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Here are three reasons why as a multi-millionaire, I still rent

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instead of owning my home. Number one, you got this wonderful home,

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you got a big personal mortgage and you cannot breathe financially. That

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is not the whole idea of making money work for you and that's not how you

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make money by your happiness. Just make sure that you know

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the details of what it's going to cost you to get into a mortgage before you

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sign the loan contract. The questions people don't ask themselves before signing

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on for their mortgage. One, what's your 30-year commitment to

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the mortgage? Meaning, what is the amount you're gonna have to pay each week

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or each month for the next 30 years to keep this property?

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Number two, I'm Lloyd James Ross, seven-figure investor and entrepreneur,

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and I've helped thousands of business owners and professionals turn financial

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stress into success. If you're stuck in old money habits, overwhelmed

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by investing, or unsure where to start, this is for you. I'll

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give you the mindset and strategies to take control, grow

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your wealth and achieve financial freedom. It's time to make your

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money work for you. So in this episode, we're going to get into whether

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you should buy a house and why society tells you to and whether that's a

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good idea or not. So most people are told,

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buy a property. They were told that from their parents and their grandparents. Sure,

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since the 1980s, as interest rates have fallen from 17% down

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to zero, it's been a great place to have your money. But that

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doesn't mean real estate is going to continue to go up at the same rate. There's been certain

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things in Australia, certainly here, that have changed the real estate landscape. They

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deregulated the banking industry. They dropped interest rates to zero. And

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the other spouse started working. Those three big moves financially is what

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propped up prices. But they're done now. That means going forward, we're probably

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not going to see the same gains. So just be careful of taking advice from

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30, 40 years ago, because the entire macroeconomic landscape has absolutely

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shifted. And it doesn't mean it's going to work in the future. But what will work

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is cash flow, investing in yourself, and having flexibility. You

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definitely want to minimize your downside. And in Australia, if you

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get a mortgage you can't afford, and you have to foreclose on it, and

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you default on it, your credit rating will drop and potentially you

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can go bankrupt. You want to avoid the downside. You want to maximize

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the upside. And if renting is a way to do that, then you'll be renting. But

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what it means is you don't have to buy into what society tells you.

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Of course, they're going to tell you to buy out. They want you to join the mortgage club with them because

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it's flipping hard, right? It doesn't mean you've got to sign up for that. Just buy

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your property when you're ready for the reasons you want to and

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you absolutely understand the numbers, which we're going to get to in this episode. Let's

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dive into the numbers so you understand exactly when to get a mortgage, why, and

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you understand in the detail where it can become cumbersome for

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you. You've done everything right. You've

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saved for a deposit, got pre-approved, and

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finally secured your home loan. The bank

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hands you a 30-year mortgage contract and you sign

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because that's just what everyone else does. Months

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later, the reality sets in. Your repayments barely

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touch the principal and you check your loan statement and most of your hard-earned money

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is going straight to interest. It feels like

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you're paying for a house you don't even own yet. You start

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doing the math. Over the life of the loan, you'll end up paying

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the bank two, maybe three times the actual

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price of your house. And if you miss a payment, more

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fees, more interest. The bank always wins.

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You look around, see others caught in the same trap, locked

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into massive loans, working longer hours, stuck in

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financial prison for decades. You begin to

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wonder, is this a scam? Not

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in the legal sense, but in the way the entire system is designed to

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keep you paying for life. Banks push 30-year

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loans, knowing you'll pay hundreds of thousands of dollars, if not

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millions of dollars, in interest before ever owning your

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home outright. Meanwhile, they'll tell you it's

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good debt. They'll tell you stay in the system, refinance, stretch

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your loan term. Every move you make, every dollar you repay, feeds

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into their profits. And here's the kicker. Most

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people never question it. They accept it as just the

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way things are. They work harder, stretch their

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budgets, keep handing their money to the banks without realizing they

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could escape the cycle sooner. Mortgage

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equals death pledge. That's

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an old French term, which actually means you've got to pay this loan back until

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the day you die, or we'll foreclose on the asset and we'll take it from you.

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That's where the term mortgage comes from. And I'm not suggesting it's

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the worst thing, but done under the wrong circumstances, it absolutely is.

