MILITARY MILLIONAIRE EXPLAINS: Should I Rent or Buy a Home?

Buying a home can be one of the most magical experiences ever.

But, it can also be one of the worst.

The day after you moved in, the A/C and furnace died.

You now have to pay $10,000 to get that fixed.

What’s that?

Did a storm cause the old 100-foot oak tree to fall on your house and destroy the roof?

There goes another $15,000.

Man, you should have rented!

That way, you wouldn’t have to pay all that money out of pocket!

That is true…

But…

What if you get a property manager that never responds to maintenance calls?

What if the owner decides to sell the property on your next lease when you and your family just get used to the neighborhood?

Also, possibly say goodbye to never having a pet or the ability to truly make your house a home (homemaking, i.e., paint, new flooring.)

Both buying and renting have their pros and cons.

Here, I will dive deep into whether you should buy or rent a home, including privacy issues, fees, house hacking, and much more.

While in the military, my wife and I experienced the joys of worry-free maintenance costs of renting and the complete freedom we got from owning a home. So we have a little bit of experience to share.

If you’re interested in finding out which option could be a faster way to wealth or help you sleep better at night…

Grab your favorite beverage and take a read below.

Should I Rent or Buy a Home?

To rent, or not to rent, that is the question.

“36% percent of people are renting their home.”

– 2023 Worthinsurace

But what should you do?

Let’s dive right into it.

Why You Should Rent

1. You Move A Lot

If you plan on moving a lot, you should probably rent.

My first place to live was a rental.

Being in the military meant I was going to move every three years.

If I was going to buy a home, I would soon have to leave it.

Sure, I could have rented it out. Still, for me personally, I was extremely young, in my early 20s, and did not have a lot of discipline or even education in the renting aspect.

So it was a no-go.

You might be better off renting if you are in the same shoes.

2. Can’t Afford A Home

“Boomers are doing what they said they were going to do. They are aging in place. And Gen X is locked into 3% mortgages already. So it’s up to the builders.”

-2023 Doug Duncan, Chief Economist at Fannie Mae.”

It’s 2023, and the mortgage rates are sitting at 7%.

You need to be about $30,000 for a down payment.

The average annual income is around $60,000.

Additionally, most folks only have about $5,300 in their bank account.

To make things worse, people only save about 4% of their income.

So take that’s about $2,400 per year.

What do all those numbers mean?

Magic 8 ball reads, “Outlook is not so bright.”

Folks don’t make enough or save enough, and prices are too high.

Sometimes, the cards are just not in your favor.

3. You Don’t Want to Pay Hefty Maintenance Fees

But maybe you are a great saver.

You have an excellent-paying job.

You may even have enough to buy a home with cash!

But you realized you didn’t want to pay $15,000 yearly in home maintenance costs!

Yes, I said $15,000.

Ask any homeowner.

The typical year is roughly $5,000, but it can range to $15,000.

I remember one year, my basement flooded.

I had to completely redo it.

I had experts come in and dig, place plumbing sump pumps, and all that good stuff.

That was about $9,000.

THEN…

We needed a new water heater, which ran about $5,000 for the gear and labor.

We then had to redo the driveway because it flooded our yard when it rained.

So that’s another $4,000 right there.

As you see, the prices add up.

And if you do not want to pay those routine fees, you may choose to rent instead of buying.

4. Amenities

Ah yes, the pool club, public gym, sauna, the glories of the renter’s amenities.

Now we’re talking homes, so we’ll go the condo route.

Yes, a condo can be considered a home.

They usually have looser homemaker (new flooring, paint, etc.) regulations than the standard apartment.

Most folks looking for a home are looking for stability and want to make their place truly theirs.

So, a condo could be the best bang for the buck if you want a long-lasting living space and all the pampered king/queen benefits.

If you buy a stand-alone home, you will not only have to fork over $100 a month for a gym membership and $100 a month for a pool club, but you might have to travel to 2 different locations.

You might want to take pets to a dog park if you have pets.

What about restaurants?

Yeah, mentally prepare to drive forever in rush hour traffic to hang out with friends and have a few drinks (Uber, of course, no drinking and driving.)

TLDR

You may want to rent to have all those bonuses within arms reach instead of having to pull up Google Maps every time you want to go out or grab a quick bite to eat.

