Housing is the largest expense in most people’s budget, and every renter knows – to the dime, how much of their paycheck goes out to their landlord or property management company. Still, keeping track of how much money you have paid in a year is an eye-opening and fruitful exercise in financial management. Knowing that the money you have paid in rent adds up over your lifetime helps prepare individuals and families for financial decision- making; especially when rent, unlike equity built through homeownership – never comes back!
So how much do you pay in one year? In five years? In 20 years? What could that money do for you if it was building equity. Homeownership has its costs in time, maintenance costs, and effort in maintaining a property on top of it being one of the largest financial decisions people can make in their lives. One major benefit of purchasing a home is that you are secured from regular rent increases, especially in hot real estate markets. Even if you are lucky enough to have rent control, by law your rent can go up by as much as 3% a year. While purchasing a home in California is expensive, living in California and not making active steps that put you on the path towards homeownership can accrue serious opportunity costs over time.
So, let’s look at San Diego. Assuming (very conservatively), that rent increases slow down over time, a 22-year-old who lives by themselves would have paid $300,000 by 30. And by 50 years of age, that person would have paid almost $1 Million.
Let’s talk and discuss ways that we can get you on the property ladder so all of your hard earned money goes into creating your own wealth and not that of your landlord.