make sense. But you need to invest the savings amount to make that happen. Now, am I telling you not to buy a home? Absolutely not. So hear me clear. We bought a very expensive home. Okay, well, relatively expensive home. Okay.

And people would ask me, you are the one that says you want investable assets. Why would you sink a lot of money into a home that isn't an investable asset? Is it going to give you a return? Well, here's why. First things first. Like I said, it's a lifestyle decision.

We purchased this home. One, we bought it at a great price. I mean, when, I mean immediately upon closing, we could have sold it and made, made a bunch of money. Okay, so negotiating the purchase money on the, on real estate is, is made on the buy side, not the sell side. What I mean by that is negotiating the price, proper purchase price and the proper terms is more important than the sales side of it. Okay, so we were able to get into this house, in fact, both our beach houses were able to negotiate really, really good prices and terms to allow us to get in and put us in a good financial position. So that was one piece, but more importantly, this was an asset. Now every asset, just like every dollar, it's why we use a cash resource plan, has a job description. This was an asset that didn't have a job description that was requiring it to be an investment. This had a job description that was requiring it to give us quality of life. We bought this and now we didn't over encumber ourselves. We'll talk about those limitations in a moment. We could, we could easily make the debt service payment, the loan payments. We could easily afford the rest of it. What? That's. That, that's not the issue. But I remember seeing when we walked the house, the sparkle in Stephanie's, my wife's eyes when she stood in the kitchen, when she stood in the grand room looking at the ocean and the joy and just how it felt. And that's when I knew that as long as affordability made sense in the overall plan, we needed to buy this house. Not because it was an investment, but because it would shift the quality of our life to a place where I could give her something that she enjoyed, that she had a chance to make her own, that she has a chance to call her home, her, her castle, whatever. So this was a decision that wasn't meant and made just on the numbers that we just walked through. So I want you to understand that sometimes we make the decisions, but it didn't put us in jeopardy. We still followed some, some financial rules to make it make sense. So why do we, we consider buying? Because there's other reasons to buy. One is savings. Okay. And what I mean by this is that indirectly as, as you pay down the mortgage of the house and put on that the possibility of appreciation of the value of the house, indirectly, you have this built in savings plan. It's a forced savings plan. Because as we build the equity here, we've got, we got money that we can't access. Now we would have to either refinance or sell it to get access. Which means we got to find another place to live or whole nother conversation, but it doesn't. Second is it gives you predictability. You know where you're living, you know what you're in for, you know what, what, what your mortgage is every month. And unless you're on a variable rate and if you're trying to get into a variable mortgage, you and I need to have a conversation. Especially in a rising interest rate market. It gives you the freedom to do what you want to the property. Okay, is we have the ability to remodel and do it the way we want to decorate it the way we want. Where we're not limited in renting. It gives you some level of stability, a home base from which to operate on a place where you can call your own, a place where you can call your home, a place where you can lay your head at. And now you can get that with renting. But this becomes more of a permanent feeling. You don't have the, well, I'm renting a place and I've got a two year lease and rents are going to go up 10%, 20%, whatever they are. And we've had high rent increases in certain rental markets over the last couple years. You have this stability, if you will, that stays in place. Third is, or the next thing is that there's some pride in ownership. This is our home, welcome to our home. And I don't think you can say, and you can't put a price on it. You can't just tag numbers to it. So I'm trying to balance the numbers part of it because if you look at numbers, it's an easy decision, but there's more to it. And what went into us buying this house and then the last piece is taxes. When you purchase a home, there's some tax benefits, there's limitations to some of the tax benefits. But you get a deduction in the US for the mortgage interest, the interest portion of the loan up to a certain amount. You get a deduction for the real estate taxes, again, up to a certain amount. One of the big tax benefits is that as long as you use the home for a personal residence, a primary residence for a certain number of years, out of five years, two years out of five years, if you sell it, you have the opportunity to not pay tax on up to half a million dollars in gain. If you're a married couple, 250,000 if you're single. Now, that can change once if they change the tax laws or those limits. But think about this.

If I bought a house for 500,000 and I sold the house for 800,000, four years later, five years later, eight years later, 500 to 800, there's a $300,000 gain, okay, that I would have to pay tax on if it was, was not a primary residence. The $300,000 gain could be a tax of as high as $100,000. But since it's a primary residence, we pay zero tax on it. And you can do that every handful of years. There are people that actually buy primary residences. They stay in it for three years and then they sell. Don't pay tax on the game and move to another one. It's not, it's using the tax. Some people might say, are you taking advantage of it? Well, no. The tax laws are written that way. So using the tax laws the way they're written, I don't. There's no crime in it. No one says that you need to overpay your taxes. You just need to pay your taxes in accordance to the tax law that is in place. If they don't like it, they can change it. They changed it previously. There used to be a different law, and then the 80s they changed it to this. So it's one of the benefits from ownership. So what are the things that you need to do? I think there's some things to consider if you're thinking about buying or renting. And I'm going to walk you through what I think are the eight considerations to move forward. And the first is, is, is to really look at this. If you're thinking of buying a home you're.

