A story about a renter that I know

I work with an older lady who is getting gentrified. This 50+ single white female is getting kicked out of her house because they raised the rents on her.  The only person she can blame is poor planning because she doesn’t have the luxury of blaming oppression and racism like black lives matter (joke).

We work in Orange County which is similar to Northern California in that the rents and the property values are INSANE.  That is kind of how it is all over California, even in San Diego.  What this means is that she has the choice to pay the rents there or pay the rents around the corner. They are going to get their rent though because that is the current market rent in this area.

This lady is under duress now because her landlord decided to raise her rent $600.  When I heard this I was immediately reminded of the rent/own conversations that get thrown around on twitter. The interesting thing is that she rents where she once owned. She sold out to only return back to where she once owned, as a peasant, I mean renter.  It is also important to note that that behind that $600 will be another increase next year, and the year after that.  It never ends in renter land.

All arguments aren’t created equal

Now the thing to understand when the rent vs ownership arguments start flying is that there are people that study this and follow housing and then there are people who just pay bills until they die. There are those that are strategic about how we live life and then there are those that just do as they are told. The problem is that on twitter we all get the same 140 (280) characters, we all think our opinions weigh the same.

So now this lady has to move and look for another place to rent, because she can’t possibly afford to buy in Orange County these days.  In Orange County 4br 2,000 square foot homes are on average about $1.1 million.  That same house in Texas costs $300,000. Imagine if she had bought ten years ago as opposed to renting ten years ago. Now, not only would her mortgage be the same low manageable number it was back then, her property value would also be exponentially higher.

Your debt to income improves but cost of living as a renter wont

Not only that, her mortgage would be in line with her debt to income based on her income ten years ago.  She likely makes double now what she makes then but the rent increases steadily each year. The rent now is equal to her debt to income so she spent the last ten years broke instead of building out of the hole.  This is a hidden factor most people over look when looking at a mortgage.  Its like my law school professor told me “the student loan payments are a lot when you leave school but after years of practice they are nothing”.  The same is true with housing, in the beginning the mortgage is huge, toward the end you start chunking it out just like my uncle who paid off his home did.

See, renting is short term thinking.  Renting is a short term solution to a long term problem.  If you don’t feel the pinch of the rent NOW you will feel the pinch of the rent later.  The pinch of the rent will never go away because it will keep lace with inflation and cost of living. You will just be living paycheck to paycheck forever as they raise the rents, add in fees and screw you for a profit.

Renting affects your heirs

Not only is SHE screwed but now her heirs are screwed as she is forced to pay even MORE of her income into the inflated OC rents, this takes away from all the wealth she could be putting toward retirement, or just stashing away for her kids.  Her disposable income is gone.

This is poor planning. This poor planning was caused by short term, right in front of your nose think.  This is the same think that most of the people on twitter use. This is why the use up all their single no kids discretionary income to look rich on the gram as opposed to punting it and putting it away for the future.

Another reason renting is short term is because most people could own if they weren’t so caught up on living in their dream home. Most people could afford a fixer upper but instead of sacrificing they want to move in and rent luxury NOW instead of building toward luxury they own.  Short term, selfish think. Stop that!

So, in conclusion, renting long term is selfish, ignorant, and ill informed. I hope that this real life example will show you that ownership is always the solution. Rentership feels good now, but long term it’s a losing strategy.

If you want to get into the land of ownership, come to Todd Capital. We are just getting started. Email us at info@capitaltodd.com

Be great, invest well,

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