Jason Bramblett Real Estate Show Podcast
Jason: Good morning. Welcome to the Jason Bramblett Real Estate Show. Hope everybody is having a fantastic start to your weekend. Hey, here it is another week in the books, and well, you have either pushed through the great American hope of a what a great New year's resolution off to a great start or you are on round, I do not know, four by now, right?
Keith: I do not even know what resolution was anymore.
Jason: Yeah. It is ancient history at this point.
Keith: Inconsequential. I do not know.
Jason: That is for sure. So, hey, we are going to dig in today to talk about a topic that comes up about every week at our office. We are always talking to new folks, new people that are considering buying a house and so thought why don’t we dig in and talk about the rent versus buy. Maybe you own a house and you are still not sure if but you made the right decision. So we are going to go through and talk about the reasons why you should own a house. Should you actually take the plunge? Should you dive in? Should you get into the real estate market? Is it something that makes sense to you or maybe you should just rent and give up on the, well, give up on owning a house? We are going to dig into is the right answer. You are really determined the answer to that question if it is right for you or not. We are just going to run through some of the probably more myths than there are pros and cons, but we are going to talk about those of owning the home. And if you are on the fence, you definitely want to stay tuned because this may push you in that direction, one way or the other. Take the plunge or well stay where you are at.
Keith: Well, clearly, I purchased a home roughly about six months ago. And obviously, I am a genius
Jason: For sure.
Keith: Clearly, I am a genius in making that decision. Correct?
Jason: There is no question. You are a genius. Let's let the drama just sit in for that, just for a minute. Just let it sit there.
Keith: Why do I feel like I am in trouble?
Jason: And let him ponder that to see if he made a good decision or not. Here is the cool thing about real estate. And there are lots of reasons that we do everything that we do in life, right? Sometimes we do it because, well, just because I can. Right? I am sure we have all made this. Why did you do that? Because I can.
Keith: It is a great reason, isn't it?
Jason: It is a great reason.
Keith: Because I can.
Jason: Yeah. Why in the world would you do that? Just because I can. We probably have said that to our spouse, our parents, ourselves, and sometimes it only needs to make sense to the one person. You, right.
Keith: All that matters.
Jason: It is the case in a lot of different ways that we look at life. Right. So, buying a house, at the end of the day, we got to get an idea wrapped around what is the purpose. So, what one of the first things that I look at is owning a house is this. It is a really terrible savings account. It is. It is not entirely bad. It is not a terrible thing that it is a savings account, but it is really what it is. And the cool thing about that for some people, it does at least force you into saving money whether you want to or not, actually. So there are some people that just if they got $1 in a hand, it is like they are in total panic mode to get rid of it. It is like they cannot hang on the money for nothing. So at least in owning a house, you are going to be forced into a winning situation of saving money. How is that even possible? Because every single month, you are adding money to the principle that is owed. Therefore, what, reducing, it forces you to reduce the balance if the house is continuing to be consistently, well, let's just say it stays where exact number you paid for it. You are owning less, therefore, you are building, what, equity. You are forcing that savings. For the most part, we assume that it will not ever go to zero, right?
Keith: You would hope.
Jason: Look, if your house goes to zero, money is not your problem. I am going to really just be confident in that statement. If your home goes to zero, or if everybody's home goes to zero. money is not going to be an issue that we have to worry about.
Keith: Something awful has happened.
Jason: Something very bad has happened, and so it is not going to be a big deal. If for some folks or some of our listeners, this is all the money they are going to save in their entire life. This is it. They do not participate in any kind of retirement plan. They do not have a SEP or an IRA, they do not have an employee or an employer contribution. The only savings that they have is their actual house and so that is not bad. It is not the best retirement plan. But it is something that something that we see. In 22 years, I have sold many, many, many hundreds of homes where when we go to sell them, it is really every dollar that they have is that. That is their entire life savings is a paid-for home. It is just choices. People make different choices and the choice for them was they paid for their house and they do not have any other money. But at least they have that, and had been renting their whole life, they would not have anything. Right? They would have just spent every dollar, so it is not terrible in that regard. And by the way, hey, if you want to improve your savings rate, if you convert that mortgage from a 30 year to a 15, you actually increase the amount of money that you are saving quicker, actually is not quite by half but you do start to contribute more even more to principle. And so you can save quicker. So if you are 50 and you realize that, hey, the hourglass has flipped and there is less sand almost on side than there was the other, right?
Keith: That is right.
Jason: How can you speed up the process? Well, if you can do it, flip it over to a 15-year note, and that will expedite your savings. The main reason to buy home simply is this, just the joy of what it creates, and the memories, the place to raise your family, to build memories with your grandkids, with your spouse, with your dog. Everybody needs a dog at a house. It is just what you should have. Right? Or cat. Do not want to leave the cat people out. But that is the reason. It is to have a place of serenity and safety. And it is your little slice of the world. Right? And the cool thing about it is you own it and like you can do whatever you want to it.
