3K a month for Rent.
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ChickenBeckerman
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PostPosted: Wed Sep 26, 2018 3:30 pm    Post subject: 3K a month for Rent.

LA AREA

How much should one be making net annually to properly justify paying 3K a month for Rent??? 1BR 1 BA at one of those wacky new overpriced condos that happen to be at ideal locations. Asking for a friend.
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PostPosted: Wed Sep 26, 2018 3:38 pm    Post subject:

To be flippant, more than $3K month, but that doesn't answer the question.

At one point, one's house payment could not exceed much beyond 30% of one's income. Today, I thought it was something like 40% (probably pre-housing crash) but I found this:

Quote:
Monthly housing costs, which include mortgage payments, insurance, property taxes and condo or association fees, shouldn't exceed 28% of your monthly gross income. Monthly debt payments, including credit card bills and student loans, shouldn't exceed 36% of your gross income.


I suspect rent could push this a bit, but not much.
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PostPosted: Wed Sep 26, 2018 3:41 pm    Post subject:

General rule of thumb is no more than 25-30% of gross income should go towards rent.
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PostPosted: Wed Sep 26, 2018 3:56 pm    Post subject: Re: 3K a month for Rent.

ChickenBeckerman wrote:
LA AREA

How much should one be making net annually to properly justify paying 3K a month for Rent??? 1BR 1 BA at one of those wacky new overpriced condos that happen to be at ideal locations. Asking for a friend.

https://www.earnest.com/blog/rent-and-the-30-percent-rule/
https://smartasset.com/mortgage/how-much-should-i-spend-on-rent
https://www.taxformcalculator.com/state_tax/california.html
You're really not giving us enough information here. Things like your "friend's" age, marital/children status, retirement goals, current expenses(Most helpful) though I understand not wanting to share any further information.
There's the 30% rule so 30% of gross income can go to rent.
There's the 50-30-20 rule for net income (50 all essential expenses, 30 entertainment, 20 retirement).
Personally I could never justify spending 3k a month on a 1bdr apartment unless I made (bleep) you money(500k+), but different strokes for different folks
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PostPosted: Wed Sep 26, 2018 3:56 pm    Post subject:

Ahem, there is no justification for basically burning $36,000 in a year.
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PostPosted: Wed Sep 26, 2018 3:59 pm    Post subject:

Aussiesuede wrote:
Ahem, there is no justification for basically burning $36,000 in a year.


Well, if it enables you getting a job that pays 12K more a year? It might equal out. Not convinced there's many situations where that's true though.
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ChickenBeckerman
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PostPosted: Wed Sep 26, 2018 4:50 pm    Post subject: Re: 3K a month for Rent.

Raijin wrote:
ChickenBeckerman wrote:
LA AREA

How much should one be making net annually to properly justify paying 3K a month for Rent??? 1BR 1 BA at one of those wacky new overpriced condos that happen to be at ideal locations. Asking for a friend.

https://www.earnest.com/blog/rent-and-the-30-percent-rule/
https://smartasset.com/mortgage/how-much-should-i-spend-on-rent
https://www.taxformcalculator.com/state_tax/california.html
You're really not giving us enough information here. Things like your "friend's" age, marital/children status, retirement goals, current expenses(Most helpful) though I understand not wanting to share any further information.
There's the 30% rule so 30% of gross income can go to rent.
There's the 50-30-20 rule for net income (50 all essential expenses, 30 entertainment, 20 retirement).
Personally I could never justify spending 3k a month on a 1bdr apartment unless I made (bleep) you money(500k+), but different strokes for different folks


late 40's. single male, no kids and just got a new job paying about 170k/yr. only has a car payment @ 250+Insurance 112. Plus 300 for medical and Thats basically it. Currently lives rent free with family in OC. New gig is in Playa Del Rey. Commute will suck so he's looking into one of those new condo monstrosities they've been building up at light speed in that area.

yeah, not too shabby a situation for him right now.
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Raijin
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PostPosted: Wed Sep 26, 2018 5:10 pm    Post subject:

Take home 114k-36k rent
78k left over- 8k in listed expenses
70k - gas assuming 3.50 price 30mpg and 10mile commute-800
69k- 6k food(very generous 500/month)
63k-23k retirement

40k left over for fun, more retirement, or whatever else you fancy

Not having to deal with Socal traffic is priceless, on that alone I would consider it. I think Socal traffic takes years off your life, so yep that seems reasonable.
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PostPosted: Wed Sep 26, 2018 7:01 pm    Post subject:

Much Thanks man.

