Buy, Rent, Or Lease? (S3E8)

Tuesday, August 1st

Should you be buying, renting or leasing? Does it matter? Find out. 


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

There's certain things that are just hard wired into American culture. Homeownership is one of them but he is homeownership the right thing for you maybe you should rent. How about a car should you buy a car should you lease a car what about that dream house at the beach. By any rain or at least that's sort of talk about on this episode of how much needed podcast her money is sponsored by kill financial high. This is in lane that's all financial advisor with Carol financial. They're ready to match retirement can be Kirby confusing and fully detours and stops but he simply getting started. Approaching retirement or fall somewhere in the medal join us sir our new series of workshops this summer we college retirement. A simple. For more information visit our website at Carol financial dot com. It's Carol financial it's retirement simple. So Chris Carroll. Harder times Wayne you should only drank diet or released or is every. Being fluid and her students who I yeah I think it I think he answers almost always it depends right you know I mean did so many. Decisions we make it just depends on the circumstances. Now. So let's kind of think through one at a time okay let's go with house is gonna because he's. I mean homeownership is kind of peaked in TV American Jews. It is and that's intentional right they. They give your tax benefit to buying a house because the that interest our nearest our mortgages all deductible right now. The government doesn't do that out of the kindness of his heart good to hear something this might this might not be degrade the greatest thing to say is a relief approved what do you think the government one -- or not home. I've sort of wonder why there were some decent about that yeah some maybe it's because. Home building and selling is such an important part of the overall economy nobody should have to live somewhere anywhere right actually the reason they want to. And home is because people who have thrown houses and have children are less likely to revolt against the government. Sean. So this isn't good children and social. Engineering it absolutely is social engineering. You either that big conceptually people who earn houses have jobs have kids. Don't protests. As we know there isn't much to lose if the status quo gets you and I mean that's that's. I'm not trying to be horrible simic by saying that but it's the unfortunate truth OK well let me let me tell you there's this. Old thought process that's been around forever that says you always ought to buy your house renting is throwing money away right great I think all of us have probably heard that at some point but. I just don't buy into that philosophy. And let me tell you why the the first house I actually bought for myself. Was a bowel I guess this would have been about twelve years ago I lived in the house for nine years. I bought the house and sold the house for almost the exact same price. So you can make some killing and really stay in the reason is we went through the big real estate crash in 0708. Losing prices came way down they recovered but they recovered back to about where they were when I bought the house which was I think. He ended 2005. So. In the nine years that I lived there I did not making money on the house value going up. Now in the nine years that I lived there aren't paid down about 60000. Dollars worth because my mortgage. Okay. So that was extra equity I had in the house some excerpts yet you were putting that you weren't just paying the mortgage minimum you were advertising it which you talked about increased sense. But I spent about 20000 dollars giving the house ready for sales so some actually is also that you should know so that gives me a little bit of a little bit that I would have made. Except that you subtracting all the things I did for the house of than nine years I lived there. Had to fix the deck or do renovations I. Good change to gutter or try to replace all the gutters on my house or replace the air conditioning unit had a pat Stewart. When you put all that together 'cause I sat down and did the math for muscle mosh house. I've made zero money. All manor house in the nine years that I live there widen the net effect was exactly the same as if I had rented. Except. For the tax benefit that I got. On paying down the mortgage during that period of time. This is one of the times curse and I'm sad for you because on those of us whose brains don't work with numbers that way are able to live and I happened fantasy. Where is you're forced to face the minister holds true except for nine years you made zero and maybe even when a few dollars back dad could and would have been basically if I could've rented. House for about what my mortgage payment wants. I would have been exactly as well off in that period of time. But the thing is there's a psychology of home ownership to because like Q I've I'm lived in the house is ever met and I'm by house's. I lived just recently in a rental house for a year and a half. And on the one hand I felt really freak because this house was an old house and you have problems but they were my door her props it's great. But on the other hand I