Yahoo Finance I’m a Self-Made Millionaire: Here’s Why I Rent and Don’t Buy My Home
Few people know more about money than those who built their own fortunes from scratch. It stands to reason, then, that all self-made millionaires own houses because homeownership is the key to building and preserving generational wealth, right?
Not necessarily.
GOBankingRates spoke to one self-made millionaire who chooses to keep renting despite having more than enough money to buy a home of his own. It’s part of a larger strategy to build generational wealth through real estate while lowering his housing costs.
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The Arguments for Renting
Homeownership as the cornerstone of middle-class wealth and security is not a universally agreed-upon concept. According to Forbes, there are four primary financial arguments in favor of renting a home instead of buying.
Renting does not always mean you’re throwing money away: Conventional real estate wisdom says that renting is a waste of money that enriches landlords and keeps renters broke. But Forbes counters that renting can provide the basic needs of shelter and utilities for a comparable price without the costs and hassles of maintenance, repairs and upkeep.
Renting can give you a crack at big-city life: For people of average means, renting isn’t a better option for living in big, expensive metropolitan areas. Usually, it’s the only option. Even for those who can afford homeownership, it’s cheaper to rent in cities like Austin, San Francisco, Seattle, Boston and Portland.
Renters have more time and money to build wealth: Renters can get away with having thousands of dollars less in their emergency funds than homeowners. They spend not just less time, but less money on maintenance, repairs and renovations, which they can dedicate to building a business, launching a side hustle or investing.
Wealth from your home can get trapped in your house: While you can build wealth through homeownership, equity can be difficult to access. Home equity lines of credit (HELOCs) and home equity loans can charge steep interest rates that can sink homeowners into debt.
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Laurence Gill is a senior IT specialist at the United States Department of Agriculture (USDA) with expertise in artificial intelligence (AI), cybersecurity, e-commerce and federal government operations.
His background includes stints with BAE Systems, Citizant, Fannie Mae and various government agencies, including the Department of Transportation, the General Accounting Office and the U.S. Government Accountability Office. He’s served as a program manager, operational risk strategist, system analyst and management consultant.
“I’m an African-American married father of two teenage children who attend exclusive private schools in the Washington, D.C., area,” Gill said. “We have a net worth of about $2 million, primarily from my wife who owns a consulting company. I’m a senior manager with the federal government. Our income is about $350,000 per year.”
The couple’s successful careers and hefty incomes have provided them with financial security and their investments are securing their wealth for the next generation — and renting their primary residence is a key part of that long-term investment strategy.
Renting as Part of a Real Estate Investing Strategy
Gill owns a house in the nation’s capital, but he and his wife do with it what their landlord does with the home they live in one state over — they rent it for passive income.
“I live in Washington D.C. and we decided to rent our home, which is valued at $1.1 million,” said Gill.
With tenants living in the home he owns, Gill and his wife crunched the numbers and decided that signing a lease made more sense than taking out another mortgage.
“Instead of buying a new home, we rent a larger home in Montgomery County, Maryland,” he said. “Our mortgage is $2,500 per month and we receive $4,700 in rental income.
That leaves enough to cover his entire mortgage payment while cutting his monthly rent nearly in half.
“Our rent payment is $4,500 per month, so we decided to rent because our net monthly housing payment is only $2,300,” Gill said.
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This article originally appeared on GOBankingRates.com: I’m a Self-Made Millionaire: Here’s Why I Rent and Don’t Buy My Home
