You are Paying How Much in Rent!?!

Filed under: Market Comentary

Last week, I stumbled across an article that I thought would be a good starting point for our conversation today. The headline was talking about how millennials will spend almost $100,000 in rent between the ages of 22 and 30.

Keep in mind that these numbers are national averages. For those of us here on the west coast, these numbers could easily double.

Crunching the Numbers

Let’s keep it simple by sticking with a calculation of $100,000, which works out to be roughly $1000 per month in rent costs for 8 years. Looking at the numbers made me ask if there is a better way for these kids to do it.

If you look at a rent vs. buy scenario, it is obvious that no one is going to be able to buy a $400,000 house for $1000 per month. But, in the early to mid-twenties, what if a millennial is able to buy a 3 or 4 bedroom house for $400,000 and then rents out the other rooms? The payment will probably be around $2500 per month with minimal money down. So, if you pay $1000 a month and then rent out the other two rooms to cover the mortgage, you could actually be building equity.

In this scenario, someone is going to have to help out the home buyer with a gift of some sort for the down payment. But, it could be worth the effort because it is a huge investment starter for a young kid.

Long-Term Benefits of Homeownership for Millennials

It is interesting to see that over the same 8-year period of time of homeownership instead of renting, it would amortize off nearly $60,000. The numbers work, and it shows why getting into the investment game early is so important. Hopefully, this information gives you some food for thought to look at options for yourself or family members.

As a parent, you might think about helping your kids by buying a house and renting out a few rooms to cover the mortgage. This option is just as affordable as rent and could offer your child a huge head start for their financial future. If the regular payments are made for the life of the loan, your child will have a house paid off by the age of 55 years old. They could buy one or two other houses, and their retirement plan is done!

I’m always here to answer questions and help with your real estate financial strategy. If you have questions, call anytime. Also, like or share this video to help your family and friends consider another angle for millennial rent costs.

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