never felt fully at home and home because it wasn't my house. And I knew that at any time day landlord. Could communion do pretty much you know within reason pretty much anything yeah I wish. And that. You know. I understand that there are psychological things passed the financial so when I went to when I'm talking about it it is. Just is a financial decision it's not a slam dunk. And and I think too often people hear this or renting is just throwing money away grace and I think you are even in our parents generation. They are they kind of took that as a truth. Freight and raised us to believe Henry and ask us to believe Adam and I don't think that's the case I think that's the case if you fundamentally assume that a house will always go up in value. But that's not. True which we no no no literature of and the thing is you also here and there almost like urban legends you know we all know somebody or we know somebody you know somebody. Who bought their house. On three did the kitchen and two years later sold. It's for a ton of money well and they made a 100000 dollars or whenever I pray not how I would tell you that that is rare but third there are people who have a talent for it. I don't I'd I don't know I live there I just little live somewhere yeah no I'm a few. Here's the thing so sir here's here's the way I think about her process of how. If I'm gonna live somewhere and I know for a fact it's five years or longer I'm going to be there I think buying a house program makes a lot of sense. If I didn't know for a fact it's under three years. There's no way I'm buying from renting from renting every time. It's a little cloudy when you're in the middle there and I think it takes. It takes somebody would stay with them are for real estate remember when you. When you look at a real estate transaction and the money is almost always made on the purchase of the real state so it's not that you. Down some dupe a willing to pay you too much to buy your house right it's that. He found some I desperate enough to sell you something at a low price rate so you make your money on the buy soon so you really pay attention what you pay for things on the up front if you're by some things. If there's an opportunity to buy something just a tremendous deal. You know I can I can't say the Dutch are good thing to do things to pursue but. You're right I just don't think it's a slam dunk and and I think if you just a person that wants to live somewhere. It's located rats are caterers. Let's talk about two some housing markets are so inflated like for example. I was in northern California recently on business. In the Sonoma valley beautiful linking a place that if you could pick somewhere to live this is where you picked. And for that reason real state of course is extremely pricey sure. And if all you can get for 600000. Dollars is a thousand square feet with no running water out. Homeownership in that situation doesn't make a lot of sense doesn't. And you hear the same thing about San Diego California for example. Are you looking place such an expensive housing market up. On it but it just makes no sense to buy so would would you say that not only do have to factor in the amount of time you're thinking of living mayor Bret. The real estate market in that place overall. Yes I think that's true although you know to have the money to buy something in a hot market. In any you know you may make a lot of money being there for shorter time because some markets just you know be if things don't turn against you. You may make a long hot. You know I think it's financially our estimates are at risk you and your basically. You know you're you're taking the decision to an investment decision rather than. Living lifestyle decisions and and that's OK the if you wanna make you and and that real estate is an investment decision. Who I would ask are you qualified to do that he dearly and there's you know really understand the real estate markets well loved your machine which are getting yourself into your. Things can you do it can ever think a lot of people say oh it's really easy anyone can do it well. I like to think I'm a pretty bright person but I'm I'm don't have any expertise and timing the real save mart can write actor this is not my thing so you know I think are pretty right person I might could learn how to do about it. I'm much more focused on must find some more than others saying she. Talked about lease option you see that sometimes with properties you know he can buy it or you can dual lease option we have so as I understand the lease option is. You're my land lord I hope I'm living in your house a home I'm paying you rent but maybe some portion of their brand is going toward a down Pena had. Usually are really small portion is going towards a down payment so that you can at the end of the lease option you have an option to purchase the home. A lot of those are structured. Kind of has one offs who you know is somebody who wants to sell a house and you come in and say. While light to buy ad but not a hundred person what if we do lease option and you offer that to them. As the buyer you an offer that to them. I think they can make sense. But it's very special circumstances. It either that person your recent. So maybe you've moved to a new town and you don't know the town well