Living in, it needs to be minimum five years or more. I'm going to say seven years or more. Number two, I want you to run the numbers. I'm going to hook up the template, the tool, the buy versus rent tool for you in the description and in the show notes. So you can get access to it totally free. You can run the numbers, you can look at the numbers and you can make the decision. Okay. Number three, if you're buying a home, I want you to look at your total homeownership costs. That is mortgage, that is insurance, that is principal, that is taxes. And make sure that they don't. Do not exceed 30% of your income. Do not exceed 30% of your income. Okay. If you go beyond 30% income, I think you're putting yourself in In a place of financial, not jeopardy, but exposure. Okay, we don't want it to be more than 30% of income. Then number four, I want you to make sure that you know why you are buying or why you are renting. Okay? It's a personal decision. You'll look at the numbers, you'll make the decision. But there's other qualitative things that we talked about. But make the. Make sure that you know, why is it. It shouldn't be because someone else told you you should. It should be because it fits into the vision for your life and the things that you want to accomplish in your life. That's it. Number five, I want you to optimize your credit. I'm going to do a whole nother episode on credit reports and credit, but what drives it, how to make sure you manage it properly. But you want, if you're going into a purchase decision and even a renting decision because they'll put credit reports on renting too. You want to make sure that you optimize your credits. That means make sure you're making your payments on time. Make sure that you're not carrying too much debt. Okay. They look at the ratio of available credit to how much credit is drawn. So if you have available credit of 10,000, but you've drawn 7,000, I can look at and say 70%. This is a risky play. So you want to optimize your credit because the higher your credit score, the lower the interest rate they're going to offer you. And trust me.

Mortgages are negotiable. I've negotiated all of my mortgages with specific terms and conditions. I have some very specialized terms on the mortgage on this house that allows me to do some things that other people that take the mortgage off the shelf the way it's offered don't. Okay. You also want to look at this. Since it's a long term decision, you're going to be in a place if you buy.

Say seven years or more, assess your job security and if you're married, your, your spouse's job security. What are you trying to accomplish? What are you trying to do? Is, is there some, some issues there? What do you have as far as a peace of mind fund, emergency fund, do you have the liquidity to sustain yourself? All those things that start to come into play need to be assessed here. Number seven is I want you to plan for deferred maintenance. We didn't know that there was another chimney up, up top. We didn't know we were going to get the leak that Cost a bit to get fixed. You need to plan for deferred maintenance. All right. And number eight, oh my gosh. Always, always get an inspection. This is something that a lot of people weren't doing when, you know, people were buying in the homes and they were buying things small, sight unseen, uninspected, unappraised. That's a recipe for disaster. Look, we paid to have a home inspection on this home and the inspector missed the fact that there was two chimneys on the roof instead of one and only one fireplace inside the house. Now could we go back to the inspector? Yeah.

But the cost of dealing with that was far greater than the cost of just fixing it and getting on our way and say, shame on us, we should have known better. Okay, you couldn't see the other chimney from the street, so we couldn't see it. So always get an inspection. Make sure that it is a good inspector that does a detailed look at everything. Don't get into the emotional play of buying a home because you start to chase it. Buying a home becomes emotional because all of a sudden you, you picture yourself in it. And when you picture yourself in it now, you get attached to it and you will chase the home price. Now, before you go in and I can do a whole session on negotiating, I do a lot of negotiating. But before you ever go into a transaction or even think about making an offer, you actually have to draw the line in the sand and know what your exit point is. And you say, if it crosses that line, I'm out and walk away. You have to strip the emotions away from the buying decision. Otherwise you tend to make a bad decision financially when it's an emotional decision. So those are the things that I would consider. I'm not saying that home ownership, homeownership has its costs. Homeownership has its benefits. Rent has its costs and its benefits. Also, you got to look at what it works for your lifestyle. If you have a more transient lifestyle, a less stable job assessment, or you don't know exactly where you're going to land, or you know that you might have to upsize, downsize, maybe, maybe ownership isn't the plan for you because that's a long term game. And getting in and out of homes is costly because it says 5 to 6% selling costs. So it takes time, it takes a holding period, and there's cost to get in and out. Whereas rent, you're in it for a year, two years, whatever, and you can move on. So if you're not sure about your job or if you're not sure about the geographic location. You're not sure about your. Your life's future, where you want to be. Maybe homeownership isn't the place for you. So I want you to use the tool to look at the numbers, but I want you to also use introspection, retrospection, and understanding of what's your financial vision, what's your vision for your life? What kind of lifestyle do you want? Does it fit? Does it make sense and make it for the right financial reasons and the right qualitative reasons, Homeownership can be wonderful in the right place, with the right people to build a life and do the things that you want to do. It can be horrible. It can. If you don't have that, renting can be just the same. So you now have the ability to run the numbers. You now have the ability to look at some of the qualitative things, do the right thing for your life, your vision, and your future. All right, I hope that you found this of value. Maybe it gives you a little bit of shining the light on what to do. If you're thinking about owning or renting. And if you have questions or if you have anything that comes up around this or any other financial topic, reach out to me. Go to askmelnow.com and send me your questions. We'll get it on a future episode, a future show, and make sure that we get it answered. We might even reach out to you and bring you on the show and coach you live. All right? I hope that you found this of value and as I always say, always, always strive to live a life that outlives you. I look forward to seeing you in an upcoming episode on the show or on the road. Cheers. Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of building your money machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright. And I want to help each and every one of you claim it. Thanks so much.