My First Million - Why You Should Rent Even If You’re A Millionaire

Episode Date: March 6, 2024

Episode 559: Sam Parr (https://twitter.com/theSamParr) talks to Ramit Sethi ( https://twitter.com/ramit ) about why buying a house makes zero financial sense.  Want to see Sam and Shaan’s smiling faces? Head to the MFM YouTube Channel and subscribe - http://tinyurl.com/5n7ftsy5 — Show Notes: (0:00) Intro (3:30) Set your rich life intention (7:30) Don't confuse luck with skill (8:00) Sam's journey from owner to renter (11:30) Do the math: Real cost of ownership (15:30) Buy for desire (17:30) Pay in cash for large purchases (19:00) The 10 year rule (24:30) Ramit's list of must-haves (29:00) Sam's dream house (32:00) Sam's war on stuff (39:00) When to overspend (44:00) Millionaires who rent — Links: • Ramit on Twitter - https://twitter.com/ramit • Ramit on YouTube - https://tinyurl.com/m2s8cuyp • I Will Teach You To Be Rich - https://www.iwillteachyoutoberich.com/ — Check Out Shaan's Stuff: Need to hire? You should use the same service Shaan uses to hire developers, designers, & Virtual Assistants → it’s called Shepherd (tell ‘em Shaan sent you): https://bit.ly/SupportShepherd — Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com • Hampton Wealth Survey - https://joinhampton.com/wealth My First Million is a HubSpot Original Podcast // Brought to you by The HubSpot Podcast Network // Production by Arie Desormeaux // Editing by Ezra Bakker Trupiano Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. — Other episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto • #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

All right, everyone, this episode is going to make a bunch of people angry. I think it's going to make a bunch of people angry. And here's why. So we're going to discuss renting versus buying. I saw recently on TikTok or something like that. There were so many people complaining that it's too expensive to buy a house and they're complaining about renting. And I've got a surprise.

I think it's way better to rent. And I'm going to explain my reasoning. And I know that on the surface, that's going to make a lot of people angry, but hear me out. And we have my friend, Rameit Sethi, Rameet is famous. for writing a book called I Will Teach You to Be Rich. He also has a famous Netflix show called I Will Teach You to Be Rich. And he gives his explanation as well. I think this might anger a bunch of people.

Listen to the entire thing before you judge and then comment on YouTube. So go to YouTube and comment and let me know what you think. And by the way, I just looked at YouTube. Right now, 70% of people who watch our videos are not subscribed to our channel. That is ridiculous to me because we have a gentleman's agreement with this podcast. And what does that mean? That means if you've ever listened to more than one video or listen to more than one podcast, you need to go to YouTube, go to My First Million, and click subscribe. We call it the gentleman's agreement because we can't track that you're actually

doing it. But Sean and I and people like for me, we make content for you all the time. And all we ask in exchange is just clicking subscribe. It means very little to you. It costs you very close to nothing. And it means a lot to us. So please do that. And I hope you enjoy today's episode. And let me know what you think at the comments of YouTube if you agree or disagree. Renting versus buying. All right, let's get to it. I feel like I can rule the world.

I know I could be what I want to. All right, we're live for me. So today, I had you on because you and I are a little bit of an agreement on a few topics. One of them being that even if we think that you can't afford it, which I'm sure we could, we could afford it by a home. we actually prefer to rent. And most people, at least online and amongst even our friend group, think that that's insane. And I wanted to have you on to discuss kind of your opinion on buying

versus renting, to discuss some of the numbers behind it. And we're going to get tons of comments. We're going to try to defend our argument against all of them before they actually come. I don't need to defend it. I already know the answer. Like, there's no defending. It's math. It's basic Matt, here's my position. Let me state it very clearly because for the last 13 years, I've gotten about 150 comments a day telling me that I'm stupid. And I think I turned into the Joker around 2012 when, you know, random people were telling me it never makes sense to rent. You're always throwing money away on rent. You're not building any equity. Equity is really important and what are you going to leave to your kids. And on and on, I don't want to pay my

landlords, et cetera. Well, and you actually do a funny job, by the way, of sharing the comments that you get on all your YouTube videos. Typically, the comments are something like land is always a good investment or you're not really wealthy if you don't actually own land. People tell me that I'm poor because I don't own a house. First of all, that's actually quite insulting because not everyone can afford to buy a house doesn't mean you're poor just because you're renting. There are actually a lot of people who rent by choice, including me and potentially you. But anyway, let's, okay, here's my position. For the biggest purchase of your life, which for almost everybody is a house, you have to run the numbers. Because sometimes it's financially beneficial to buy,

and other times it's financially beneficial to rent. And this should not be controversial. It's like very straightforward, simple, especially if you have lived in, a high cost of living city, New York, San Francisco, L.A. I've lived in all three cities. However, for some reason, saying that basic concept is like me telling everybody that the sky is green. And by the way, you said sometimes it is profitable. Sometimes it isn't. There's a third part of that sentence, which is also who cares? That is an important thing. So usually my take on this situation, I try my hardest never to use certainty, like certain words. So I'll never say always or never. That's nonsense. That's crazy to say that. But usually my take is, or my take now is