Keith: Exactly. You can do what you want.
Keith: They cannot tell you what you can do and cannot do like they can in a rental.
Keith: Not that you should do some of the things you want to do. Because you can does not mean you should.
Jason: I am going to go 100% in agreement with that. Yes, many, many, many of you should not just do anything you want to your house, believe me, because that is a whole harder conversation I had to have when you call me about selling it, and I have to be like, what color is this? It is not even on the wheel. It does not exist, and the creative additions that I have seen over the years. And now there are certain things that you do need to do legally. Like, if you are going to do an addition, getting a permit would be a good idea.
Keith: I am sure they all have were permitted. Right?
Jason: Oh, no question.
Keith: Yeah, that extra bedroom outside of the garage that was permitted. Wasn’t it?
Jason: Sure. They gave themselves permission to do it. There is no question about that. Yeah. But hey, it is what it is. But yeah, there are certain things you can do does not mean you should do it no matter what, but there are certain things. Well, there another reason tax savings. Hey, it is not as great as it used to be because less people actually itemize their taxes these days. So, interest deduction is a great thing. You can reduce the amount of taxes you pay by the interest deduction, but that really only works if you itemize your taxes. And then of course, we see that most people do not even do that anymore. So that is a little bit less of a now benefit or a yearly benefit, but it is for some. But here is a cool tax law that we have currently today, that you can really save tremendously when you go to sell your home. And right now, the way the tax code is, is written. If you are single, you can sell your home and make up to $250,000 in profit. So above what you paid and pay zero tax. And for a married couple, it is $500,000. So that could be a significant tax savings for you. So, think about that. That is $500,000 more than you paid. That is a gain. That is hey, you bought it for $100,000. You sold it for $600,000, that $500,000 increase, you are paying no tax on that when you go to sell the property, and so, man that is phenomenal. Now, is that possible to do? Well, not everywhere. No. It would be really cool. If it worked like that in the Triad.
Keith: It would be nice.
Jason: Yeah. I could sell a lot more houses, no question. But in certain markets, it is easier. Think about like California. If you got a $2 million home, it is not unreasonable that you would make a half a million dollars on a house over the years. Right? So geographically we do not benefit maybe as much as some other areas. That is the only thing that has ever bothered me about politicians, if you will, in how they talk about the middle class and but that number is not the same everywhere.
Keith: That is a true story.
Jason: The middle class in New York City and LA is not the same as it is here in Greensboro and Winston Salem, North Carolina. You could not take middle class wages in Greensboro and even survive in New York City.
Keith: You would be at poverty in New York City.
Jason: Absolutely. So, and there are a lot of places that that math does not work. I think really, this is where we could do a better job with more state centric taxation because that does give us somewhat of a real, I guess, a better overall look if you will, but to compare Iowa to California or North Carolina to whatever Texas. These different incomes, one size does not fit all. Right? I realize you to create a tax code for the for the masses, but it just does not work all the time. There are some areas of America where if you could just get to what they consider the middle class you would like, feel like you are a millionaire, right?
Jason: You would be like, just off the charts. But yet in some parts, it does not work that way. It is $500,000 in North Carolina, if you made that in profit, that is phenomenal, but is it realistic? Well, in 22 years of business, I have never seen it. I have never seen anybody. And I have sold homes where people have been in them for 40 years and they have not realized $500,000 in profit.
Keith: Let mine be the first.
Jason: It sounds like a great idea. I think that is good. I think it was a good idea.
Keith: Let’s set a new trend.
Jason: Of course, the politicians say, well, it is not. You just did not live long enough. That is all. Not enough time elapsed. You sold it before. No. The math just does not work, and there are certain price points and certain areas in which it just does not work. How about revenue producing? There is another reason to consider owning a property. So really cool thing about our area, the folks in High Point see this more so than anybody else. The folks in High Point were running AirBNB before anybody even knew what the heck it was, right? Because they rented their homes out there during the Furniture Market. And so if you have a home in High point or near the Furniture Market where you could actually go create some revenue out of it. That would be a really cool reason that you could actually some folks get almost all their mortgage covered.
Keith: I was going to say. You can do your mortgage maybe more in a week.
Jason: Yeah, it is really amazing what some of these companies will pay. It actually saves them money by renting a home as opposed to being in a hotel. And you think about a company bringing 15 employees, and they are coming here to buy furniture. Well, you can rent a house a lot cheaper than 15 hotel rooms, no question about it. It is an economic savings for the company. It is a win for the homeowner. And so that is something to consider. And then of course, Airbnb, there is another one that just recently has popped up. Now it does not work for every property. I am told. I have never done it, but I am pretty sure it does not work for all of them. But another thing that some of our owners have looked at is we are college town. Think about all the universities we have in Winston, Greensboro, and High Point and the surrounding areas. So we have a lot of owners that have taken a bedroom or a basement and rented that out to a college kid.
Keith: It is true. There are a ton of colleges around here.
