Renting vs Buying Property

The concept of renting a house for $7,700 per month may seem unusual to some, but there are individuals who choose to do so. One of my clients, a close friend, recently expressed interest in leasing a house at this price. Initially, I found the idea to be illogical, but he said, give “Rich Dad, Poor Dad” and I’d “get it”. I read it, and I kindly understand the reasoning behind his decision now. I say kinda as its not that simple.

The house in question is worth approximately $2,500,000. The cost to carry a $2,500,000 mortgage, including fees, would be approximately $15,400 per month. By leasing the property for $7,700 per month, he is effectively paying half the cost of a mortgage.

Unfortunately there are several caveats to this plan. When paying a mortgage, a portion of the payment goes towards interest and principal. By leasing, my client is not building equity in the property. Additionally, the value of the house may increase over time (appreciation), potentially resulting in a missed opportunity for profit.

In conclusion, while the concept of leasing a house for $7,700 per month may seem unorthodox, it is important to consider the reasoning behind the decision and the potential drawbacks before passing judgment. It may be beneficial for individuals to read the book “Rich Dad, Poor Dad” for more insight into this perspective on business, money, and the business world.

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