Personal Safety

The No. 1 myth about renting a home that self-made millionaire Ramit Sethi says 'needs to die'

The No. 1 myth about renting a home that self-made millionaire Ramit Sethi says ‘needs to die’

The No. 1 myth about renting a home that self-made millionaire Ramit Sethi says ‘needs to die’ CNBC 3 hrs ago Click to expand Replay Video UP NEXT Recount judge says system ‘undercuts trust’ Retired Judge Robert Rosenberg reflects on his famous photo from the 2000 recount which solidified Florida’s image in election controversy, as the sunshine state finds itself in a whirlwind of lawsuits and broken voter machines 18 years later. (Nov 15) Associated Press Pence says ’empire and aggression’ have no place in Indo-Pacific U.S. Vice President Mike Pence has told leaders of Southeast Asian nations that there is no place for “empire and aggression” in the Indo-Pacific region, a comment that may be widely interpreted as a reference to China’s rise. Rough cut (no reporter narration). Reuters – US Video Online California wildfire victims sue utility PG&E Victims of California’s deadliest wildfire have filed a lawsuit against PG&E Corp alleging negligence and health and safety code violations by the utility company in the blaze that has killed at least 56 people. No reporter narration. Reuters 1 Cancel SETTINGS OFF HD HQ SD LO Ramit Sethi debunks 2 myths about renting vs. buying CNBC See more videos SHARE SHARE TWEET SHARE EMAIL What to watch next Recount judge says system ‘undercuts trust’ Associated Press 2:19 Pence says ’empire and aggression’ have no place in Indo-Pacific Reuters – US Video Online 1:02 California wildfire victims sue utility PG&E Reuters 0:42 Avenatti: I am not going to be intimidated CNN 1:08 Avenatti: ‘I have never struck a woman’ NBC News 1:16 Stop ‘absurd comments’: missing teen mom’s plea Reuters – US Video Online 1:23 George Conway heads group against Trump CNN 2:42 Inside the mind: Why Paris gives people panic attacks Newsweek 3:23 Brexit agreement explained in 35 secs BBC News 0:40 Trump blindsided by Melania’s public rebuke CNN 1:56 First winter storm of the season expected to hit the D.C. area The Washington Post 2:16 Potential Pittsburgh massacre copycat apprehended after family tip CNN 3:44 Southwest Airlines jet in deadly accident had engine with “metal fatigue” CBS News 1:52 National Security Aide Reassigned After First Lady Calls For Firing Newsy 0:52 New Yorker who won $350 million in Powerball played same numbers for 25 years Inside Edition 1:25 A&M Student Shares Good Feelings After Ted Cruz, Beto O’Rourke Sighting At Houston Airport CBS Dallas 0:46 UP NEXT A lot of people will tell you you’re wasting your money if you rent, rather than buy, a home. That may be conventional wisdom but it’s just plain wrong, personal finance expert and author of “I Will Teach You to be Rich” Ramit Sethi tells CNBC Make It.
The idea that you’re just throwing your money away by renting is the No. 1 myth that Sethi says he hears all the time, and it “really needs to die,” so renters can stop feeling guilty about doing what’s right for them.
“When I pay rent, I have a roof over my head and a great view. That’s what rent gets you: shelter. It gets you a house,” Sethi says.
Paying rent doesn’t mean you’re throwing your money away. It means you’re exchanging your money for something important.
You don’t have to be able to hold something tangible in your hand in order to be excited about it. When you go to a movie or buy a basket of strawberries, Sethi says, all you have to show for that purchase is the satisfaction that the film was fun or that fruit tastes good. But that’s enough.
“When you spend on something you love, you get value from it,” Sethi says.
In fact, depending on your situation, renting your home, as opposed to buying one, may save you money , especially if you’re planning to move in the next five years.
The costs associated with a $200,000 home, including the brokers’ fees, appraisal costs, title insurance, and mortgage origination fees, add up to about $2,128 on average, according to Fidelity . And if you end up paying closing costs, that could be another 5 percent.
The longer you live in the home, the more you can amortize and justify those extra expenses. But if you move around a lot, the fees can really add up.
Besides, it’s not like you can assume your landlord is making huge profits off of you. “Your landlord can only charge you what the market will bear,” Sethi says. “So sometimes landlords are making more than their expenses, but a lot of times they’re not even covering their expenses.”
Costs such as taxes, insurance and maintenance can add up to about 50 percent of a person’s monthly mortgage , Sethi says, and those are borne by the landlord.
Ultimately, Sethi says, you can feel good about making whichever housing decision makes sense for you and your financial situation: “Paying rent is perfectly fine. Buying a house can be perfectly fine. But I want you to run the numbers before you make the biggest purchase of your life.”
Don’t miss: Self-made millionaire Ramit Sethi: Don’t buy a house without asking yourself this question
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