While I really enjoy Grant Cardone and what he has to say, this is why I don’t “rent where you live and own what you can rent.” Instead, I prefer owning where I live AND owning what I rent, the best of both worlds. Enjoy! Feel free to add me on Snapchat/Instagram: GPStephan
To preface this, Grant Cardone has a video explaining why you you should “rent where you live, but own what you can rent.” His reasoning behind it is fairly logical: the majority of people see the home they buy as an investment and don’t look at the opportunity cost of this money, so they don’t fully understand the expenses that come with owning a home. Grant explains that instead of tying up money in a home you live in, you should use that to invest in multi-family real estate – and then, rent where you live, because that’s less expensive. His reasoning is that he can rent a home for much cheaper than it would cost to own that home, he has more flexibility in moving around, and can leverage his money more by investing it.
But lets break this down a little further…and then I’ll give you my own thoughts on this, because I own where I live and own where I rent, and have purposely designed it this way for a reason, which I’ll discuss shortly.
The biggest point with Grant’s argument is that it’s less expensive to rent a home than it is to own it, and you get a higher return elsewhere. And the answer to this is both a yes and a no at the same time, meaning it’s largely dependent on your market. Here in Los Angeles, MANY areas are more expensive to own than rent…in the higher end markets, home owners make more money in appreciation than they do in monthly cashflow, which often balance out the costs of buying vs renting.
Other markets are the total opposite. Some markets are way cheaper to own. Outside of really high and really low cost of living areas, most markets tend to fall somewhere in the middle. It doesn’t make a huge difference either way, BUT with owning, you generally have a little more control with what you do with the property, and you’re not worried about a landlord kicking you out on a whim out of nowhere. So Grant’s argument can be true depending on the situation, but it’s also false in other markets.
The problem here is that for most people never do any research about which is better for their situation, and automatically assume they should buy because “it’s a good investment long term,” which won’t always be the case.
I like to own where I live and own where I rent. This gives me ultimate control of both words and most people don’t realize the HUGE opportunities of buying where you live. First off, buying where you live gives you this immediate advantage over an investment property…it allows you to put less money down at a lower interest rate. The difference between paying a 4.5% and 4% rate can add up to an enormous amount of money over 30 years. The other advantage here is that you can buy a property that needs a significant amount of work and renovate it. This is what I’ve always done, for every single property I’ve bought.
By renovating a property, you can walk away with a significant amount of equity…So right off the bat, I’m coming out ahead by buying and renovating, than just flat out renting something. Even if I pay more for buying, I’ve just made way more money in equity.
Now, granted, you could also do this for an investment property and rent it out for a higher price, but my approach has been to buy a home as a primary residence, get the lower interest rate, renovate it, and then move in and live in it for awhile. Enjoy owning without having a landlord. When the time comes, buy something else and rent out the house you were living in. Now you have a renovated investment property, financed at a lower interest rate with less money down, that you can one day rent out. Ideally the property SHOULD cash flow though, which is why you need to anticipate the rents ahead of time and what your total cost will be. But when done correctly, you’ll end up with a great cash flowing property.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at [email protected]
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