Yeah, I hear you on that traffic. Definitely years out of our lives. smh
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PostPosted: Wed Sep 26, 2018 7:21 pm    Post subject:

I have always heard 30% tossed around....but I have always felt like that was very high. I know there were times in my life where my rent/mortgage was not near 30% of household income, and there were not stacks of cash left over each month if you know what I mean. I guess there are so many variables related to other lifestyle choices....but I figured out pretty early in my adult life that there were no material assets worth the stress of always feeling financially stretched to pay the cost of the asset.
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PostPosted: Wed Sep 26, 2018 8:20 pm    Post subject:

numero-ocho wrote:
General rule of thumb is no more than 25-30% of gross income should go towards rent.


Yep, that’s the figure I’ve heard as well. What are some of you folks paying, as a percentage of gross?
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governator
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PostPosted: Thu Sep 27, 2018 4:45 am    Post subject:

Raijin wrote:
Take home 114k-36k rent
78k left over- 8k in listed expenses
70k - gas assuming 3.50 price 30mpg and 10mile commute-800
69k- 6k food(very generous 500/month)
63k-23k retirement

40k left over for fun, more retirement, or whatever else you fancy

Not having to deal with Socal traffic is priceless, on that alone I would consider it. I think Socal traffic takes years off your life, so yep that seems reasonable.


An extra hour commute (to & from work) = 1hr x 5 days/week x 50 work week/yr = 250 hours/year = roughly 10-12% of your income (based on 2000 work hr/yr)
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PostPosted: Thu Sep 27, 2018 4:27 pm    Post subject:

governator wrote:
Raijin wrote:
Take home 114k-36k rent
78k left over- 8k in listed expenses
70k - gas assuming 3.50 price 30mpg and 10mile commute-800
69k- 6k food(very generous 500/month)
63k-23k retirement

40k left over for fun, more retirement, or whatever else you fancy

Not having to deal with Socal traffic is priceless, on that alone I would consider it. I think Socal traffic takes years off your life, so yep that seems reasonable.


An extra hour commute (to & from work) = 1hr x 5 days/week x 50 work week/yr = 250 hours/year = roughly 10-12% of your income (based on 2000 work hr/yr)


There was a 1.5 year period when I was fresh out of college and I did an Irvine to Century City commute. Never...ever again. 1.5 hours in "lmoderate traffic". 2+ hours in heavy traffic. This was 18 years ago too...I imagine it's even worse now.
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PostPosted: Thu Sep 27, 2018 5:02 pm    Post subject:

jonnybravo wrote:
governator wrote:
Raijin wrote:
Take home 114k-36k rent
78k left over- 8k in listed expenses
70k - gas assuming 3.50 price 30mpg and 10mile commute-800
69k- 6k food(very generous 500/month)
63k-23k retirement

40k left over for fun, more retirement, or whatever else you fancy

Not having to deal with Socal traffic is priceless, on that alone I would consider it. I think Socal traffic takes years off your life, so yep that seems reasonable.


An extra hour commute (to & from work) = 1hr x 5 days/week x 50 work week/yr = 250 hours/year = roughly 10-12% of your income (based on 2000 work hr/yr)


There was a 1.5 year period when I was fresh out of college and I did an Irvine to Century City commute. Never...ever again. 1.5 hours in "lmoderate traffic". 2+ hours in heavy traffic. This was 18 years ago too...I imagine it's even worse now.