5. Lower Credit Requirements

“The minimum credit score needed for most mortgages is typically around 620.”

-USBank.

Even worse, 34% of Americans have a score between 330 and 669.

That means a big chunk of Americans out there won’t even get past the first step of purchasing a home.

That’s quite a shame because there are a lot of hard-working and good folks who just have low credit scores.

Well, that’s where renting comes into play.

Renting a home gives you a lot more options.

Some may disagree, but if you find a mom-and-pop property management, you can find a good place to rent without a credit score and background check.

And no, it doesn’t have to be smack dab in the middle of a bad neighborhood.

It’s just that some people who rent their place to tenants are more trusting or just prefer the simple cash-in-hand exchange.

Either way, if you’re having difficulty finding a place to sleep at night because of your not-so-good credit score, do a quick pull on Craigslist or drive around until you find a place that fits your needs.

6. Have Unstable Employment

Okay.

Your main occupation is a tour guide in Salem, Boston.

You make quite a killing during Halloween time!

But not much else.

November through August is pretty dry regarding the spooky attraction money-making opportunities.

This leaves you finding odd jobs to get by check to check.

If you want to buy a home, you may not have enough if your main source of income is just a couple of months out of the year.

This is where renting may be a little more beneficial.

You can do what we just discussed a minute ago.

Look for a mom-and-pop-owned place to rent from.

Get a cozy place to lay your head at night, and call it a day.

Why You Should Buy

Alright, now on to the good stuff!

I think that everyone, when given the chance, should buy.

Some of you say, “What a money pit, Charles never!”

Well, let me explain.

1. You Can Build Equity Over Time

Ah, yes, equity.

Delicious, yummy equity.

What is equity, you ask?

Equity in a home refers to the difference between the market value of your house and the amount you owe on your mortgage.

In simpler terms, it’s the portion of your property you truly “own” or have paid off.

For example, if your home is worth $300,000 and you owe $200,000 on your mortgage, then you have $100,000 worth of equity.

This is pure gold, my friends!

Quick Pro Tip: Pay the home off in 5-7 years; that equity will pay off over time.

I can tell you from experience that there’s an awesome feeling of knowing that if I chose to tap into a few hundred thousand dollars of my home, use those funds for another investment, and still have a roof over my head for me and my family…

It’s just an awesome feeling.

2. Ability To Rent Your Home

Make that money, Debra.

I don’t know why I say that.

I say that to my wife a lot.

She says stop, I say okay, Debra.

Her name is Jasmyn.

Anyway, I digress.

If you buy a home, you will have the ability to rent it out.

And you can make a pretty penny doing so.

Me, for example.

There was a time when I had two rental properties.

Both paid off in full.

One was my primary residence.

I moved from Maryland to Ohio and decided to rent it instead of selling it.

For the next two years, I was pocketing about $4,000 extra dollars a month.

If you rent a home, you will not have this luxury.

You could rent a home and then find a rental investment property.

But why not just buy a home, let someone else live there, and pay off your mortgage if you decide to leave?

Just know that if you pull the trigger on buying a house, you will always have the option to make a little extra income in the future if you choose to.

3. House hacking

“House hacking is a real estate term used to describe generating passive income from renting out a piece of your property while living there yourself.”

-Quicken loans

So, if you buy a home with a basement or in-law suite, you can rent out that portion for some extra cash.

Here’s a scenario:

Imagine you buy a house for $300,000 and don’t put any money down. Your interest rate is 6%, and your mortgage term is 30 years.

This means your monthly mortgage payment would be about $1,798.19.

Now, let’s say you have an in-law suite that you rent out for $1,600 per month.

In this scenario, you’re using your own money to cover the entire monthly mortgage payment, and the rental income from the in-law suite is being used as an extra payment toward your mortgage principal.

So, you’re making a monthly payment of $3,398.19 towards your mortgage ($1,798.19 regular mortgage payment + $1,600 additional payment).

If you consistently follow this plan, you could pay off your mortgage in about nine years and ten months instead of 30 years.

That is the beauty of getting your place.

4. Stability

Some people crave this.

Others don’t.

If you do want stability, home buying might be for you.

What do I mean by this?

Well, if you pay for a home, it’s yours.