historically, in many cases, in fact, maybe even most cases, it is buying a home is not more profitable than renting. And what people say is, well, I shouldn't. So why are you buying a home? They'll say. And I like, well, because it makes me happy. Why did I buy a steak? last night. You know, why did I do this other stuff? This, you know, it makes me happy. Yeah. My other point is that doesn't mean it's a horrible investment. I'm just saying compared to the alternatives. I actually think it's not great. And then and people will say, well, but I made money on my house and this house. I've done it before. And I say, yeah, it can happen sometimes. Yes, it definitely happens sometimes. And particularly, and they'll also say, so should I

never invest in real estate? It's like, no, because investing in a apartment building or sometimes of development where the intention is cash flowing and the intention is number one investment, many times be a great idea. But historically, if you look at the trailing 50 years of the S&P 500 of the average home growth, annual growth rate, and rent that is of equal quality, if you just run the numbers, I think more often than not, in fact, not sometimes yes, sometimes no, more often than not, it's actually not as profitable or it's less profitable to buy than it is to rent. Have you ever done like the historical math? I've seen the historical math on how the appreciation of homes, purchased homes, which shockingly for over about

100 years is right around inflation. People find that very hard to believe. It's like three and a half percent. Yeah. And what they typically will say, their first response is quite funny. They go, my house went up 26 percent in the last two years. And I go, hmm, I'm, I I wonder if anything historically, historical aberration happened in the last four years, such as a worldwide pandemic and generational shifts, I wonder. But that comment is actually quite revealing because it reveals recency bias. The fact that what happened to us in the last two or three years is something that we extrapolate will happen forever.

You hear people saying this all the time. They're like, remember when we were younger? It's like people would say stuff like, MySpace is always going to be on top. Like, it's dominant. that changed. People believe that right now about Amazon, Facebook, Apple. That will change in our lifetime. When there's a major world war, people believe things will never recover. They do. So if you want to be a great investor, you know, you got to look at a big, big, big picture. And sure, things have appreciated. That's awesome for the people who own a house and they can

make their payments. I think that's awesome. I'm really happy for them. But I still made more money renting than I would have owning. And by the way, I'm in the category where I, I currently own a home. I own my home now. I'm moving and I'm renting a house. I haven't decided if I'm going to sell my house or rent it out. I'm making that decision in the next couple weeks. But if I decide to sell it, I'm actually going to have made a profit because I got very lucky and it just, it worked out. Now, but here's. I got to tell you something. You said something the other day on Twitter that I really liked. You said, the older I get, the more I appreciate what role luck played in my success.

What I said was, and what I believe is, basically, when I started my career, it was like, pull yourself up by your bootstrap, make it happen. Like, I'm the only one responsible for my wins and losses. And I actually think that that's an all right attitude to have when you're, like, doing it because you think the internal locus of control. Like, it is up to me. I have to do something great.

But then when things work out in my favor, I reflect after a few years. And I'm like, oh, my gosh, like, that worked out. perfectly and it had nothing to do with me. It just like, for example, when I sold the company, the CEO of HubSpot, a few days after the deal closed, he got into a life-threatening accident. And had that happened three days before or one or 10, one week or two weeks before the deal closed, everything could have changed.

And that had nothing to do with me. It just was luck. And so there are many examples where like, it just got lucky. And in the case of selling my home and buying my home, everyone thought it was not going to be a good investment, and I didn't think it would be either. And it just totally got lucky. That is luck. I think that it's okay to be lucky. It's actually great. Fantastic. Sometimes luck strikes. Let's take it. Fantastic. But I also think super important to be honest about when you are good or when you are lucky. So I have a question for you.

because I've found that when people buy a house, they rarely want to rent afterwards. And so now you're going to rent. What does that feel like for you? So I'm moving to a place where I intend to rent. I don't know how long I'll rent it for, two years, five years, don't know. And I wanted to rent a completely furnished home. And the reason being is I didn't want to own much of anything. I didn't want to own a lot of stuff because I have a small house in Austin and it's 20, 200 square feet.

I have to fix stuff all the time and that's a small place. And I have historically rented for three months out of the year when I go and visit family in New York. And I love it. I love being able to call someone. I just say, fix this please. It brings so much joy that I don't have to like go and like find a vendor or like fix something myself. And so it feels like there's a burden. and lifted off a little bit of my shoulders.

That's what it feels like. Just from looking at you, I would have assumed you like to fix stuff. I do like to fix stuff, but only stuff that I like to fix. So, for example, like, I like to do Legos. That's fun for me. I like to work on old motorcycles, but I don't want to have to fix like an electrical thing in my home that it's reliant on like, I don't have light tonight if I don't fix this.

Okay. Now, looking at me, you also agree that I like to fix stuff too, right? A lot of tools, a lot of grime under my fingernails, right? If I had to guess, you've never stepped foot in a Home Depot. Only the last time I went was when my dad made me go, which I was probably like 11 years old. Yeah. My goal, my rich life is to never set foot in a Home Depot ever again, ever. So far, I'm 41 years old.

