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They rent for various reasons, but whatever the reason, renting just doesn't make sense- unless you HAVE TO RENT.
I showed one of my houses the other day to a couple who had been renting for 15 years. (I secretly love to hear this remark about renting so long, because my response can produce such a dramatic understanding of the difference between renting and home ownership. And yes, I'm selling houses, not renting them.)
"How long have you been renting?" I asked.
"15 years," they replied.
"At the same place?"
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"Yes."
"How much is your monthly rent?"
"$850."
"Has it always been $850?"
"No, it just went up $25 per month."
"What do you figure has been the average rent for the past
15 years?"
"Oh, it has averaged $750."
"OK, let's figure what you've spent on rent over the past 15
years."
"Oh, we know, we know. We just never have gotten around to
buying our own house, and we sorta like the house we rent anyway."
"OK, let me plug these figures into my calculator. Let's
see, $750 average rent per month times 12 months times 15
years, that's...."
"Oh, I don't want to hear it," the wife objected.
"Well, might as well face the music," I continued.
"OK, OK."
"You have flushed $135,000 down the drain by renting for
the past 15 years! You have nothing to show for it, except a memory!" I concluded.
"WOW! I didn't realize it was that much!" both said.
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"Yep, very few renters realize how much money they waste when they rent. And $135,000 is just how much house you could have bought if it had all applied to principle. That doesn't account for all the tax savings on your income tax for being a home owner. For example, if you had been self- employed (or even had a little side business that qualified you for business deductions), you are allowed to deduct the portion of the house, utilities and maintenance expenses on your profit and loss statement for the business to the IRS. And if you had been paying $750
monthly on a mortgage, you would have been allowed to deduct
ALL the paid interest off your income taxes, which is sizeable. That might have been as much as $100,000 in interest deductions.
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You can't deduct any other type of interest charges off your income
tax, such as interest charges on a credit card, but you are
allowed to deduct the whopping interest you pay on a home
mortgage."
Well, it's a hard lesson to learn, but renting doesn't make
sense, unless you are in a situation where you must rent,
and I acknowledge there are those situations.
This makes a strong case if you attract renters to buy a house from you, or if you appeal to
renters for creating a lease-to-own agreement on one of your houses.
Phil Speer, Ph.D., started his real estate investing career 25 years ago. Without the availability of credit and using only a $10 bill, he purchased $1 million in properties in his first year, and had accumulated $10 million in properties by his fourth year. He was featured in a Wall St.Journal editorial as most successful investor in the Nothing Down Real Estate Movement, and was honored with a Caribbean cruise as top investor of the year. In his hometown of Nashville, Tennessee, he has been a businessman and Human Resources Consultant for 30 years. He is an author, speaker and seminar director. To learn how to profit in real estate investing, even without cash or credit, read his report at at http://www.CashinHouses.com.