Great example of why work from home jobs and opportunities need to catch on. Plus it would mean less cars on the road, which would be good for the environment and mean less smog for L.A.
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PostPosted: Fri Sep 28, 2018 2:16 pm    Post subject:

That's insane to be paying that much for anything but a mortgage, but that's just me.

There are these new apartments in my neighborhood that are 480sq going for 2500$ a month. They are a full two blocks removed from the beach not even on them! Just insanity all the way around.
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PostPosted: Fri Sep 28, 2018 4:39 pm    Post subject:

ringfinger wrote:
numero-ocho wrote:
General rule of thumb is no more than 25-30% of gross income should go towards rent.


Yep, that’s the figure I’ve heard as well. What are some of you folks paying, as a percentage of gross?

Midwest
13.3% of gross
18.3% of take home
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PostPosted: Fri Sep 28, 2018 7:49 pm    Post subject:

Raijin wrote:
ringfinger wrote:
numero-ocho wrote:
General rule of thumb is no more than 25-30% of gross income should go towards rent.


Yep, that’s the figure I’ve heard as well. What are some of you folks paying, as a percentage of gross?

Midwest
13.3% of gross
18.3% of take home


Nicely done. Real nice.

I’m in Orange County.

18.9% of gross
26.3% of net but I max my 401K
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PostPosted: Fri Sep 28, 2018 8:29 pm    Post subject:

I'm paying $3,330 + utilities and cable/internet for a studio in the Bay area right now.
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PostPosted: Sun Sep 30, 2018 12:00 am    Post subject:

Lonzo'sBalls wrote:
That's insane to be paying that much for anything but a mortgage, but that's just me.

There are these new apartments in my neighborhood that are 480sq going for 2500$ a month. They are a full two blocks removed from the beach not even on them! Just insanity all the way around.


I have this philosophy that you are always paying rent no matter if it’s a mortgage or if you’re actually renting.

Example:

Let’s say you own a house and you pay $3k mortgage. One day you find out your neighbor is renting his house out for $3k a month and you’d rather live in his house instead of yours. So you put your house up for rent and you get someone to rent it for $3k. Now you can move into your neighbors house for $3k month.

So basically, when you think about it, you’ve been paying rent all this time. The rent you’ve been paying is the opportunity cost for living there. You could have been renting your place out for $3k a month all this time. But by living there, you lost out on $3k a month. And as long as you keep living there, you lose out on rental incone.

So you’re always paying rent no matter if you’re renting or you own your own home.

And people really feel this effect when they move out, rent their home, then decide to move back in. They feel the loss of that rental income. So if you bought a house and been renting it out for $3k a month, once you decide to move in, that’s when you feel the loss of that rental income. And that’s the rent you’re paying.

So no matter what you do - you can never escape paying rent.

So every homeowner out there, you’re not bound to living in the house you own.

You just need to figure out how much rent you can get for it - say $3,500. Then you can live anywhere you want for $3,500 and break even.

So when people say it’s insane to choose to rent a place for $2,500 vs paying a mortgage for $2,500, I say you can do both as they r interchangeable.

You can buy a house, pay a mortgage for $2,500, rent it out for $2,500 and go rent another place for $2,500. If you want.
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PostPosted: Sun Sep 30, 2018 6:38 am    Post subject:

LongBeachPoly wrote:
Lonzo'sBalls wrote:
That's insane to be paying that much for anything but a mortgage, but that's just me.

There are these new apartments in my neighborhood that are 480sq going for 2500$ a month. They are a full two blocks removed from the beach not even on them! Just insanity all the way around.


I have this philosophy that you are always paying rent no matter if it’s a mortgage or if you’re actually renting.

Example:

Let’s say you own a house and you pay $3k mortgage. One day you find out your neighbor is renting his house out for $3k a month and you’d rather live in his house instead of yours. So you put your house up for rent and you get someone to rent it for $3k. Now you can move into your neighbors house for $3k month.

