Don’t Buy A House In 2025 (You’ve Been Lied To!)

What's up you guys, it's Graham here, and this video has single-handedly brought me back from the Graham Stephan show retirement. That's right. I just had so much to say about this that it deserves its own dedicated video, not on the main channel where it's a bit more scripted. This one, I just want to speak honestly off the cuff because this stirred up quite a controversy. It's titled a house is not a good investment by this YouTuber, Kara Nicole. I'd highly recommend her channel, by the way, down below in the description, because she has a lot to say about this that I actually tend to agree with. With that said, make sure to hit the like button, subscribe, welcome back to the channel. Also, big thank you to Function Health for sponsoring this video, but more on that later. Let's begin. Hot take, but a house is an awful investment. I would go as far as to say it is not an investment at all and that we need to stop seeing home ownership as an investing money move, because ultimately that is just not what it is. See, here's the thing. This completely goes against this mainstream narrative that buying a house is going to be the best investment you'll ever make. And most people make all of their money from buying a house. And the thing is, it's like, even though that has been the case for the last 50 years, we are at a point now where you start looking at whether or not you're actually going to make money in your home. And over the last few years, I've seen so many Reddit threads, so many Twitter posts about people losing money on their house that they bought a few years ago. Like these are people who bought a house in 2022 or 2023, and now they're trying to sell it and realizing like, wait a second. I can't sell it without writing a check out of my own pocket for $100,000 to cover the difference because I have lost money on this thing. And that's something that people just aren't used to. Like it was in the past where you could buy a house, maybe you overpaid for it, but then the worst case scenario is that you could just go and rent it out and you make some of your money back. Everything's fine. And you wait for the market to appreciate and you sell. These days, though, people are buying these houses and they say, if I rent it out, I'm losing $1,500 a month. If I sell it, I got to write a check for $50,000. What do I do? I am stuck. And it's a bad situation to be in. Don't ever do that. Our culture loves to prop up home ownership as the ultimate status signal that shows you've made it. Think about the movies and shows that we grew up watching and how often buying a home was framed as a triumphant moment that symbolized the character making it. Yeah, you never see that with renters. You never see that like, oh, I signed a great lease agreement and we just moved in and we're renting it for the next two years. No one ever congratulates that. They're like, oh, man, are you sure you're just throwing money away? Meanwhile, the person who says you're throwing money away has an 8% mortgage, pays 2% in property tax and their insurance just jacked up by three times. You know who's really getting ripped off here? I'm truly in the mindset now that renting is making way more sense than it ever has in the past and that more people should consider renting their home if they have the option to save a lot of money by doing so. With that, let's talk about how a house is not actually a good investment, how home ownership compares to renting, and when is it truly the right time to buy a house? You know, it's funny. When I was growing up, it was a college. College is the American dream. You go go to college, get a good education, borrow $50,000 of student loan debt to go and fund your education for a job that pays you less than what you spent for the degree. Go and do that. And then people started to smarten up and they realized, wait a second, I don't need a college degree for this. Everyone has a college degree. Therefore, there's no competitiveness in the marketplace for me to have this degree to and spend $50,000 to do it. Or maybe I go to a community college. I save the money. My point being is that for a long time, we were jammed with this, like, go to college, get a good education, then work hard, then you can buy a house. Well, we've kind of put that college bit to the side and now we're on the house part. Owning a house is not a reliable way to make money. My aunt and uncle actually bought a house in the 90s and it's now worth $500,000 more. Are you saying that isn't profit? Dumb, dumb, carer, you house hater. Here's the thing to consider, though, is you have a lot of these properties where, yes, you look at it on the surface. They bought it for $100,000 and now it's worth $400,000. But nobody looks at the math and says, OK, how much did you spend in property taxes, mortgage interest, repairs, maintenance, everything else that comes along with that? Did you do any upgrades to the house? How much of that is just luck? How much of that is just lower interest rates have fueled a whole bunch of home buying growth? And now it's a trendy area to live in. When you really calculate every single cost that goes into this and then you subtract 6% closing costs and potentially taxes on top of it, depending on your price point and whether or not you get the married filing joint capital gains exclusion on homes, you could actually be looking at a break even or a loss, or it could be like a really bad investment compared to just about anything else that you could be doing. So you really have to look at all the numbers, subtract the amount it takes you to close on the house. That's going to give you a true understanding. Now, that's not to say that a house can't be a good investment. You can't go into it intentionally buying something that's hopefully undervalued, fixing it up, adding equity, and then you're left with a little profit margin there. That's usually maybe like 10 to 15% at the very most, 6% of which just goes to closing costs. But, you know, the point could be that you're not going to lose a ton of money buying a house if you do so very intentionally. But if you're just going and buying a house and rationalizing it, that this is going to make you money, it's probably not. According to Renophy, quote, on average, renovations return 70% of your initial investment. So you probably won't get back the total cost of the remodel. Look, the more you see these numbers, the more you begin to realize that homeownership is a lot more complicated than you expect. And you have so many nuanced things just coming up last minute that you would never expect, like property taxes, insurance, maintenance, repairs, you name it. Unless you're keeping meticulous track of these things, there's going to be something that falls through the cracks. And the same thing also applies to your health. Like, you might look totally fine on the outside, but unless you're tracking what's going on on the inside, you're basically just guessing. That's why I partnered with today's sponsor, Function Health, because they're the only health platform that gives you access to the kind of data that most people never see and the insights to actually take action. With Function, you could test over 100 biomarkers, everything from heart and hormones to toxins, inflammation and stress. 