enough to know where you relive what the school systems are like her saying you you might find somebody's going to. Give Europe one year to year lease with an option to buy at the end. What happens if you don't take the option usually you lose out our in some of the money usually you kind of overpaid grabs. For however and then you don't there usually you don't get that back now but again these are usually one off situations so. I can't say you'd never would because it just depends on what you negotiate. So here's a good Beers goods teachable moment right here on if you are looking at least shot lease option and good to know that you need to negotiate. Every writings portion of that extra rent is return we'll tell you if you don't exercise the option. Absolutely every every part of that is a negotiable contract. So. One of the one of the mistakes I've seen in that market is relying on the other person's real state attorney to draw it off yet the other side's lawyer always has your best he has exactly. You know see just Muni donor Schumer cheating yourself into and if you're doing and learn to something like that realize it's all negotiable that you ought to have an attorney review it and talk us through what do you really want to happen let's. About second homes a little bit and that's that's a dream that a lot of people have a lot of people I know dream of having a house in the mountains or house at the beach and I I have to say I'm not that person I find it almost impossible to take care of the one house and I'm living share time. She idea of having to house is makes me feel like I can't get enough oxygen but that's just me okay. I know a lot of people in my dearest friends save deceive deceive to have a beach house. And he's happy it's working out for him. Is it when a good idea to actually buy eight. A second whom and why isn't a good idea to just get on lake home away dot com and just go where you want to go and not have the headaches of homeownership. You know I think that answer has she changed a lot in recent years OK because. Two when he years ago if I wanted to Brenda placed the beach for a month. It would be really hard for me to figure out how to do it. You know I'd call real estate showdown at the beach I talk to them about what they want what I want and they would describe it to me and it's ultimately I would be taking probably a lethal faced so I don't see I don't seem right. Obviously that's not the world we live in any war and so I think I think our world changed a lot. For me I really enjoy the beach but I'm not the kind of person who's gonna do down the beach for months. You know I don't think I can't see buying a second room if I'm not going to be there two months or more out of the year. How about people who buy them and immediately turn around rent them on my co lawyer V because that's and they are different and they say these these Reynolds are paying for my mortgage from my investment and I know for some people that does seem. Work it does work. Again I think I think you're taking your risk in doing it and that's fine if you know something about the market. So do your research before you commit to something like but it definitely can't work because there's always going to be people like me right they don't want to learn some thing. Because I'm not gonna be there enough. But I rent. All right you're lowering your first half week season you know mom all right. Put my wife and kids like you're down there for two weeks in the summer might not be with from the whole time there is they get a vacation away from me but how. I won my thoughts about having a second house is so well I have to link so during my first worry is I just wanted to clean to house a second. I don't wanna feel obligated to spend my vacation time in the same place yeah third. I don't want my recently paroled causing constantly asking you to come and visit me at the beats. Yeah I'm not going to mention which members of my family would want to use that beach house if I have that exact I think we all have that we are I have to recently rolled her husband. Who is almost sure he's done which is nice swallowing back here. Yeah sometimes give their lives to. And let's that's actually that's the reason had a third car for all of my life that I actually got in the stiff about I didn't wanna have a third car because people were always borrowing it. And and she didn't understand why are you so mean to help you hate it camp does pretty much the governor's recent album you know I. I do very much on the same lines as you're going Don cherry you know among my parents have had to how's this for a long time. And probably fifteen years. And I'm always your mom say oh gosh I've got to go to the mountains to get to stop and have got to get so yeah. A dishwasher fixed up there are older are still pipes broken arm gotta go out there for two days to wait for the plumber. So you know lake even those they use that place a lot. I still think you saw one or more can headache and I would much rather just say. Oh let's go online and find some murder staged or we can you know if I like it that's very maybe elder backed her next year if I don't. Who cares it was one week it's not my problem yeah yeah problems. Well and let's talk about Carson on the track OK so. I've always do with cars I've