Renting vs. Owning

Speaker 1 0:00

I'm Sally Mahals and going back to renting , and let me tell you why . Welcome to the Money Cheese man Podcast , a fun and safe space for personal finance , investing and entrepreneurship tips , where we get the cheese man on all things money , with sass and humor . I am your host , violeta , a first generation Mexican immigrant , a real estate investor , entrepreneur , and I am here to help you kick ass in the financial game . Each week , I not only bring you expert tips , but also share the financial freedom and entrepreneurship journeys from our own community , because , you know , representation is important . So grab un cafecito o , si quieres , an adult beverage and let's get into this week's Money Cheese man .

Speaker 1 0:54

Hola , I am Violeta , the first-gen real estate investor . And am I crazy ? Why am I selling my house and going back to renting ? I mean from me , because you know I'm always the first-gen real estate investor and I'm always , you know , pushing to for home ownership and to use your first home to house hack and to start . You know , real estate investing and your first property can be your first investment and all that . But you know what ? Sometimes you have to rent and that's okay , like renting , there's nothing really bad about renting . There's so many benefits with renting and if you use it to your advantage , you can actually fulfill a lot of your financial goals and help you , you know , like save for your first property or your first home or whatever . And sometimes you can even just stay renting but still invest in other like properties or just investing in general . So I want to talk about that in this episode . So I currently live in California and it is freaking expensive . Everything is getting like way out of hand with this house Love the house and everything like that . But we went from , like you know , having $3,700 as a mortgage payment and now it's up to $4,200 and it's just going to keep going . Because you know , fire insurance I mean , it's California , you have to have fire insurance , but there's not a lot of other insurance companies that you can , you know , go to , so you're really stuck with one insurance company and they just keep raising the prices .

Speaker 1 2:35

And the other thing that I wanted to talk about is that you have to have a set of rent in versus being a homeowner is that you have pretty much a set price for housing . So you know you're going to pay basically the same rent for the term of your lease and , yeah , it might go up after the end of the lease or whatever . If you are a homeowner , then you know like , for example , how I was saying about the fire insurance it goes up and so then your mortgage goes up . For property taxes you also have to take that into account and your property taxes might go up year by year . And that's another thing that's been happening here with this property , with this house , is that the property taxes are going up and so now we went from like again $3,700 to now paying like $4,200 in a few years . To really think about that and really , if you know , after your lease is over you end up , you know , be your rent increasing a little bit , you already know roughly how much you're going to get . It's not going to be a surprise every time . You're not going to get a surprise bill of taxes or a letter from your escrow company saying that now your price is going up and all that . You have everything towed to you up front and so you could budget better for your finances .

Speaker 1 4:05

Reason number two is you know I'm a real estate investor . I always advocate for , you know , buying your own house and stuff like that , but at the same time I want you to understand what all comes into owning a house and that means you're going to be doing maintenance on the property . You're going to have to fix stuff , you know landscaping , updates , painting , all this stuff , and you know if I was going to stay in this house long term I wouldn't mind . For maintenance on a home you're going to average I think they usually tell you to budget around , you know , 1% to 4% depending on the property . If it's like an older or newer home , that's how much you're going to pretty much spend yearly for maintenance . I'm already looking at , if I calculated at 1% , I'm already looking at $7,500 to about $9,000 a year of budgeting to upkeep the property to keep up with this home .

Speaker 1 5:16

My house is not old . It was built in like 2000 I believe , so it's not that bad . Lots of things are up , but then you start getting into like since 2000, . Then now the HVAC system , the heater , all that stuff is going to start coming up to be replaced and all that . And that's some of the things that I'm already looking at . And same thing with the solar system To see what's going on with that , because it's already starting to need like maintenance . So all this stuff gets added on on top of like the landscaping , like buying plants for the property , for the house to look pretty and all that stuff . So all that goes into it .

Speaker 1 6:00

You'd be surprised how much you spend on maintenance throughout the year for small things and big things and just to troubleshoot something and it all adds up . So , for example , with this house I've already had to fix like the AC unit a few times . Little small things like just the heater had to have this little tiny component that heats up to ignite the furnace . I guess it's what it is , I don't know , but that's a little bit . And then the AC had some issues in the summer and then my fridge went out so I had to replace that , which that's kind of like neither here there , I guess . But then you know , last year it rained a lot and so I had trees that fell in the backyard that are still there , that now I have to cut down and fix that fence because it like laid on the fence and kind of broke it .

Speaker 1 6:55

And just general upkeep of the home , the when you own a home . This is why , if you are thinking of buying a home , that you are buying way below what your max is , because things are going to be coming up . Whatever you think your max is or whatever , you should go way below that because you're going to have to do repairs and just general maintenance of the property and you want to be able to afford that . Otherwise your property goes downhill . Of renting is that you don't have to worry about that . You just have to worry about , like , if you see something , then you let the landlord know and they send maintenance out and you don't have to worry about it or pay for it .

