5 Shocking Facts Why San Diego Home Owners Are Smarter Than Renters in 2023 | 2024
In this video I want to break down the 5 (crucial) things San Diego home owners understand that renters simply do not - if they had, they would not be renting.
I will be so bold as to say that if you are renting right now in San Diego, and don't take the time to watch this video, and read the detailed post - you will be costing yourself tens of thousands, hundreds of thousands, millions, and if not tens of millions, over your lifetime.
And as always, will back it up with facts, versus just some dude online trying to increase his real estate and mortgage business.
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In previous recent videos to you I have revealed the best tactics to use buying a house for cash, broke down how I see the current mortgage markets, what I am seeing on the ground in terms of real estate trends, San Diego mortgage rates hitting all time lows, and the most recent housing stats that are updated in real time.
I want to be very clear - I call things as I see them from over 20 years doing real estate, loans, and investing, not only in San Diego, but several overseas locations as well. You might agree, disagree, or have different takes. Everyone has a different standpoint depending on different life factors.
If you are finding value from this video, I would really appreciate if you could smash that like button, subscribe to get more hard hitting videos just like this, and tap that notification bell so you know when a new video comes out.
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Without further ado - let's jump into today's video...
Home Owner Crucial Fact #1 - Their Monthly Housing Will *Not* Being Going Up 5-7% a Year
As I pointed out in a video earlier this year - California passed a new law that started January 1 2020 - where there is Statewide rent controls. It states rent can be increased a maximum of 5% per year + the cost of local inflation. So, what does that mean? You can be sure, moving forward, rents will be increasing around 5-7% a year, every year. If all landlords are doing it - you can no option but to pay it.
That doesn't sound that much - how much is it you ask? If your rent is $2,500 a month - you take $ 2,500 x 1.05% = rent increase of $125 *per month* that first year.
This won't be in a straight line up, of course, as nothing is - but, you can see from these stats - rent has only gone up.
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What happens for home owners?
They get to buy a place at today's values, lock in a long fixed loan of 30 years, and have the same monthly payment over that time until they refinance, sell, or pay off the home, and live mortgage free.
Think of having, and knowing, what your fixed monthly expenses will be for decades, and then having the ability to never have a mortgage payment again - versus being locked into rent for the rest of your life.
Let's do a hypothetical - let's say you are 40 years old - get a 30 year mortgage - pay it off in 30 years - at the age of 70 are mortgage free - and you live till 90.
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You live 20 *years* without having to pay rent.
Let's assume rent at that time will be $4,000 per month (I gotta pick some number).
$4,000 per month x 240 months (that's 20 years) = $960,000 you paid in rent - the mortgage free person saved.
Now, I get if you own a home you would also pay property taxes and home owners insurance - but, clearly no where near $960,000 over those same 20 years.
That alone should freak you the f&%k out and want to get into something you are buying versus renting.
Home Owner Crucial Fact #2 - Every Month They Pay Down More and More Principal
When I bought my first condo in late 2001 - it was $110,000 - and my interest rate was 10%. At the time I was not licensed yet to handle real estate and mortgage loans - and, went stated income/stated assets.
That might sound high - but, check historical rates dating back to 1971.
If you were getting a mortgage in September 1981 your rate would have been 18.16% - and it would have cost you over 2% in points (plus normal closing costs, escrow impounds, etc.
To put that in perspective - today's average is 3.02% paying only 0.8% in points.
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Let's put this in terms of paying *down* your mortgage balance every month.
Let's assume you are getting a $700,000 mortgage at 3.02% - starting from month 1 (and more each month as the balance gets smaller and therefore you pay more principal) you are paying $1,200 towards your principal balance.
So, think of it as putting $1,200 into your piggy bank of the future.
Clearly, when you pay rent, you are not paying down anything, the owner is you give that to.
Home Owner Crucial Fact #3 - You Get Vital Tax Deductions
According to the H & R Block website - home owners for sure get these 3 deductions: your real estate taxes paid that year, the interest you paid that year on your mortgage, and the mortgage insurance you paid that year if applicable (like if you put down less than 20% and went with an FHA loan, conventional loan, jumbo loan, etc).
There *are* more - consult with your tax pro - but, let's just use these.
Let's go back to that hypothetical loan amount of $700,000. In your first full year that's $21,000 +/- in interest you get to deduct from your income.
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You also paid $700,000 x 1.25% in property taxes / 12 months = $729 per month or $8,750 for that year.
You also paid $7,476 for that year in FHA mortgage insurance (for FHA loan).
So, lets add up these numbers: $21,000 + $8,750 + $7,476 = $37,226 in deductions off your income.
Home Owner Crucial Fact #4 - You Get Appreciation (Over the Long Term)
Here's a great graph. In 1953 the median US home price was just over $18,000. I know just recently the median US home price passed the $300,000 mark.
From $18,000 to $300,000 in less than 70 years - that's less than 1 lifetime.
Of course, for San Diego, these numbers are only more dramatic.
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We see the biggest rises, and drops, passed 1971 as that's when the US (and World) went off the Gold standard and print money that's backed by nothing.
Guess what - until there's a new system - home prices *over the long term* have to go up - that's the system they created.
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Yes, there will be years it goes down, yes there will be years it's flat, but over the long term, and backed by stats, will go up.
Home Owner Crucial Fact #5 - You Get Peace of Mind, Your Time Back, and off the Real Estate Porn Wheel
This is one you gotta hear on the video - don't miss it.
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