So basically, when you think about it, you’ve been paying rent all this time. The rent you’ve been paying is the opportunity cost for living there. You could have been renting your place out for $3k a month all this time. But by living there, you lost out on $3k a month. And as long as you keep living there, you lose out on rental incone.

So you’re always paying rent no matter if you’re renting or you own your own home.

And people really feel this effect when they move out, rent their home, then decide to move back in. They feel the loss of that rental income. So if you bought a house and been renting it out for $3k a month, once you decide to move in, that’s when you feel the loss of that rental income. And that’s the rent you’re paying.

So no matter what you do - you can never escape paying rent.

So every homeowner out there, you’re not bound to living in the house you own.

You just need to figure out how much rent you can get for it - say $3,500. Then you can live anywhere you want for $3,500 and break even.

So when people say it’s insane to choose to rent a place for $2,500 vs paying a mortgage for $2,500, I say you can do both as they r interchangeable.

You can buy a house, pay a mortgage for $2,500, rent it out for $2,500 and go rent another place for $2,500. If you want.


That philosophy is wrong, unfortunately. You are not always paying "rent" no matter what. You're only always paying rent if you choose to do that, constantly refinance your mortgage, or are unable to purchase a home. Here are the key differences:

- With fixed rate mortgages (the only ones most people should be getting), payments stay fixed for the entire duration of the mortgage.
- Rents on the other hand, increase significantly over time. LA County has seen a 34 percent increase in rents over the past 7 years alone. The mortgage amount would have stayed the same.

- In 30 years (or less), you will no longer have to pay a living cost at all if you choose to purchase.
- If you choose to rent, you will still have a monthly outlay to pay for a roof over your head at significantly inflated prices.

And the idea that by living in your purchased home you lose out on $3K a month is incorrect. You're not losing out on $3K a month. The only amount you're really "out", would be the percentage of your monthly payment that represents mortgage interest. Because of amortization, the amount you are out decreases over time.

In the first year, on a $3K mortgage, you will be out about $2,200 with the remaining $800 going to your principal.

In the second year, on a $3K mortgage, you will be out about $2,000 with the remaining $1,000 going to your principal.

In the 29th year, on a $3K mortgage, you will be out $130 with the remaining $2,870 going to your principal.

That's important because you can effectively get the amount going to your principal right back into your hands if you wanted to if you sell your home.
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PostPosted: Sun Sep 30, 2018 9:06 am    Post subject:

ringfinger wrote:


That philosophy is wrong, unfortunately. You are not always paying "rent" no matter what. You're only always paying rent if you choose to do that, constantly refinance your mortgage, or are unable to purchase a home. Here are the key differences:

- With fixed rate mortgages (the only ones most people should be getting), payments stay fixed for the entire duration of the mortgage.
- Rents on the other hand, increase significantly over time. LA County has seen a 34 percent increase in rents over the past 7 years alone. The mortgage amount would have stayed the same.

- In 30 years (or less), you will no longer have to pay a living cost at all if you choose to purchase.
- If you choose to rent, you will still have a monthly outlay to pay for a roof over your head at significantly inflated prices.

And the idea that by living in your purchased home you lose out on $3K a month is incorrect. You're not losing out on $3K a month. The only amount you're really "out", would be the percentage of your monthly payment that represents mortgage interest. Because of amortization, the amount you are out decreases over time.

In the first year, on a $3K mortgage, you will be out about $2,200 with the remaining $800 going to your principal.

In the second year, on a $3K mortgage, you will be out about $2,000 with the remaining $1,000 going to your principal.

In the 29th year, on a $3K mortgage, you will be out $130 with the remaining $2,870 going to your principal.

That's important because you can effectively get the amount going to your principal right back into your hands if you wanted to if you sell your home.


Nah, you missed my point.

My point is not the mortgage you pay. The mortgage you pay is your investment in the house.

The choice for you to actually live in that house is the "paying rent" part.

So wherever you choose to live, you'll be paying rent for living in that house.