Speaker 1 7:36

I want to go back to renting . The last year and a half that I have left here in California is because all that money that is going into maintenance and stuff like that I could be saving that money to , you know , send to the other house . You know I'm going to be building my dream home , hopefully at the end of this year , and so all that extra money I could be sending it to that house and , you know , being able to put what I want on it , to be able to leave , like as soon as that lease is over . You could just take off . So the flexibility of renting versus , you know , owning a home is that if you want to like take off or move or whatever , then you have to worry about like selling the house and trying to find a place to stay at the same time , and worried about still having the old house that you're trying to sell and then renting or you know a new mortgage or whatever . And now you have like two things to pay for , both military , and you know he is transitioning out this year of the Navy and I will be , you know , following suit next year .

Speaker 1 8:52

So that means like next year I want to be able to just like cut ties and be able to just leave without having the stress of like trying to move to Texas and all that and starting to pay the my house down there , worrying about having to fix this house , on top of like figuring out the move , like moving from California to Texas that's a long drive and having to move all that stuff and you know just the coordination , and then on top of that , making sure you're fixing up little things on the house and everything to make it marketable and then doing all the like closing and all that on top of trying to move . Like it's a lot of stress , it's a lot of moving parts and I just don't want to deal with that at the end of my career , as I'm planning my move , go ahead and do it now and just have to do a local move into a rental and do like the updates now , when we don't have all the chaos that's going to be happening when we move to Texas and getting out of the military and all that stuff is like a lot . So I don't want to like bunch up all the stress together . Instead , I'll just , you know , do it now , sell the house . You know we're already matter of fact , kind of went to low today and started pricing stuff out so we could do some updates to make the house more marketable and stuff and probably listed like around close , almost close to the summertime , because the market will be better . And so , yeah , just going to just sell it now and just go ahead and rent and be stress-free up to until we leave .

Speaker 1 10:38

The money is going to give us a better ability to , you know , budget our finances and , you know , do all the money management that we need to do , because you know he is getting out of the military this year and then I follow suit next year , and so that's one thing I want to think about as well is you know , the military , you know , gives us a paycheck like clockwork , it's , you know , reliable , and stuff like that . And now that he's gonna leave and yeah , he's gonna be able to get a job and all that stuff , is it going to be around the same amount that we're used to ? And so I want to be able to have that cushion by moving out of this property and going into pretty much downsizing to ensure that , you know , we don't strain ourselves too thin , because , although I'm pretty confident that you know he'll be able to , with the skill set that he has , he'll be able to get a good job and all that stuff , I just don't want to put a put us at an unnecessary risk , especially with , you know , planning a family and all that stuff . Like I just I rather just play it safe for now and use , if whatever , extra that we save to go towards the dream home .

Considering Renting Instead of Buying

Speaker 1 12:02

And you might be thinking you know why don't I buy like a multi-family home or a smaller home , like just downsize to a smaller property ? But like , really it's two things . One , you know there's not really much available . Whatever is available is super overpriced , it's expensive and of course , the interest rates and stuff like that and yeah , the interest rates , I talk about how this shouldn't be such a big deterrence , especially if I was planning to buy like a multi-family home that I could house hag . But at the end of the day I just don't want to have that big risk .

Speaker 1 12:38

I'm used to you buying properties , rental properties , at a way lower price , like 120 , 150k . I don't want to pay that , I don't want to put that huge burden on me knowing that we're about to transition out the Navy . And then on top of that , california is awesome , love it , weather is awesome and you know , besides it being so pricey , it does come with a lot of risk with the tenant laws and stuff like that , and I just especially the squad or rights and stuff like that . I just don't want to put that risk on me at the moment . And again , it of you know renting is that you're not gonna be exposed to the market risk in your area wherever you're renting . Because here , if I was to get another property , I'm going to be exposed to like the high cost of living here on top of like the tenant laws and the squad or rights and all that , and like the housing market . But you know , renting you don't have to worry about , with the potential income that I can make and the interest rates and the high prices . It's just like to me it's not worth it at this point in time . And that's why I always advocate that , if you do want to get into real estate investing , that you just don't get lost in the sauce with everybody , be like , oh , we're going to buy this beautiful high price luxury , you know property , and make all this money and stuff like that you got to take account into the whole picture .

Speaker 1 14:14

Last year was really a struggle year for my rental properties like oh my God . But the first two years were freaking smooth sailing . I was like making money . And then you're always going to hit that year where , like , you just have extra stuff that come up and you're going to have to cover down that mortgage . So I do not want to have to be , you know , out in Texas and you know , trying to just be minimal lifestyle and all that stuff and be worrying about a 4,000 mortgage or that I have to worry that I have to get somebody out that's not paying and I'll have to fight this squatter rights bullshit . So for those that want to invest in real estate , like you have to think about those things as well , not just get blinded by like oh you know , I'm going to go buy a big property or a big multi like y'all to . There's so much that goes into it , which is why I've decided that I'm just going to go back to renting for the last year that I'm here in California , versus looking because at another property , because I did do that last year .

