Financial advisor and Netflix host Ramit Sethi took aim at the common financial belief that renting a home is a waste of money.
On a recent episode of Stephen Bartlett’s podcast Diary of a CEO, Sethi busted common misconceptions about real estate ownership and argued that renting can be a smart financial strategy when combined with smart investments.
“Renting is not about throwing money away,” Sethi told Bartlett, comparing housing payments to other service costs. “It’s like going to a sushi restaurant and not throwing away money on sushi. You’re paying for something, so you’re getting value.”
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The “How to Get Rich” host pointed to current market conditions to support his stance. “Currently, in the United States, in the top 50 largest cities in the United States, it is cheaper to rent than to buy,” Sethi said, citing New York City as an example, and the difference in monthly costs between renting and owning the same property. , pointed out that it could exceed 2 million yen. $3,600.
Separately from CNBC, Sethi detailed the often overlooked costs of homeownership. “People say they don’t want to waste money on rent. Well, they don’t want to waste money on interest,” he says, adding that the first few years of mortgage payments can be up to 80% interest. It was mentioned that there is a possibility that
What Sethi calls “phantom costs” include costs that many potential buyers don’t factor into their calculations, such as property taxes, insurance, maintenance and homeowners association fees.
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Sethi shared his financial success story with CNBC based on his personal experience. “I made more money renting than I did owning,” he said, referring to investments made with money that would have otherwise gone toward down payments and real estate costs.
Sethi doesn’t discourage homebuying entirely, but he does argue for a more nuanced approach to major financial decisions. He recommends prospective buyers conduct a thorough financial analysis, including calculating depreciation and carefully considering alternative investment opportunities.
“Most of us don’t run numbers,” Sethi explained in the podcast. “You spend $1 million on the total cost of owning a home, but you never calculate it.”
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Financial experts suggest allocating 5% to 10% of your monthly income to investments. “I don’t try to brush my teeth, I don’t try to save money, I let it happen automatically. That’s what I want for couples,” he said.
Sethi acknowledged that home values are as high as ever, up 85% since 2010. But he cautions against assuming that real estate is the only path to wealth, noting that stock market investments have historically outperformed house prices.
Sethi recommends considering both financial and lifestyle factors, from work flexibility to family planning, when deciding whether to rent or buy. The key, he says, is to make informed decisions based on analysis rather than society’s expectations about homeownership.
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