The rent you'll be paying would either be: (a) actual rent; or (b) opportunity cost for lost rent

So wherever you're living, you're paying rent to live there. Because even if you own it, by living there, you're giving up rental income. Someone else would pay you to live there.

If you're talking about a house that would be paid off in 30 years so you're living there for free. No, because the rental market value by that time could be $10k a month. So, you're losing out on $10k a month just by living there. You could move to Thailand or something, pay little to no rent, and pocket most of that $10k a month.

So you can't escape "paying rent"
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PostPosted: Sun Sep 30, 2018 7:55 pm    Post subject:

LongBeachPoly wrote:
ringfinger wrote:


That philosophy is wrong, unfortunately. You are not always paying "rent" no matter what. You're only always paying rent if you choose to do that, constantly refinance your mortgage, or are unable to purchase a home. Here are the key differences:

- With fixed rate mortgages (the only ones most people should be getting), payments stay fixed for the entire duration of the mortgage.
- Rents on the other hand, increase significantly over time. LA County has seen a 34 percent increase in rents over the past 7 years alone. The mortgage amount would have stayed the same.

- In 30 years (or less), you will no longer have to pay a living cost at all if you choose to purchase.
- If you choose to rent, you will still have a monthly outlay to pay for a roof over your head at significantly inflated prices.

And the idea that by living in your purchased home you lose out on $3K a month is incorrect. You're not losing out on $3K a month. The only amount you're really "out", would be the percentage of your monthly payment that represents mortgage interest. Because of amortization, the amount you are out decreases over time.

In the first year, on a $3K mortgage, you will be out about $2,200 with the remaining $800 going to your principal.

In the second year, on a $3K mortgage, you will be out about $2,000 with the remaining $1,000 going to your principal.

In the 29th year, on a $3K mortgage, you will be out $130 with the remaining $2,870 going to your principal.

That's important because you can effectively get the amount going to your principal right back into your hands if you wanted to if you sell your home.


Nah, you missed my point.

My point is not the mortgage you pay. The mortgage you pay is your investment in the house.

The choice for you to actually live in that house is the "paying rent" part.

So wherever you choose to live, you'll be paying rent for living in that house.

The rent you'll be paying would either be: (a) actual rent; or (b) opportunity cost for lost rent

So wherever you're living, you're paying rent to live there. Because even if you own it, by living there, you're giving up rental income. Someone else would pay you to live there.

If you're talking about a house that would be paid off in 30 years so you're living there for free. No, because the rental market value by that time could be $10k a month. So, you're losing out on $10k a month just by living there. You could move to Thailand or something, pay little to no rent, and pocket most of that $10k a month.

So you can't escape "paying rent"


Your scenarios are wrong.

The “rent” you would be paying is either your actual rent PLUS the opportunity cost for not buying. You didn’t factor that in and it is a huge factor and price to pay which is why they aren’t the same.
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PostPosted: Sun Sep 30, 2018 9:02 pm    Post subject:

Paying rent is basically taking a match to money and burning it. Once it leaves your hands, you are guaranteed never to have use of that money again. It has truly been spent and you'll never be able to utilise the benefit of the earnings you've just spent on rent at any point in the future.

With a mortgage, if you chooses to live in the home, then you''re basically residing in a piggy bank. Every cent that you pay towards that mortgage remains in your pocket. You're engaged in what is basically a forced savings plan where you retain the value of the income you utilise to pay the mortgage to be repurposed and used again at a later date. Even if the unthinkable happens and the value of the property doesn't increase in value over the 15 year term of the mortgage, you still have retained the value of the income that you spent on the mortgage over that term.

So paying $3000/mo for rent over 15 years means you're taking $540,000 of income you've earned and lighting a match to it.

Paying $3000/mo into a mortgage over 15 years means you are RETAINING at least $540,000 in income value since you'll have the ability to spend that $540,000 at a point in the future of your choosing.