always been someone who did not want to lease ever for a couple of reasons and I and I could be. Just slick assume there's this crazy person back. I don't want to lease because I don't want to have to drive with one eye on the odometer hormone. And my children are filthy disgusting on the little creatures who cannot be safely allowed to ride shotgun and a car that I don't know. I've got. So I've never get the combination of the mileage caps and all of that you know fine print. And the feeling that award have to treat this thing with kid gloves. Have kept me from ever leasing a car them but I know lots of people to do so let's talk about the benefits to leasing a car. Buying a car and now we live in a brave new world where you can have a car sharing option to you know no where in the country you live yet start at least he's. A coast are replacing leasing is designed for people who can least through your business. Called police and expense. And deduct it. As an expense. So they're paying their lease with pretax money. But he doesn't imply I'm most of my eyes those exact tour I'm going with this series. That is what leases are designed for so my car that I drive around I think of it is my car is least through my company. Now. It's for means that makes sense because I am traveling for business like all hi I'm all the time a driver around there come down to see you yeah there you go see your I understand lines in different places regular conferences I drive to conferences. All the time. So it makes sense. In you know in one sense it makes sense for me to have accompanied vehicle. There are still use a company vehicle for myself right right it's still drive it on Saturdays I drive it. If my wife and I you're out to nurses same car. And there are rules about how much of the payment you can deduct and things like that based on mileage it's pretty complex. We need to realize when you release. There are designed to be good deals for people who were paying basically with taxes go. To borrow money what I'll be Ding dang good because that is not how they present data and thousands in the way they presented to use what's the monthly payment yet exactly you can discard your dreams are a fraction burden for 399 a monsoon. How would you spend all this money on a car when you can just leases for three and I mean I'm it's a depreciating asset why would you do that what he's seen how disgusting my children are because I can't put them in your Lisa and I mean here's the thing when you Chris I think Lisa. Are incredibly complex particularly if you're not financially minded. Because normally if I go in to buy a car I'm negotiating. On the price of the car right. Craig how much is Hamachi is the Carner cost me and maybe there's a second thing I'm negotiating I might also be negotiating the price might treat them. OK so as to numbers we got to come up with and agreed to the value on. If I'm leasing a car. I've got to I've got to negotiate the price of the car getting. The interest rates that there are charged me. In the valuation. Of the car when they sell it at the end of the lease so four year lease arm there. They have calculated what that car's going to be worse than four years it's part of their calculation that role in their current. Well then. I need to think through every one of those numbers if I'm gonna make your decision grain it's conscious is this car worse this amount of money. It's is it going to be worse than a mile and a that a lot of money and got the interest rates the third ever charged me. You know in a lot of cases to doomed. Dude interest rates on leases are not attractive. If you look at the find a traitor well right in particularly if you compare them to somewhere else that you could borrow money a lot of times you know if you have a account with a co writing or something. You can borrow money to buy a car incredibly cheaply. Right there we are about that in previous a lot of time and I can find incredibly low rates. To borrow money to buy a car through credit union through bank. Sometimes to the harsh financial company right of target Honda financial or Infiniti financial work. You know I'm just throwing car names out there basically everyone of them has want to. My husband financed to struck a long time ago through Toyota and got a great and we knew was a great deal that was fantastic deal. So what about all the panel Lisa it is it's is still true that if you go over the mile ol' age you pay a certain amount and that that can add up really fast oh yeah if there's any damage you a little door dangle you hear a little door dig that there. Could be a thousand dollars 15100 dollars extra only in the police absolutely true and here's the thing that I know because I've done with their right Obama on my fifth leased vehicle since I started this business. That does. All of those things get waived if you stay with the same car company. So I learned so five drive a Lexus at the end of my lease I get another Lexus. Daylight really don't look at a lot of the little stuff so they can send you can't use one 2000 miles over your limit with a shot on the cartoon in the side door and my real election. He didn't share of that they'll negotiate that's all negotiable to influence let's write this down as things that you can negotiate. A lot of times when they. When