I've done it. I think I can keep it going. Okay. And so that's great that you know what you want. So when you're thinking of the buying versus renting thing, is what percentage of your equation is on math and numbers, and what percentage is on emotion and happiness? Great question.

In the beginning, almost all on numbers. So when I was renting in San Francisco, it was a steal. Basically, the amount that I would have paid to own it was close to two times more for an equivalent place. Then I moved to New York. And I had a place in New York, a pretty nice place. And I would always keep my eye on the real estate market, just for kicks. And I was tracking stuff.

And of course, every year I would negotiate my rent. And in an 11-year period, my rent went down four times. This is in Manhattan. So a lot of people think, like, rent only goes up. No, it doesn't. Depending on where you live, even depending on the segment you're in, rent can go down. At that point in New York, when I ran the numbers for an equivalent place that was just two buildings over, same view, same square footage, same everything, it would have cost 2.2 times more to own than to rent. So let me break down the math, because I was mathematically oriented. Let's pretend that I was paying $5,000 a month. If I was paying $5,000 a month to rent, And to own that place when I factor in taxes, maintenance, opportunity cost of the down payment, transaction costs, all of it.

Wait, let me ask you about those numbers. So for opportunity costs, do you assume 7 and a half percent? 7 percent. Okay, so you assume 7 percent. And then for maintenance, what do you assume? 2 percent of the property value a year? In New York, yes. In other places, I would go lower, but New York is just inherently more expensive.

Okay. And then in some buildings or apartment versus other stuff, you'd have HOA. New York. Correct. Like thousands per month. Very expensive. Yeah. I have friends who have an HOA that's $5,000 a month.

Very expensive. That's totally normal in a high-end building in New York. Completely normal. All right. So you have opportunity cost. You have maintenance. You have HOA. What else do you factor in that?

Transaction costs. When you buy and sell, it's a massive. That's real. Fees? 4%. I forget the calculation I used back then, but it's like hundreds of thousands of dollars for a unit of that, when you count both ends. Okay.

And then furniture. This is something not to be missed. You don't get the same furniture in a rental as you get in a place you bought for a lot of money. You get nicer furniture. You need to factor that in. Need to be honest. Also, renovations.

People are not really renovating their rentals, but they're renovating their other ones. So I factored it all in. Okay. And again, you can play with the assumptions in New York. I always prefer to estimate high. What do you use for the future growth? Do you use 3.5% handle growth?

I used 3% for rental growth. And I used, I think, a 3.5 or in the ballpark of that for owning. Again, we need to factor in appreciation because there are a lot of buildings in high cost of living cities. They lose money every year, but they make it on appreciation. Okay. So I factored it all in. I was like, wait a second. If I'm paying five grand over here, sample number, it would cost me 11 grand per month to own the same basic unit with the same view, et cetera. I go, I'm good. I'll take the 6K per month. I'll invest it. And that's exactly what I did. And I've been

doing that for like close to 20 years. So that turns into a lot of money over time and you get to live in amazing places. Now, that's the math part, but at a certain point, when my wife and I decide to buy, which one day we probably will. Do you have a time frame or like not a time? Do you think that maybe in the next five years you might? Or is it just whenever you? Probably not in the next five, but after, yeah, probably like after that. That's my guess. But when we go to make that decision, my goal with anything really important in my life is that I don't want cost to be the number one consideration. I don't want it to be number two or even number three. I want to have enough money that I can go and be like, that's what I want. It's totally irrational, but it's exactly what I want,

and I don't really care what it costs. Is your mentality, okay, so money is number three or number four, I think you said four or five on that list. So is your mentality going into buying a home, do you think it's going to be like, I would like to not lose money on this, or if possible, I want this to be a store of value or something like that? No. I will lose. a huge amount of money. It will be the worst financial decision I ever make. It will cost me millions. It will cost us millions. I know that. It's okay. Well, but you said that money, you said money's number four. So if it's number four, I don't want it to be number one, number two, number three. It's going to be like a distant number. Like me an example, my wedding.

When my wife and I got married, I'd been saving for like over a decade well before I knew her. Because I knew, you know, I'm Indian. I want to have an amazing wedding. And I don't want to cost to be relevant at all. You should have brought that up on your first date. Like, hey, I've been saving for our wedding, by the way. That's not weird. That's not weird at all. That's what people often in the personal finance community want you to do that. They're like, pull out your Rothai-Haree, show me your allocation. I'm like, can you guys go on a first date for once in your life, please? Like during dessert, you're like, what's your credit score? And by the way, can we go over our budget for our wedding? So that was an example where I, I,

knew that something inevitable was going to happen. One day I was going to get married. I wanted to be married one day. And I was like, this is going to be awesome. And I don't want cost to be relevant at all. Okay, within reason, but I was happy to pay a lot. Same for a house. It's a luxury purchase.