So the OP's choice is to either take a match to $36,000 over the course of a year, OR retain that income by instead purchasing.
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PostPosted: Sun Sep 30, 2018 11:34 pm    Post subject:

ringfinger wrote:
LongBeachPoly wrote:
ringfinger wrote:


That philosophy is wrong, unfortunately. You are not always paying "rent" no matter what. You're only always paying rent if you choose to do that, constantly refinance your mortgage, or are unable to purchase a home. Here are the key differences:

- With fixed rate mortgages (the only ones most people should be getting), payments stay fixed for the entire duration of the mortgage.
- Rents on the other hand, increase significantly over time. LA County has seen a 34 percent increase in rents over the past 7 years alone. The mortgage amount would have stayed the same.

- In 30 years (or less), you will no longer have to pay a living cost at all if you choose to purchase.
- If you choose to rent, you will still have a monthly outlay to pay for a roof over your head at significantly inflated prices.

And the idea that by living in your purchased home you lose out on $3K a month is incorrect. You're not losing out on $3K a month. The only amount you're really "out", would be the percentage of your monthly payment that represents mortgage interest. Because of amortization, the amount you are out decreases over time.

In the first year, on a $3K mortgage, you will be out about $2,200 with the remaining $800 going to your principal.

In the second year, on a $3K mortgage, you will be out about $2,000 with the remaining $1,000 going to your principal.

In the 29th year, on a $3K mortgage, you will be out $130 with the remaining $2,870 going to your principal.

That's important because you can effectively get the amount going to your principal right back into your hands if you wanted to if you sell your home.


Nah, you missed my point.

My point is not the mortgage you pay. The mortgage you pay is your investment in the house.

The choice for you to actually live in that house is the "paying rent" part.

So wherever you choose to live, you'll be paying rent for living in that house.

The rent you'll be paying would either be: (a) actual rent; or (b) opportunity cost for lost rent

So wherever you're living, you're paying rent to live there. Because even if you own it, by living there, you're giving up rental income. Someone else would pay you to live there.

If you're talking about a house that would be paid off in 30 years so you're living there for free. No, because the rental market value by that time could be $10k a month. So, you're losing out on $10k a month just by living there. You could move to Thailand or something, pay little to no rent, and pocket most of that $10k a month.

So you can't escape "paying rent"


Your scenarios are wrong.

The “rent” you would be paying is either your actual rent PLUS the opportunity cost for not buying. You didn’t factor that in and it is a huge factor and price to pay which is why they aren’t the same.


I never said anything about buying or not buying.

I said you’re always going to pay rent. No matter if you own your house or not, you cannot escape paying rent.
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LongBeachPoly
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PostPosted: Sun Sep 30, 2018 11:38 pm    Post subject:

Aussiesuede wrote:
Paying rent is basically taking a match to money and burning it. Once it leaves your hands, you are guaranteed never to have use of that money again. It has truly been spent and you'll never be able to utilise the benefit of the earnings you've just spent on rent at any point in the future.

With a mortgage, if you chooses to live in the home, then you''re basically residing in a piggy bank. Every cent that you pay towards that mortgage remains in your pocket. You're engaged in what is basically a forced savings plan where you retain the value of the income you utilise to pay the mortgage to be repurposed and used again at a later date. Even if the unthinkable happens and the value of the property doesn't increase in value over the 15 year term of the mortgage, you still have retained the value of the income that you spent on the mortgage over that term.

So paying $3000/mo for rent over 15 years means you're taking $540,000 of income you've earned and lighting a match to it.

Paying $3000/mo into a mortgage over 15 years means you are RETAINING at least $540,000 in income value since you'll have the ability to spend that $540,000 at a point in the future of your choosing.

So the OP's choice is to either take a match to $36,000 over the course of a year, OR retain that income by instead purchasing.


Ok, let’s take your scenario to paying a mortgage of $3,000 a month for 15 years.

Let’s say that house is in Southern CA. Let’s say you get a job in Northern CA now you have to move, but you want to keep your house. So you rent your house out, let’s say for $3,000/month and you move to Northern CA where you now rent an apartment for $3,000/month

Are you now taking a match to money and burning it because now you are “renting”?
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