Jason: It is unbelievable how many colleges there are. If you want a really easy, easy way to get a somewhat of a premium, if you will, for your rent, and have a young of mind, a college student, a sponge and somebody you could influence and, really help out in their dreams and their career, and they will pay a premium if you just include like one meal, like a home-cooked meal because they do not get them anymore. Right? And I have a couple of past clients that I was amazed. It was like they have garage apartments. I am like holy smokes, you are getting what in rent. It was amazing. And they are like, yeah, we will we only used to get just $400 a month. But then we decided that we had this great kid, and she was homesick. We brought her in, and she would have dinner with us. She said I should pay more because you are you are supplying food. And so for like the last 20 years, I have been getting like $650 to $700 a month just because they provide a couple, the opportunity for that student to have dinner with them a night or two a week. How cool is that?
Keith: I need to carve out a room.
Jason: Yeah, carve out a room. Those main caves, hey, you could turn them into revenue you never know. So I just thought that was a really creative, clever way to maximize what an opportunity that they had. And so they have continued that. And so now they have college students stay with them. It is more than just creating the income to them they take an interest in those kids’ lives, and they really do work to help them which is awesome. And they have a place to live. It is a safe environment. And it it is paid 10 to $15,000 a year of this owner’s home off.
Keith: It is a good deal.
Jason: It is a really win-win deal all around. The kids win because they get a meal every now and then or whatever. So of course, there are pros and cons to all this stuff. And of course, check your local zoning to make sure that it is legal, because just because you can do it does not mean it is legal, right. So take a look at those things. So we will do this. We are going take a quick timeout, go pay some bills. We are going to be back in just a minute. You are listening to the Jason Bramlett Real Estate Show.
Welcome back to the Jason Bramblett Real Estate Show. So before the break, we were talking about all the good, the bad, the pros, the cons of, should I rent, should I buy? Is it worth buying a house in today's market? Or should I just continue renting? So we were kind of digging into some of the logic in that.
Keith: So far I am not getting a warm fuzzy feeling. Why is it so bad to buy a house? I guess maybe I am better off renting.
Jason: Well again, it really comes down to a personal decision. At the end of the day, I do not think it is ever bad because of that forced savings aspect to it. Right? Now, but it could go the other way. Just over long periods of time. If we go back and look in especially in 20-year cycles, there are very few places in America that has lost in real estate over a 20-year span in a 10-year span. Oh, absolutely. For sure. We saw that happen ‘08, right? The previous people that bought prior to that they got hammered because they bought, what, top of the market. It is not so much top of the market because if you just stay there, you are going to be okay.
Keith: This sounds weird. It does not really matter what your house is worth if you are staying in the house. In fact, if you are staying in the house, and the house declines in value, maybe your property taxes go down. It could actually be good if you do not want to leave.
Jason: That is right.
Keith: if you do want to leave, that is a different story.
Jason: Yeah, truthfully, you could go to zero or $100 million. If you are not moving, it makes no difference. You are not going to feel the pain either way. But for some folks out here, the answer is yes, you should rent. Many the owners lack the finances to properly maintain a house and they do not learn that or they just do not know it. There is no education or training or nobody is teaching them about maintenance and there is additional cost and those type of things. It actually can create a bigger financial hardship than renting by owning a home because things do break there is wear and tear and maintenance and those type of things. One of the huge benefits to renting versus owning is you know exactly how much money you are going to lose every single year. 100% like on January one. Hey, if your rent is $1,000 a month, you are out 12 grand.
Keith: It is easy to budget.
Jason: It is easy to budget, right? And so, as opposed to owning a house, there is absolutely no guarantee that you only are going to lose 12 grand. Many folks in the last decade can attest to that. Right? And they know that that the fact that your house could drop $120,000 in value.
Jason: Right? And so if it did, especially like you 2008 folks that owned back then, and when the market crashed. Think about that, that is 10 years of rent. And unfortunately, that is the benefit that some people got. They did own a house on paper, but really, they rented it, because it never was worth anything more than they ever paid. And unfortunately, some people went completely the other way, and they lost 100%. So not to be 100% political, but it is kind of the deal. The politicians have kind of spun this with the banks that it is the American dream to own a house and that is really not the truth.
Keith: Who really owns that house?
Jason: Well, there is one way to find out. The whole reason for the purpose of buying the homes is so the banks can loan money. That is it, and what a sales job. Create this dream and call the American Dream, right, and then you create this emotionally charged person that wants to have it. They actually go in and seek the money and what a great thing you have got that emotional-tied asset to what this debt that you have sold, but there are still other great reasons to own a house. All the ones we talked about before raising a family, the joy of ownership, all those type of things, and plus it is yours. You can like just kick the wall, paint whatever color you want, do all those things. So lots of reasons to own. If you want to get more information about the pros and cons of that, go to Jason Bramblett dot com. You can set up a consultation with our agents to decide if it is good for you. We will be back here next week. You are listening to the Jason Bramlett Real Estate Show.