It's not an investment. It's a horrible investment in a high cost of living area. So I'm just approaching it as a pure luxury as if I was going and buying a beautiful sweater or car or whatever. I don't care. I'm going to lose money. It's pure desire. You said that you want to be able to buy.

cash, will you get a mortgage or does that depend on the rates? Maybe. Maybe. So I have 10 money rules. They're online. And one of the rules is be able to pay in cash for any large purchases, such as wedding, honeymoon, car, house. Now, people always like, what the hell are you talking about pay for a house in cash? And the origin of this is, I had a mentor when I was an intern, much younger.

And he told me, he said, Rameet, we have a no debt policy in our house. No debt. I said, wow, in my head, I'm thinking, must be nice. The guy lived in a very elite Bay Area city. As I got older and my business grew, I started to realize that actually takes discipline to have a no debt policy in your house. Now, we can quibble about whether debt is good or bad, and sometimes it's leveraged and whatever. But just the idea that he had a philosophy, a point of view on debt, I really love that.

And so, one day, when we buy a house, I want to make sure we have enough somewhere in our net worth that if we wanted to, we would pay with cash. Will we do it if it's a 1.5% mortgage? No, we'll take that mortgage all day. But I'm not going to buy a house that we don't already have. have the available cash for purely as a matter of discipline. And I want to ask you about like your future home, like what what you want to, what like what the attributes will be.

But when you are, does it factor in how often you're going to move? So for my rules for buying a home, the one of the rules I have is I want to live there for 25 years. Dude, you and I agree on so much. Basically, all of our podcasts are two bros. agreeing with each other. Like, that's it. I love it. Okay, I totally agree. When we go to buy a house, the general suggestion I give to people is you better plan to live there for at least 10 years. I think the same way, long term. Let me explain the math behind it because this is quite counterintuitive

as well. So we've all heard the phrase, you're throwing money away on rent. I go, uh, how come you don't say the same thing when you go eat at sushi on Saturdays? You're throwing money away on sushi. Or how come you don't say you're paying your sushi owners? mortgage. How can we only use that real ridiculous sneer for a landlord? I don't care if a landlord makes money. As long as I'm making money, everybody can make money. It's great. In the case of buying a house and staying there and then moving in a few years, it's usually a really big financial mistake. Let me tell you why. I ran a quick calculation before we talk. Take the median house, it's like $417,000. Let's even be conservative. Let's say you put 20% down, which is pretty hard to do,

but let's just say you do most people do 20% or less? I think they do less, especially now because it's so unaffordable. That's a median price house. That's really expensive. Let's say you have 7.1% interest. I calculated with really good credit, but that's the interest rate right now, 7.1%. Okay, listen to this. This is going to blow your mind, everybody.

You are paying more in interest than in principle for the first 20, years. Not one year, not two years for 20 years. Only in year 21 are you paying more towards the principal than you are in interest. So in other words, for all the people who leave me hundreds of comments every single day saying, why are you throwing money away or rent so dumb? I just have one simple answer. I don't like to throw money away on interest. Do you think that your opinion, and this is more so because I know you get these comments all the time, and I'm recently in this category and I'm reflecting on how I feel. Do you think that your opinion would change if you had two or three kids? Family definitely factors in. For sure. In fact, I was going to ask you,

how does family factor into your decision? But it's so interesting because you're choosing to rent right now. I love that. Well, it's going to, for me, it's going to factor in when she's of school age. She's not. I have a four-month-old. And so that's why I said, and so by the way, the lease that I got, I negotiated down a significant amount. And I got them down. by signing a two-year lease and paying six months up front. So good. And so, like, I think we got a, it's like a 30% discount. That's amazing.

Yeah, it was a significant discount because we did a two-year. And then I called them and I go, look, like, we are the perfect tenants because we are, we have stable jobs. We, like, we don't party. We, I've got a newborn. Like, we are the, I'm the best possible tenant you could ever want. But like, at what point did you say, by the way, have you. ever heard of my first million.

Never. I actually don't like breaking that up. Okay, I have to tell you something. So my friends are always like after my Netflix show came out, they're like, dude, so like, what's it like being famous? Like, you get into any restaurant you want? And I was like, what are you talking about? They're like, don't you have like your agents called and like get you into whatever? And I'm like, is this what people do? Because if so, I need to learn. I need to learn how to name drop my first million. No, first of all, I never named up. And second of all, I'm not famous. When people make fun of me And like, as for my friends and they'll say, I'm famous.

I'm like, no, I'm popular amongst a handful of nerds. So anyway, for me, for factoring with children, I think that like when they're of school age and like school, if we decide to go to public school, school district matters, things like that. And in which case, buying will be a no-brainer. But my, and I'll talk about this in a second, but my whole thing with the hardest part about me deciding when to buy is, is not the rules. It's deciding what I want. So the hardest part is like seeing like what features of a house do I actually care about.