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I'll be sharing my own results in a future video, so if you want to join me, the link is down below in the description or you could use the QR code on the screen. Also, make sure to use the code GRAM100 at checkout because the first 1000 people who sign up will get a $100 credit towards their membership. Again, that link is down below. Thank you so much. And now let's get back to the video. Average renovations return 70% of your initial investment, so you probably won't get back the total cost of the remodel. Yeah, see, this is so true. It used to be again like 10 years ago, you would be able to do strategic renovations in your property. So you would basically be able to go and do landscape, paint floors, kitchen, bedroom, bathroom basics. And for every dollar you spend, you should be able to get about a $1.20 to a $1.30 back. It was a really good investment to do strategic things. But when you're going and overpaying for that renovation because everything is so expensive, speaking of which, speaking of renovation, literally getting a call from a contractor right now about putting money in a water heater. Oh, there we go. I'm back. That's the joys of owning a property. Even a rental, by the way, is just like things break. And there's been one property this year where I'd be I don't want to say I'd be lucky to break even on it. But my expenses have been so high this year that I'm basically going to be breaking even. I've spent so much money just fixing things that have broke. A tenant moved out, you know, did a did a nice enough little like, you know, fixer on it. But like, my gosh, it's never ending. And by the time the year is up, again, a break even would be successful. So there you go. Literal proof real time. So now let's continue. In the less than two weeks since we've closed on this house, we have paid four thousand four hundred and fifty six dollars and fifty five cents. This is what I find so frustrating about the conversation around buying a house, because it's framed like the thing you do the second you're able to afford a down payment. Yeah, it's very true. I think it's just so glamorized and so just ingrained in people that to buy a house is just like such a big accomplishment. But, you know, I'll tell you, like as much as I love owning this house, the reality is I bought it like five years ago for half the cost that it would be today at an interest rate of two point eight seven five percent. I probably wouldn't buy this house today at today's prices with today's interest rates. That's just the reality of it. Like, I don't think this house is worth that cost. Yeah, it's worth half of its price at a two point eight seven five percent interest rate. I wouldn't buy it again today. We'll put it that way. And I'm looking at it more and more like how nice would it be just to rent and have a landlord take care of everything for you, where if something breaks, you give them a call. They send someone to fix it. The HOA gives you an assessment. They pay for it. The property taxes go up. They pay for it. The insurance doubles. They pay for it. I don't want to be on the hook anymore. I could justify it when I have so much equity in a house like this because its value has gone up so much and I'm locked into such a low payment. Then it doesn't bother me. Then if the HOA has like an unexpected oopsie and I got to be writing checks for 500 bucks every single month, fine, because I've made so much money on the house. But but if I'm buying it today's prices, I want nothing to do with that. I'm just being honest. For this example, we are using the medium cost of living city of Savannah, Georgia, specifically looking at two properties in the gorgeous historic district, both one bedrooms, both in the same part of town. The main difference being that one is a condo to buy and the other is an apartment to rent. Oh, this is going to be bad. First of all, condos just in and of itself, terrible investments. When you look at the return of a condo versus a single family home, the single family home wins nine times out of 10 unless you get really lucky with just one like booming area. But that's like a lot of ticket. That's like saying, oh, stocks aren't a good investment because you could win one hundred thousand dollars on a scratch off ticket. Yeah, if you get the scratch off ticket, great. But if you are anyone else, you're not going to win. And that's basically it between condos and houses. The houses are going to win nine times out of 10 because you own the land. But regardless, I was even looking up a house recently in Las Vegas down the street for me, and I determined that home prices would have to go down by about thirty five to forty percent. To equal what I could just rent the same house for. Why wouldn't I just rent unless I get a 40 percent discount off the purchase price? It's cheaper for me just to rent the house. And then I have no overhead expenses. I save money. It's like now renting is such a good deal that I'm looking at this like if I were to move, I would just rent. Never thought I'd say that. That's the truth. First off, we have the opportunity cost of not investing that eighty five thousand dollar down payment because that down payment money is wrapped up in the house. We can't use it to buy something like a low cost index fund, and that causes us to miss out on a lot of potential money growth. That's very true. A lot of people, when they buy a house, all they do is they bank on appreciation. That's it. Appreciation saves so many people from really bad home buying decisions from so many mistakes. They can up a lot. But if but if homes go up five percent every single