Ramit Sethi, a self-made millionaire and star of Netflix Inc’s NFLX "How to Get Rich," says that homeownership is overrated, and people should think twice before investing in a home.
Sethi's "most controversial money opinion" is that homeownership is not always a great investment, according to CNBC's Make It.
His opinion is that homeownership is an expensive investment that should not be taken lightly.
The idea that owning property in the U.S. as an investment has become a "religion," he said, explaining that homeownership is an unquestionable belief system deeply ingrained in American culture.
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Sethi argues that the idea of homeownership doesn’t make sense in 2023, with the median home sales price in the U.S. still floating around the all-time highs seen in June of last year.
He blasted those who say renting is like "throwing your money away" since the money is going to a landlord rather than into an investment, telling CNBC that they’re ignoring the true costs of ownership.
In addition to monthly mortgage payments, homeowners cover closing costs, utilities, maintenance, and homeowner association fees in some cases.
As for renting, the millionaire said he’s rented homes in some of the most expensive rental markets in the country, including San Francisco, New York, and Los Angeles.
"I rented in all of those places by choice. And I made more money renting than I would have owning," he said.
Despite the recent surge in home values, Sethi said real estate doesn’t offer the same returns as the stock market does, historically.
More than that, the Netflix star argues that home sellers often overlook the "phantom" costs of financing and upkeep when calculating the total return on a property.
Sethi told potential homeowners, renters, and investors to “run the numbers” to help determine whether investing in the market may be a better option than buying real estate.
The millionaire’s own experience supports the idea, as he found that monthly expenses of owning an apartment in Manhattan were almost double the amount he was already paying in rent, prompting him to invest his money elsewhere instead of spending it on homeownership.
Sethi's views may seem controversial, but they have some merit. While homeownership has long been considered a critical part of the American dream, it is important to consider the financial implications of the investment.
This story is part of a new series of features on the subject of success, Benzinga Inspire.
Photo: Jared Goralnick on flickr
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