And so what I love to do is when I go and visit my family in different parts of the country all the time, I purposely actually rent a variety of Airbnbs. So like sometimes I'll splurge and I'll rent a 10,000 square foot place. Other times I'll rent a really small apartment. Other times I'll rent a place in the city, sometimes in the suburb. And so I get to live for two weeks or whatever just to see what is. this lifestyle like and do I like it? I'll give you an example. I love that. I used to want to buy a brownstone in Brooklyn. I thought they looked so cool. I rented one for a month and it was a lot of money and I splurged and what I found is they stink. Like even the like for what my preferences,

an old or a renovated brownstone is still an old building that things break all the time and like you hear the and so like I got to I got to like test that out. You know what I'm saying? So I do that all of the time. When you're thinking about buying a place, what attributes do you want it to have? I have a very, very specific and growing list because, like I said, it's a luxury. So, a luxury means you get exactly what you want. It's not about price. It's about getting exactly what you want. How long is your list? It's pages and pages. Oh, just bullet points? Yeah, just bullet points. So, like, for example, so we rented an Airbnb. That's amazing, right? that we can test it. Amazing. Amazing. And honestly, like, a huge gift to be able to be like,

oh, I can live in a different house that I would never have access to. And living there, even for a week, you see things you didn't. So we rented an Airbnb one time. And the owner was a chef. Oh, wow. Well, it made a lot of sense because the kitchen was like extremely efficient. Like, I found, I'm not in the kitchen a lot, but I found myself just enjoying being there. And it's because I later learned there's something called like the kitchen triangle or something, and it's like a highly efficient way of setting your kitchen up. And then I connected the dots. Oh, this is chef, so they knew what they were doing. Like two dishwashers, things like that. Exactly. Like it's all within reach. So you're not wandering around. So good. I also, you know,

I love hotels. Yeah. Right. So every time I go to hotels, which I consider the best hotels have the absolute best designers, the best hospitality, the best thinking about what's going to make an amazing experience. So I go, for example, the best bathroom in the world that I've ever encountered is that Amon Kyoto. It's amazing. So what makes it amazing? Okay, first of all, so they have a beautiful mirror. The lighting looks incredible. The set up huge counter space, beautiful Hanokey wood right behind you, toilet in a separate room. The Toto toilet alone, I think, is $20,000. And it looks like a spaceship. It's incredible. Our friend Noah has one of those. Oh, really? That's cool.

I think so. It's like a really expensive, like smart toilet, right? Wait, hold on. Are you sure? Toto has like 20 models. Well, I don't know which. I know that it was like north of $10,000 and it has like a remote control. Noah. Okay. That's amazing. I did not know that. Wouldn't it be funny if we got Noah on right now? We're like, Noah, join this link right now. And then we're like, Noah, show us your toilet. And he's like, show you. I'm sitting on it right now. No, it's a fancy to. And he, as a gift, he bought Neville one as well, a really fancy toilet. Wow. And so Neville had, they have, like, remote controls, enough that, like, Neville's family

member came and visited, and they were really intimidated because they were like, I don't know how to work this toilet. It is a little nerve-wracking, for sure. So you want a fancy bathroom. You want an efficient kitchen. A couple other things. Bedrooms, small. I'm not interested in a huge bedroom.

I don't want a couch in the bedroom. It's so irrelevant. It's so dumb. dumb. Small. I want a place to put packages because we get a lot of packages and I don't like seeing cardboard everywhere. In the south, they call that a mudroom. You want a mud room. That's what they call it. Great. I like that. We want, well, my vision is multiple pavilions. So three small houses or structures. One would be an office physically separate. One would be a guest house. One would be a guest house physically separate. And one is a house. I don't like a house that's huge. I don't like anything,

I don't like anything above 3,000 square feet. I find it quite cavernous. And so human-sized, my parents taught me this really interesting thing. You know, we grew up, we didn't have a lot of money. We have a pretty big family. And I was asking my dad, you know, as I got older, like, how did you decide to buy a house? How did you calculate it, all this stuff? He's like, let me give you a piece of advice. He goes, don't get too big of a house. I was like, how come you say that? He goes, if you have too big of a house, kids will go into different areas and they won't congregate. You want them to congregate because that's how you build a family. I was like, whoa.

Dude, I interviewed this guy on Tuesday or Wednesday or yesterday or something like that, and he has a 25,000 square foot home. He was telling me, I was like, what's the expenses for that? He was telling me all the answers. And I was like, how much time do you spend a week, like, managing vendors? He goes, like, 15 or 20 hours a week I'm spending. He's retired. So he's like, I kind of like doing it because I don't have anything to do.

Okay. And he's like, at the time, I was divorced and remarried a woman who had a bunch of kids and I had a bunch of kids. And it was cool to have. And then they grew up and they had kids. And so it's like, this is our compound that everyone hangs out. He goes, but now I'm trying to downside. It's just too much work. I can't handle it.

Yeah. And he's like, I'm just, I can't change the light bulbs. Like they're just like, because they're too high. I'm not going to get on a ladder. He's like, it's just way too much work. And so, because I was thinking about size. I'm trying to decide how big I want. I think I actually want like 5,500 square feet.

5,500 square feet? Yeah. And the reason why I like that is because my in-laws can come and stay there and basically live and have their own room. And they could be with my family. And it doesn't feel like it's a burden that they're just living. And they could work from the house. And by the way, working from homes in ordeal now, where like, plus I record for a living.