Speaker 1 15:20

Last year I wanted to downsize , and just because of the same idea was that I was wanting already to buy the land I want to start building and stuff like that , because I thought I could get out of the military sooner than what I thought I could . So that kind of was a bummer . And then , on top of that , I also found out that I can't move to Texas till a certain time , which was another bummer that I'm upset about . Still so , but yeah , last year I tried to find a property as well , like a multi unit stuff like that , which in hindsight , I'm glad that it didn't work out , because I wouldn't want to have to deal with it and I would have probably ended up selling it anyways . But yeah , I haven't been able to find something that's even worthwhile on top of to be able to justify dealing with the squad of rights and the crazy tenant laws that are here in California . So instead I just rather rent right now for the last year that I'm here in California and I know that the only thing I have to pay is , like the electric or whatever , the utility bills and the rent and I don't have to worry about like paying for something that broke down or whatever . I could just give a call to landlord . Which brings me to the last benefit . Which brings me to the last benefit of renting is that you really again are going to benefit from just the stability of that price , of knowing that , hey , I am going to pay this much for housing and it's not going to budge for the term of the lease . We work around that budget and so , for example , for us , we're going to go to renting , but we're also having a friend also , so we're basically going to have a roommate as well , a friend of ours that we've had forever , and now we're both going to benefit . It's going to lower even more our housing costs and that's more money that you can spend on other investments to put in a high yield savings account or in another account to for travel , like you could go use that for travel . I mean you're going to be able to budget more like efficiently , because right now , like that , I try to budget it's always one thing that comes up is like oh well , now we have to like during December we're budgeting for certain things , and then now , boom , the fridge went out , so now we have to buy that . Or then now the solar is having issues , so now we have to get a technician out here to check that . And so there goes the budget for that month . And so when you're renting , it's so much easier to stick to your actual budget . Home is awesome and you know , just like with anything , you do have to spend money to maintain it . Just like with the car . You own a car . It's awesome , you have the flexibility to drive around and all that , but you still have to pay for all the maintenance of benefits for owning your own house , especially if you house hack or buy a multi-family the first time . I mean this is how you can start building that generational wealth and all that . But sometimes you know you need to rent , and that's okay . There's nothing wrong with renting , as long as you have a plan and using it to your advantage . And this is where I want to kind of like get this message across is that sometimes you have to take a step back to be able to launch forward . And that's what I'm doing right now because , like , like rentina is not always the worst thing like , if it's going to benefit you , you can rent and save up your money so that you can either a by your first rental property or whatever , or just save money in general , and even if you're real estate investing , you can still be renting because that might be something that works out for you . You don't always have to , like , own your own home or whatever . I mean I I do . I always like to have control of the property and stuff like that . But now , at this moment , I have to take a step back to be able to , you know , fulfill my next goals in life . And yes , that's going to be a sacrifice for me because , again , we're downsizing , so that means that I'm probably going to have to fit this little area in , like a smaller room instead of it having its own office , its own room , and it's gonna be a struggle , but that's going to be worth it for me because I know doing the small sacrifice now is going to benefit me next year when I'm in my house , in my dream house , in my properties , having my chickens and everything like that , and just living the life that I have dreamed of . And all I have to do is just kind of give up a little bit of some convenience and , not to mention , I'm going to be able to have that extra funds to not only put towards the dream property , but now I have more money that I could save , on top of the rental income that I receive , to put towards another property . And so then start , you know , continuing to invest , because last year I had to pause my real estate investing last year just because of all the stuff that came up and the things that I was trying to do for the end of the year . So now it's going to take a step back and it's going to be kind of weird because I haven't rented since . Well , technically , I guess we rented for a few months here in California back in 2020 , but before then I hadn't rented since before 2014 , I believe . And so now going back , it's all for something that's going to be beneficial for me and my family in the long run . So don't be afraid to take that step back to be able to , you know , fulfill whatever goals or dreams or whatever it may be that you're trying to fulfill . And if you're renting right now and you know it's kind of sucky because I'll see a lot of like the finance world kind of really like beat down on people that are renting and like , oh , you're renting , you're losing money , you're dumb and all that stuff and it's really shitty thing to say because there's nothing wrong with renting . Like lots of people that are financially stable or , you know , are kind of wealthy or whatever , they like to rent because they like , again , the flexibility . They don't have to stress about the maintenance , they can leave whenever they want and they just have a place to stay . They could save extra money and use it somewhere else that they could benefit from , like travel or other investments , and so really there's nothing wrong with renting . And you know again I'm going back to it so don't let these like finance people that are making you feel guilty or bad that you're still renting or are renting or whatever , just do what works best for you and your family or whatever . And if you know owning a home is something that you do want to do , like don't feel guilty . Like everything takes its time , it's going to come in due time and you know you just gotta like , plan for it and work towards that goal . And you know , don't be rushed into it . You know making you feel like that you need to hurry up and buy a home now because of the housing market , or whatever it may be like . Do it on your own time , on your own timeline , because , regardless , it's what you want and what's going to work for you and you know what you want and what you need and when you want to get there . Well , that's it for this episode and I will see you in the next one . Bye . Thank you so much for listening . Don't forget to like and share this episode so others can also find this podcast . Don't forget to follow me on all my social medias listed in the show notes below , where you can also find resources to help you in your financial journey . If you're interested in becoming a guest on the podcast , you can find that information in the show notes . Other than that , thank you so much for your support and I will see you in the next episode . Bye .