Self-made millionaire Chris Hutchins buying or renting a house

Most Americans who bought homes since the beginning of last year are having second thoughts.

In the year About 31% of those who bought homes in 2021 and 2022 said they had to pay the asking price to land their home, according to a recent survey by real estate information firm Cleaver. And for financial and other reasons, 72% of recent homebuyers say they regret buying a home.

But even if you regret it or feel like you’ve overpaid for your home, many financial experts say it’s better to own a property than rent. But, depending on your financial habits, that may not be the case, says Chris Hutchins, founder of Grove, a financial planning firm acquired by Wealthfront in 2016.

A self-proclaimed “life hacker,” Hutchins, 38, is a self-made millionaire who has effectively been part-time since he was 30, but currently holds down a full-time gig in addition to hosting the Life Hack podcast. “All hacks.”

He’s a homeowner, but he doesn’t think you have to be to get ahead financially. “So many people think that buying is the biggest financial decision of your life, but you don’t need to own a home,” he says. “I think it makes perfect sense to rent for the rest of your life.”

Here’s why, depending on your finances, you may regret buying a home instead of continuing to rent.

Home ownership is more expensive.

It’s not hard to see the benefits of home ownership. In the long run, if you pay off your mortgage diligently, you will build equity in your home and own it outright. And if property prices rise during that period, you can get a good return on your money.

Rental payments, meanwhile, build nothing.

All things being equal, a loan payment goes further toward building wealth than a rent check. But not all things are equal, Hutchins says.

For one thing, homeowners need homeowner’s insurance, which costs an average of $1,272 a year, according to data from the Insurance Information Institute. Average annual price for a renter’s policy: $174

Homeowners also have to pay property taxes. State average annual property taxes range from $606 in Hawaii to $5,419 in New Jersey, according to an analysis from Rocket Mortgage.

And if you own a home, anything that breaks down or needs updating is on you. “Even in a new house, the water heater went out. We had to pay for washers/dryers, plumbing, painting, repairs, renovations,” says Hutchins. “That’s something you have to take care of as a homeowner. As a renter, you don’t have to.”

That’s it after submitting a down payment. Standard cost: 20% of the house price. Get under this, and you’ll have to pay more for personal loan insurance every month until you build up 20% equity in your home.

Investing your savings: ‘You can still build equity’ with more flexibility

Renters are paying less but still fail to build wealth, right?

Not if they’re strategic about using their savings, Hutchins says.

“If you take the money for the down payment and property taxes and maintenance and closing costs and put it in a brokerage account, that will grow over time,” he says. “You can invest in stocks and other investments, including real estate. That way you can build equity.”

Meanwhile, by renting, you offer flexibility that’s hard to come by for those with a 30-year mortgage commitment.

“The general rule of thumb is you should wait five years before trying to break even at home,” Hutchins says. “I wouldn’t consider buying a house now if the location and size of the house is not what you need for the next five years.”

A lot can change in five years. Say you get a new job in a new city. Or suddenly you have a child and find out you live in a bad school district. If you have to move, it’s easier to break your lease than to sell your home, Hutchins says.

Of course, the math behind renting only works if the renter is diligent about spending the money he’s saving by not owning.

“You build more wealth with real estate than if you were someone who wouldn’t otherwise save,” Hutchins says. “But if you’re someone who doesn’t know where you want to be for five years, you can rent and move out in most cases.”

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