So I would need a dedicated room for that. My wife would like a dedicated room. And I want space for in-laws and I have out-of-town family. I want them to be able to make themselves at home and not feel like they're a burden on me. And so that's kind of how I decided on my square footage is about 55 to 6,000. Okay. I'll tell you what, I like that. It all kind of makes sense.

You go, I need this, I need that. And then it expands. I think that also brings me to the list. It's not just about the house. So I went one level up because when my wife and I moved to L.A., one day I was like, let's go, let's go take a driving tour of the most expensive houses in the city. So I found like all the expensive neighborhoods. And then we just drove around, Bel Air, all these places. Most of them have huge gates, but you can kind of see through. And you're talking like 100 million

homes, 50 to 100 million. Yeah, yeah, exactly. So I was like, write down that address. And we would look it up later. And sometimes there's photos. It's pretty cool just to see. And as I was going through this, I, you know, while you're driving there for a minute, especially as an entrepreneur, you're like, I could live here. Remit Satee, Bel Air. You know, like, you're like, kind of falling into the vision. And then I got home and I was like, what the hell am I talking about? Like, I have a very small list of things that are absolutely important to me. And guess what's number one on that list? Walkability. Same. Walkability. So how am I going to have a Bel Air house where there's literally no sidewalks and then also reconcile that with walkability? And that's why

I think it's so important for us as you get to know yourself to just create a simple list of values. Because otherwise, even I will get enchanted by some cool thing I see. Like, oh, belly are so cool. And then I buy this thing that I don't even want. Or it could be a car. It could be a shirt. It could be whatever. So just having those values to remind you, what is actually important to you? The place that I rented, the second biggest reason why I did it was it's across the street from a weekly farmer's market. I love that. So simple. And I just like, I just like, I just, want to eat like fresh vegetables and fresh meat. And that was like an ordeal, was that it's just across the street from a farmer's market. I love that. And does this, when you're this methodical

about buying a home, are you this methodical about all the other things you like to purchase on a daily or weekly basis? Well, I think you should be this methodical for the largest purchase of your life. That's what blows my mind is people just literally buy a house and they spent more time researching their local steakhouse. Like, what? What? So, no, I'm not as methodical. No, I don't spend years deciding, you know, what brand of chips to buy.

But I do like a couple of rules that kind of make life simple. Like you, I don't want to have to be consumed with stuff. I find that just like that older guy you mentioned, we buy stuff with good intentions, right? It's like I worked hard, the American dream. I'm going to buy a car, a house, et cetera. And then suddenly we blink our eyes and wake up one day. and we spend 50% of our time fixing stuff and repairing stuff and thinking about stuff. I don't want stuff.

I find that sometimes when people buy stuff, their world shrinks. It's like, oh, I got to work on the roof thing outside. You can see how little I know about houses. That's the only example. I'm like, the roof. And yet, I want to expand. I want to be like talking to friends, traveling, trying new foods, doing my business. I don't want to be focused on a light bulb.

That's not of interest to me. So tell me what your opinion on this is. So I'm actually methodical about acquiring just things on a daily basis. Like what? So like I don't have an Amazon Prime membership. I just found myself buying like $5 extension cords or like a USB thing that I don't, that I don't need. Like because, because A, I don't want like all the packaging coming to my home. Like it's, I think it's ridiculous just that sometimes I have to spend more money.

And it's not the money, but it's just the energy of just like the actual energy in terms of what it's doing to the environment, but also like my mental space of like I have to spend money to get someone to come over to get rid of all the boxes because it doesn't fit in my trash can. But B, it takes so much clutter. And so I've actually created a handful of rules when it comes to just buying things on a daily basis. Tell me. Yeah. So the first one is when possible, I try to buy for life. And so that could mean a fancy leather jacket. So like let's say I want a leather jacket. So like let's say I want a leather jacket. jacket, I'll spend more money than I, then I'll buy the nicer thing in hopes that it can last for 30 or 40 years. And it, and like, it couldn't be classically, like it said, the classic style or it could patina nicely, things that can last for a long time. I do that with cars as well. I like to buy something that I think can last for a long time because I don't want, it's, it's a little bit of cost, like just transaction costs, but it's like financial costs, but it's more so the mental cost of just like having too much stuff. The other thing that I do is I actually think that recycling is nonsense.

I think that most of the recycling in America just gets thrown into the garbage. And so I prefer to just reduce, reuse. So I just like the amount of energy that an Amazon truck takes to get something to my house so that it got from China overseas with this huge ship and like all the energy that goes into that.

