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In The Media

10 Reasons to Rent at 91 Rainey Street

by Larry Chiang on August 22, 2020

By Larry Chiang

Renting. It’s what Elon Musk, Tom Brady and Larry Chiang are doing right now.

Should you rent?!

Top 10 Reasons to Rent

#10] Dry powder.

The metaphor of “dry powder” refers to ammunition for muskets. It applies to keeping financial obligations are a bare minimum. Building a treasure chest means spending less money as a ratio of money coming in.

The concept of ratios goes to my next point:

#9] Ratio of Mortgage to Rent

I know your down payment savings egg has grown since the stock market has spike the value of your robinHood account

I know you’re half way to your goal. You just need Amazon to hit $5,000 and Microsoft to be $300. But the ratios are so messed up

– price earnings ratio

– any ratio during Quantum Economics

– it applies to your ratio of future mortgage to present rent.

As a rule of thumb, the ratio of 2.5 is too expensive. A mortgage payment of 2.5x your one bedroom rent is too high. Quantum Economics is shitake econ majors just make up. For example, “House values only go up.” For example, ‘Real estate is the best investment of all time’

-8- Macro Economic Forces

Global macro and sovereign debt default. It’s a mess

Be flexible in case you need to dump it all and move

-7- Fees, junk fees and closing costs

The over under of Return on Investment is approximately 2 1/2 years just to recoup the fees of owning a home.

That’s just the fees

That is in the optimal case where real estate keeps going up.

-6- Cash Isn’t Trash

Every market relies on liquidity.

Sure the Federal Reserve prints in one month 5x what it printed in all of World War 2. Sure renting money from the bank is cheap.

But banks are going to own your house if you default on mortgage payments. All those months spending 2.5x your rent payment will be lost sweat equity

Stealing sweat equity is the name of the game

-5- Do you own your stuff or does your stuff own you?

Check out storage lockers.

Most people never come back for their stuff.

You think you’re owning an asset when your purchase a home, but it’s actually a liability. And it’s definitely an anchor.

~4~ But I am embarrassed to Rent.

Look, I am a shareholder in Camden Property trust so I am biased when I am recommending that you rent a place with one door and own a stock that’s got upside. With a strait face, I pay my rent on a charge card that pays me points.

Pride in ownership works great when you’re already profitable and your house is paid off. In years 1-8 of a 30-year Mortgage you don’t own anything…

{3} You can’t be upside down if you are renting.

Upside down is where you owe more on the house than it’s worth.

It’s the mortgage industry’s dirty secret. The financial advice is never advertised because it is true. Upside down on a car is sad face. Upside down on a house is mad-sad-angry face.

It’s impossible to be upside down if you’re renting.

/2/ The networking component

Buying something for $450,000 puts you in a desolate neighborhood. Even if you walk your dog 3x per day, the likelihood you will meet a Silicon Valley whale is zero

But, if you rent on Rainey Street, it’s chock full of Bay Area people post exodus. The network aspect is large because with a fast changing financial environment, being isolated with super fast broadband can reduce your outreach to zero

#1 reason to rent: The Pool

Swimming in your own in ground pool means your mortgage is hovering around $6k. And it’s isolating

Let’s say you invite “friends” over. Well, they swim naked and that sucks. In theory, it’s cool. But in practice you’re just stressed because being naked in even a large private pool gives off hibbie jibbie vibes when naked bathing with 5 or more

“I’ve never seen naked people in the 8th floor pool at #91RaineyStreet”

– Larry Chiang

Bonus: When you do pick up real estate at pennies on the dollar, make sure your FICO score is over 800

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