year, eventually they're going to dig themselves out and look like a genius. That's what it is. That's what's happening. You know, long term, I do think homeownership is just going to get more expensive. A lot of the times home values are going to be going up in line with inflation. Overall, they tend to about track. But you know what? In the short term, when you're looking at the price, you spend the mortgage interest rate, property taxes, insurance repairs. Renting is looking just better and better and better and better, especially when you can just invest the difference. If you are disciplined enough to do that, the condo we buy has a Zillow estimated monthly cost of twenty hundred and twelve dollars a month. This is between mortgage and interest taxes, insurance and HOA dues. However, one thing it does not account for is maintenance. Experts typically recommend setting aside two percent of your home's price to maintenance every year. That's a bit high on maintenance. But you know what? I will say when you add that out over like 10, 15 years, it might be about accurate, especially on a home because most people think of the maintenance. And, you know, month to month, it's not bad. And then all of a sudden you're you're five rolls around. You got to replace the roof. There's twenty thousand dollars. Then now that balance is out and you have to kind of amortize that cost over your entire length of ownership. So things like this do add up. But it's never like 700 here, 700 here. It's always like zero, zero, zero, zero, zero, zero, seven grand, zero, zero, zero, zero, zero, zero, zero, zero, 30 grand, zero, zero, zero. So that's usually how it works. And over the long run, it adds up. Yeah, but most of that thirty five hundred dollars for the condo is going toward investments. OK, get that through your head. Except it's not. That is the exact point I'm trying to make. As you can see, most of the monthly mortgage payments you are making are going to interest, not to your principal. Yeah, it's one of the biggest things. So you're paying down the loan. Eventually you get to own it outright. Well, sure. But if you just invested the difference anyway, in like a broad index fund over those 30 years, you'd have enough money to buy the thing outright and have investments left over on top of it. So that's the balance. Again, like things made so much sense when you could get like a three, three and a half percent interest rate mortgage. Then I'm all for it because so much of your payment is going towards principal. You're paying down your loan way faster. And then the break even between buying and renting was like one to three years. Now it could be like 10 to 15 years just to break even. And meanwhile, you don't know if you're going to be in the house for that long. Most people only stay in their home for about 12 to 13 years before they sell it, which means for a lot of people it would be cheaper for them to rent. And then move after 13 years, then buy and move after 13 years. If you rented instead up front, you would have $100,000 from both the $85,000 down payment and the $15,000 in closing costs. You would also have your $1,500 a month extra to invest. You might say, oh, but inflation, that's going to impact those prices. And absolutely. But inflation will also increase the cost of owning a home. Yeah. Ask me how I know everything is so much more expensive. If I get someone to the house for a repair, it's costing about 30 to 50 percent more than it did five years ago. My insurance is all up 30 to maybe 60 percent, depending on the property. My property taxes go up consistently about two to three percent a year, which might not sound like a lot. But if I'm not increasing the rents two to three percent a year, it costs more money than I'm getting back every single year. So every year that I own the property, I actually make less and less and less unless you have to bump up the rents to keep pace with that. It's insane. So then if a house is not an investment, what is it? Buying a house is a lifestyle choice. That is it. That's what we primarily should see it as. I completely agree with that at this point. At today's prices, you have to do it because buying a house is an emotional decision that gives you peace of mind, that gives you stability. And you pay a price for that. It's like paying a price for insurance. It's like hopefully you never need the insurance, but you're paying a premium to know that if you need something, you're going to be OK and they're hopefully going to cover you. Buying a house is the exact same thing. Hopefully a landlord never kicks you out and jacks up your rent to the moon. And all of a sudden you got to move somewhere else. Your whole life is disrupted. So you buy a house and you pay that premium to know that that's not going to happen. Yes, you could get completely reamed by contractors and just property taxes, insurance companies, all this sort of stuff. But overall, your monthly mortgage payment is going to be about the same every single year as long as you don't get an adjustable rate mortgage. And that gives you stability. There is something nice and peaceful to know about owning a house. And the longer you own it for, the more likely it is to come out ahead of renting. So if you say, hey, this is where I want to live for the next 30 years and I can afford the monthly payment and I don't mind paying a little more upfront to know that 30 years from now, I'm still going to be in the same spot by all means. Then I think buying makes a lot of sense. If you really want to put down roots and feel good about the stability, buy a house a hundred percent. But if you're looking at the financial component of it and you don't mind being a little more flexible, it save you a lot of money. So if you thought about buying a house recently, just be sure that you are really thinking it through and that you remember a house is not a good investment. Look, I'd highly recommend checking out her channel down below in the description. Go and subscribe to her because she gave me a great reason to come out of retirement to talk about a topic like this. And for that, I'm totally grateful. So, again, check out her video. Give her credit for this. Like a hundred percent. Go and subscribe to her. Check out her channel, watch her videos, all of that. And also don't forget to check out Function Health down below in the description. I also highly recommend that. And I'll keep you posted on my results, by the way. So thanks so much. And until next time.