I find that to be just, it hurts my heart of like how much waste it is just for me to buy this like silly USB thing that I could have just gotten at Target without all the packaging. Do you know what I mean? And so I prefer just to reduce and reused. And then finally, I try to be super intentional of like, I bought a weighted vest the

other day because I like to wear a weighted vest when I take the baby for a walk. It's actually a fun way to like get a little exercise. And so I try to be intentional of just being like, all right, which type do I want? How much weight do I think I want for this weighted vest? When in the past, I've just like bought, I've bought three of them and I'll be like, oh, I'll just see whatever's cool. It's only $25. And so I just try to be a little bit more intentional about, intention about what I'm going to acquire to make sure that that's the one I really, really want because I don't want my home full of cluttered because it makes my brain cluttered. Yeah, I totally agree. Wow. Amazing. I love those real. I love how intentional you are that you just

have them. I have to say that I think we kind of grew up fairly similarly like socioeconomic, like similarly. My mother was a teacher and my father was a small business owner and he didn't. Yeah. He did okay. But that was when I was in. high school. Yeah. Okay. So it's so interesting that often, you know, on my podcast, I speak to these couples about money. And sometimes there are trends that emerge from different types of couples. So for example, one insight that is quite obvious if you ever listen is parents who have credit card debt can never say no to their kids 100% of the time. They have inability to say no to themselves, inability to say no to their kids. It's classic. Another one you'll find is that people who have

credit card debt, sometimes I'll be like, hey, pick up your computer and take me over to your closet and they'll show me their closet. And wow, is that intimate? Well, you had a lady on your show that was kind of, I don't know if she was broke, but she was in a money crunch and she had tens or hundreds of thousands of dollars of like purses and things like that. Yeah. But the, but the interesting thing, she had a lot of money on the Netflix show, Natalie. But in the couples that will often, sometimes I'll ask him to show me their closet. So they have financial problems. They're overspending. And I take them to the closet and they, and I, and usually they're kind of withholding. They're not really opening up. And so I say, show me your closet. They love it. They open up because

for many people, their closet is their identity. And I don't mind. Like, I love my clothes. And they start telling me. And what you see in the closet is often chaos. It's just tons and tons and tons of stuff. And I'll say, hey, if you were given the option to buy one $150 shirt or $10.15 shirts, what would you take? Okay, before I tell you what they say, Sam, what would you say? Less quantity any day of the week. Exactly. And they never say that. They say, I want more. It provides me memories. It shows me that I can get it, etc. So what I see is that class, money, socioeconomic status, they all intersect. And what you're talking about is so interesting because as you have made more money and

you've kind of met people who have a lot of money, you also realize that when you go into their houses, there's a lot less stuff in. And it is really fascinating and extremely taboo to talk about in our culture about how what you see in someone's house actually tells you a lot about who they are, their identity. It is so revealed. Yeah, and it creates huge amounts of headache. This isn't just a financial thing. This is a, like, I think that, like, usually the desk where I work, I need it to be clean.

I think you said something, you're like, I love beauty. And if I surround myself in my home or my office with beauty, I feel inspired and I feel more productive. I don't need beauty. I'm not inspired by, like, particular paintings and things like that. But I need it to be clean. I need it to be clutter-free. So the desktop on my computer.

computer, it is always empty and it's just white space. I like that. You know, there's this quote, luxury is that which can be repaired. And it strikes me when you talk about, you know, reduce and reuse. Same exact thing. One example I shared that people went berserk over. They loved it. was I have these shoes, tennis shoes, and the company that I bought them from, they're expensive, and they do free repairs. So what's the name of the company? That's pretty cool. It's Brunello Cuccinelli.

It's a high-end Italian brand. And basically anything, at these high-end brands, if it ever breaks or gets frayed or anything, you take it in, they'll fix it for you. No question is asked. There's no cost. But it's very expensive on the front. How much are shoes there? I know the brand, but I've never looked at their shoes.

Well, I think those tennis shoes are like $700. That's a lot. But yeah, but it's not really, this service, they're doing it as a courtesy to me. Really, they want you to bring in your $11,000 coat. Got it. Which you've had for 25 years, and they'll send it back to Italy where only they know how to perfectly repair it. And then they'll ship it back.

That's awesome. Which, yeah, it's amazing, right? So I posted this and I showed my shoes. I wore some of these shoes on the show. and I really like to, you'll see me in sometimes the same outfits a lot because I want to wear my stuff. I buy it. I spend on it and then I want to wear it. I don't want to just throw it up.

So I took these shoes and I took them to the store and they were like, yeah, no problem. And it took months. So the other thing about buying nice stuff is that you're often not going to get the speed that you would get if you order from Amazon Prime or something else. Like you go to H&M, you're buying it right there on the spot. you're tossing it, et cetera, or another fast fashion brand, I should say. But for this, it's like months away. Anyway, people loved it. They loved the idea that, oh my God, free repairs, free repairs, where do I get stuff repaired for free? What they don't love as much is spending on quality in the

first place, right? It's not about the free repairs. Like, I can afford to get shoes repaired, so can you. But I think I like your mentality of like, I'm going to be selective about what I buy and not just by quantity, but really think about what's meaningful to me. I think that's really cool. Yeah, I think it's exhausting. I remember as we're preparing to move and I'm thinking like, all right, so we're going to spend money to ship this. And I'm like, but I don't even want this. Like, I don't even, why am I, I don't even, why do I want to ship this thing that I don't even want? Like, it's kind of ridiculous. Yeah. I like how you kind of stop it before you even get it in the door. Like, you're like, I'm not even going to get Amazon Prime. But I also think that once you have it

the door, if something's in your house. You can also, like, I do a quarterly closet cleanse. That's in part because my wife is a personal stylist. So she's taught me how to always cleanse. And it's just nice to get things out. And it frees up mental space. You know, when you open your closet or when you open your office or even your kitchen every day, I want to feel good. I want to open the fridge and things are in order. I don't want to feel chaos like by 7.30 in the morning. It's really challenging, though, by the way, to throw away stuff. It's like a, it, I used to make, I read that I would make fun of like the hoarder TV show. I'm like, how are these people so ridiculous?

