Renting long term is like throwing money away. You might as well take stacks of cash and flush it down the toilet every month as a renter.
At the end of each month, you'll never get your money back. Yes, you were able to get a place to stay for your rent. But so does the homeowner. But after 20 years of flushing money down the toilet in rent, you don't have the option to sell your property for potentially big gains.
Let's look at how much money in rent you'll flush down the toilet in the largest cities in America.
How Much Rent Will Be Flushed Down The Toilet
Below are the top 25 major cities in America and how much rent you'll flush down the toilet by the time you're 60 years old. The chart uses the median rent price per city as of 2019.
As the years go on, the higher the average rental price goes, causing you to flush even more money down the toilet.
By the age of 50, you will have flushed $671,965 down the toilet if you rented in Austin, $992,434.29 if you lived in Washington DC, $773,000 if you lived in a bad part of NYC, and a whopping $1,647,000 down the toilet if you rented in San Francisco!
Are you kidding me? Stop wasting money folks, and try to at least get neutral real estate by owning your primary residence.
If your city is not on the list, don't worry. Simply add up how much you'll end up spending on rent for your desired property if you never buy. Then run the numbers like the example above and see where you'll end up in 10 – 40 years from now.
If you can't afford to buy your primary residence, then at least invest in real estate so you don't get left so far behind. You want to ride the inflation wave with real estate, not drown in it as a price taker.
The best way to invest in real estate is by buying a publicly traded REIT or buy investing in real estate crowdfunding. Fundrise created the eREIT and is the most innovate platform out there.
I've personally invested $810,000 in real estate crowdfunding after selling my SF rental for $2,740,000 in 2017, or 30X annual gross rent. It feels great to be diversified into 18 different properties around the country and earn money passively.
Fundrise is free to sign up and check out. It's always good to diversify your investments and leverage technology.
Why Waste Money On Rent?
Please don't be a dummy and rent for life. If you rent for life, you are going to look back 30 years from now with regret.
Your kids will also likely hate you for not buying so long ago. Think back to 30–50 years ago when your parents could be real estate. Wouldn't it be awesome to go back in time and buy up all the prime real estate as you could back then?
If you don't want to build wealth for yourself, build wealth for your children. They will thank you when they become adults for having the foresight to buy real estate today.
Always remember: the return on rent is always negative 100%. At least get neutral inflation by owning your primary residence or investing in real estate.
About the Author: Sam worked in investing banking for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis and taking care of his family. Financial Samurai was started in 2009 and is one of the most trusted personal finance sites on the web with over 1.5 million pageviews a month.