No one is gonna come and take it from you or kick you out when the lease is out (Well, unless you don’t make payments)

If you rent a home, you never know when someone will sell it.

Hek, you can sign a lease and talk to the property manager about your intent to stay there for years.

He or she may say,” Yep, the owners plan on keeping this forever! Go ahead and make plans!”

One year has passed, and the owners now want to sell; your lease is about to expire, but you made plans for vacation because you got the verbal okay; but now, instead of going on that Disney Cruise with the family, you now have to save it for moving expenses and another down payment on a rental.

Those scenarios happen all the time when you rent.

If you have your own home, you have stability.

You can save for the vacation of your dreams and go on it without worrying about where you’ll sleep when you return.

5. You Have More Freedom

Imagine you’re sitting down watching Property Brothers.

You’re watching them redo the kitchen, living room, and bedrooms.

All the while, you’re thinking of what you will do to your home when you move in.

Well, you finally move into your new single home rental, buy some new paint, and get some laminate flooring to change that nasty carpet to something more allergy-friendly.

Then you come to find out that ABSOLUTELY NO CHANGES are allowed.

That includes paint, flooring, fences in the yard for your dog, mailbox decorations…

NOTHING

If you rent, that might very well happen to you.

6. Privacy

If you buy your own home, you don’t have to worry about sneaking in home decor, which may or may not be allowed.

You control who comes into your home for maintenance.

If you want to build a big privacy fence to keep out your prying neighbors, you can do so.

Before you make the purchase, you will generally have more options.

So, you can do that if you want a big open lot with trees or a bunch of land away from the population.

When you rent, just know that privacy can be a big issue.

7. Faster Way to Wealth

I know that’s a brave statement.

So let’s just say it is a possible faster way to wealth.

So what do I mean?

If you pay off a mortgage, all those funds return to your bank account.

Or wherever you want.

For me, I paid off my first home in a few months.

The mortgage was only about $1,110 because I paid a giant down payment.

But after I paid that off, that money was back in my pocket.

But what makes it even more interesting is that I was in the military and Maryland then.

So, that means the government was giving me a tax-free housing allowance.

Since I was in a traditionally expensive place, my wife and I received over $4,000 a month to find someone a place to live.

We received that money, whether we had a mortgage or not.

So that meant we were pocketing about $60,000 of tax-free income for about four years.

Do the math.

That means we received over $200,000 in tax-free funds directly in our bank accounts.

If I chose to rent for four years, I would have to pay at least $2,200 at the time for a one bedroom.

If I save the remaining funds for the next four years, it would be about $105,000.

If I had invested, I could have gained…or I could have lost.

But you cannot argue that I was GUARANTEED at least $200,000 because I paid off my mortgage.

That is the power of paying off a mortgage.

Once your home is paid in full, your savings will skyrocket.

Recap

Okay, my home renters and buyers, let’s check what we just went over:

• You should rent because
  • You might move a lot
  • Homes are just too expensive right now
  • The maintenance cost of homeownership can be a bit much to your liking.
  • You want poolside access!
  • The credit requirements are a lot lower
  • You have an unstable paycheck at the moment
• You should buy it because
  • Overtime you can build equity
  • You can choose to rent your home if you please
  • You can house hack your way to an early, fully paid-off home
  • You have stability, meaning a property manager cannot kick you out
  • More freedom to do with walls, flooring, yard, whatever.
  • Privacy, price, privacy,
  • It can be a much faster way to wealth.

As you read this article, you might have noticed I am biased toward owning a home.

I have done both renting and buying, but as far as seeing firsthand my bank account grow and my stress levels lower, purchasing a home is a no-brainer.

I have a permanent location to raise my kids.

They will have a place if something happens to me or my wife.

If I choose to move, I have the choice to rent it out or sell it.

I became a military millionaire by doing small, simple things such as saving 50% of my income and paying my mortgage early.

It’s not sexy.

But if you’re trying to build generational wealth, do yourself a favor.

Take small steps.

You can invest in stocks and other things to make your money work for you.

But don’t overlook what’s right in front of you.

The place you live could be the thing that is holding you back from building that nest egg, or it could be the tool to help you become the first-ever millionaire in your family.

Thanks for reading.

Have a blessed day.

Talk to you soon.