And then when you go through that process of actually cleansing out and cleaning, it, I don't know if it impacts you. It impacts me. I get emotional. I'm like, oh, but I've owned this thing for 15 years, even though I've never used it. It's actually, it is hard. And so I don't want to get into that rut. Yeah, I agree.

I mean, I don't have an emotional thing, but I do. have a problem with piles. Like, I get stuff and I just put in a pile and then I like never get to the pile, sometimes for years. And it's just like, why am I doing this? Like, that's the one thing I really need to improve on as it relates to cleanliness because I'm like, these piles do not look good. They don't feel good either. So for the listener, the takeaways in all this. So we talked about running the math. You get criticized online all the time. And I think it's nonsense because all you're saying is run the math. That's all you're saying. And don't do so. And even if it is unprofitable, do it anyway. But don't kid yourself and say that it's a good investment.

Yes, you can totally if you, like I have a friend. They lived, they moved to New Jersey. New Jersey notoriously high taxes. And they were like, hey, Rameet, we ran the numbers. It makes no sense. And we're buying anyway because of schooling and because of location to work. I go, fantastic. I gave him a round of applause. Good job. It doesn't matter to me if you buy a rent, it only matters that you're actually calculating everything. Math is one part of it. You need to know your numbers. But also there are other things. Family, you know, just pure desire, anything you want, but you've got to calculate it all. You cannot simply say, like, I want, like, it's hilarious to me that so many 24-year-olds on Twitter are like, my number one goal with money is financial

freedom. And then they spend 630% of their net worth on a 30-year mortgage. It literally makes no sense. You need to be sure you're actually using your money to live your rich life. And part of that is calculating carefully the biggest purchase you'll ever make. And I wanted to ask one last thing, which is amongst your friend group, is there a difference, is there a pattern that you've known amongst people who earn a significant amount versus those who don't? Like, I have a bunch of relatively high net worth friends who actually rent. Yeah, same.

Have you seen a pattern in that? It's the ones who are like especially savvy with personal finance. And it's like me telling you, Sam, like, hey, Sam, if you eat a lot, you're going to get full. And you're like, yeah, I know. It's like, yeah, okay, we know. It's so simple when you understand it and you're not being blinded by this idea that I need to buy a house. And by the way, this is like a lot of people in any expensive city. By the way, for everyone listening, did you know that it is currently,

more expensive to buy than to rent in almost every city in America. That did not use to be the case, but with interest rates as they are and with the rising asset prices, it is crazy that people are still recycling the old phrases of like, you're throwing money away on rent, when right now in almost every city, it does not make financial sense to buy. All right, man, we're going to wrap up there. I appreciate you doing this. This is awesome. If you're listening, I want you to go to our YouTube page. Type in, you know, if you're listening on podcasts, like Spotify or iTunes, go to our YouTube page.

So, you know, type in my first million, find this episode. I want you to put a comment if you agree or disagree with us. Oh, no. I'm very curious. And by the way, be nice. Be nice about it. All right. That was very nice of you to say.

Thank you, Sam. Let me tell you something. You can always recognize someone who has never been to a high cost of living city by the comments they leave. I had a guy, this just happened like two days ago. He goes, for me, just such an idiot. I make more money owning. It's so much better, et cetera.

And so I like to talk to people. I like to ask questions. I say, tell me more. And I have this very long conversation with him. He bought a house for like $75,000. He lives in a very inexpensive city. So in a city like that, it actually makes a lot of sense. Here's my simple request for anyone leaving a comment.

Before you leave a comment, I want you to look up properties in, Palo Alto or Menlo Park. And I want you to look up those properties. And I want you to find a couple properties that have rented and have sold. And I want you to understand the math of a really expensive city like Menlo Park and Palo Alto. But you can do that with like Chicago as well or Atlanta. Like I bet you right, the numbers would actually still tell you the same story. You're totally right. You're totally right. I just want to show them like all the way in the most expensive cities in America because I want you to see that it is true in some cities. It will never make financial sense, even after 30 years to buy. And then once you understand that, you go, wait a second.

So if that's true, then what about Chicago? What about Atlanta? What about my own city? Let me take a fresh look at this. And that's when you really start to master money. When you take all the preconceived notions you have, you go, ah, maybe that wasn't true. Let me analyze it for myself. That's awesome. I appreciate you. And that's the pod. In it like no days off on the road less travel never looking back