they tell you all there's this much this is the number this is the number for the dairy your car you could be like no. That's not Erica. Now how much power do you really have to negotiated well to pets. Every release pretty much has an option to buy at the end of it. So if you're gonna negotiate what they're charging you for the damage that you need to be willing to buys a car for that amount of money. And and what is bulk order which means going way overall mileage. You don't you don't want to do can't do yet you don't wanna do. When when I think about like car ownership vs car sharing if I were to move back to Philadelphia today for example. The cost of car insurance and pencil these insane. The cost of having a parking your car in Philadelphia and saint assault on the roads all winter long insane. The people on scratching shelty profanity in the dust on your windshield in saint. Are you wouldn't know I. When I lived in Philly before I didn't own a car idea he'd it was more trouble than it was worth I would so jump on a car sharing service. So stock about those a little bit for people. A little bigger delirious you can manage and I think that's the key you've got to live in a bigger rim area to take advantage of it and there's got to beat the biggest thing that. Did you wanna get away from is paying to park. You know this is paying for like the top part of the whole so yeah right I mean to me that's the biggest pain you know it. I think you're gonna see more and more. Car sharing in the future I think you're also gonna see me more. Families only have one car families who would it used to have three would have to fairways you have to would ever want. I think you're gonna see a lot more of that in the future I mean I. I used to rent a car when I traveled all the time and never read any new war fervor instead of less gas so that I don't have to think about. During the car back in force and filling up getting gas and an end and you know I just don't have to deal with all match and most of the time when you travel you really only ruining your car for like. Three drives you know drives airport hotel hotel airport Kim may resume and others out one other time you read from the hotel through summer I ranked. Thumb is you know so so I think I think car ownership is gonna change I think it's gonna change pretty drastically in the next ten to fifteen years. That's the thing that's gonna happen and and driver Lewis is going to be a big push here to. Is. It's going to become more and more and more efficient to get your car wherever you want. For whatever you needed student sued to be transportation is evolves in a lot this is to meet its a lot of what happened to retail. Over the last ten or fifteen years is gonna happen and so we just our case transportation the next ten or fifteen years. It's interesting because we started off talking about how the idea of homeownership has baked into American culture. The idea of an American behind the wheel on mile and her car and that I. I mean when when I turn sixteen and got my first car. Meehan that car or like that you you know we would like I was still yeah that was Mike does an extension if yes it was it was a part of me like. You know that he was it it was part of my identity. And I think for a long time Americans have had their cars part of their identity and I think that's really changing. I think it's gonna continue to move all if I could. You know the best car owners of the corridors that via. And take great care of it and and for ten or fifteen years and get a ton of mileage out of it. And then move on to the next car right we all like. Intellectually I think we all know that's true okay this is hard it's. Are the rest of us is your practice right wolf the think about the fact that those people might not even have to exist anymore right so like. I think if you're buying debris new car today. You might have ten years before transportation looks very different than it does right now. Massive disruptions on the road up ahead how you only did there come on you're not happy couple I mentioned how expensive car insurance can be certain places and on the next episode of are we the podcast we're gonna talk about concerns you weren't. You wanna talk about something that's confusing. I think. From that time you need it until he dies insurance as one of the most confusing things ever aboard on break it down and make it simple and that's on the next episode of her money. K if you want more information about what we talked about today's show or if you just have other questions about money. This is our website it's WWW Doug Carol financial dot com or you can only choose meaning mill workers through the podcast or through my website. I'd be happy to help this I can't. Her money is sponsored by killed financial hi this is only natural financial advisor with Carol financial. They're ready to match retirement can be Kirby confusing and Foley. Approaching retirement or fall somewhere in the medal join us sir our new series of workshops this summer. We college retirement. It's simple. For more information visit our website and Carol financial dot com. It's Carol financial it's retirement simple. They're her laid my guess is hosted by me Sherry lynch and meek Crist shareholders. 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