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And how do I know this? Because other pundits in the industry, other major

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financial commentators like Morgan Housel, Dave Ramsey

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and Ramit Sethi have all said the exact same thing. Under

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the circumstances that people are buying properties, it does not

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make sense. You don't want to become house poor,

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meaning you've got this wonderful home, you've got a big personal mortgage, and

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you cannot breathe financially. That is not the whole

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idea of making money work for you, and that's not how you make money by

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your happiness. To prove what I'm talking

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about, I want to go through some numbers. So stay to the end so you can see exactly

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how much is going to be coming out of your account if you go into this

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death pledge. All right, so let's get into it. Before I move

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into the data, I want to caveat this. I'm not suggesting that

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having a mortgage is the worst thing ever. And I'm certainly not suggesting not buying

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a home. What I'm suggesting is buying it under the right circumstances and

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you actually understanding what you're getting involved in. Because if

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you don't understand your mortgage contract, you don't understand the numbers, The

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devil's in the detail. You're gonna put yourself in a financial bind, in

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financial prison for the rest of your life. And that's what I

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don't want for you. So pay close attention as I go through the numbers so

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you know exactly what you're getting yourself into and you know

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exactly when the right time, when the right numbers stack up for you to

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absolutely get a mortgage and live in your home with your family and enjoy

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that experience. All right, let's jump into the numbers. So I

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live in Australia right now and the median or the average house price right

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here is around a million dollars, okay? It used to be a lot less,

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but now it's a million bucks. It might be different in your country, but a

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million dollars with a 10% deposit for a 30-year loan

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term means you've got to actually fork out 100,000 for the deposit. And

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at 6.5%, your monthly principal

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and interest payments every month are $5,688.61. But $5,688 every single

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month. So

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if we look at that over the course or the duration of the loan of

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30 years, it means you're going to pay in interest

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$1.147 million just in interest. That's more

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than the price of the home. So your total repayments in that time are going

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to be over $2 million. And this

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is why it gets tricky to own a mortgage with a

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very high priced home. Okay, this means over the course of the

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loan, you're paying more in interest than the homes costing. Okay, so that

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works out to be about $1,400 a week, $1,400 a

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week of after tax dollars, meaning you've got to go and probably earn 2000 a

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week just to pay the 1400. That's someone's entire income

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into the mortgage. Now, if we add in their operating costs, like

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council rates, which is about $36 a week, we

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add in home insurance, which is about $28 a week, and we

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add in maintenance, what people don't see you have to do with your house, and

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we add in about $190 a week. That means we're adding a whole nother $256 a week to the $1,400. So there we have $1,656 a week just

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to live in your mortgage house, and it's only worth a million bucks. $1,650 a

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week of after-tax dollars. So you can see how much

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you have to actually put in to just buying a million dollar home after

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you put in $100,000 deposit. On the flip side, let's

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look at this from a personal experience from myself. Just

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quickly, if you're ready to take control of your finances but feel stuck on

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where to start, I have a solution. My book, Money Buys Happiness,

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simplifies investing and wealth building with practical steps to help

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you achieve financial peace. Get your copy via the

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link in the show notes and let's get your money working for you. Now back

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to the episode. My wife and I live in a million dollar

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apartment on the river. It's a great apartment, right? But we pay $850 a

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week for that apartment, 4.4%. And

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so the balance of what we don't pay, we invest into shares. So

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here's an example. We pay $850 a week. So

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by contrast, we save about $800 a week not

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having the mortgage. That's about $40,000 a year. I

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take the $40,000 we invested in shares that grow roughly

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at 14% per annum. So we're actually saving money

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and then putting it to work harder than the 6.5% that you're paying in

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interest. And that's how we're getting ahead. But most importantly for us, here's

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what we've done. Instead of putting out the 100K as a deposit, we

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invested it in growing and scaling for businesses that are

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now producing money back to us. We're taking the cash flow and

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we're investing it in shares that are producing a lot more than the 6.5% in

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interest that the bank is charging. In fact, we have been

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known to buy a lot of bank stocks because we know that it's better to

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be the bank than owe the bank. And that's how we've got ahead

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financially to become financially independent. In fact, we got financially independent in our 30s

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because we didn't rush out and get a big house with a big mortgage

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like everybody else. We weren't trying to keep up with the Joneses because the Joneses are

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broke, right? So don't try and keep up the

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Joneses, just go at your own pace. But make sure if you're going to get a mortgage, you've

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got enough for a deposit and you understand, you truly

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understand the principal interest payments on a weekly basis that

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you're going to be committed to for 30 years. Now, I understood this because

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my whole background is property and finance, and I'm a lawyer. So I looked

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in the details. I'm like, why are all these people buying houses? What are they, crazy? Right?

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Because we want to have flexibility to be able to build businesses, get out

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of our jobs, and build freedom. You can't do that if your hands are tied with

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a golden handcuff, as they call it, to either a job you don't like, and

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most importantly, to pay a mortgage that you don't really need. And

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that's what I saw. I never wanted to put myself in a position where I couldn't

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move. And that's what happens if you get into these death pledges where

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you don't understand the details, all right? So. For

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11 years, we've lived in our apartment. We started renting there for about 500 bucks

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a week. And from there, the rent has

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gone up to about $850 a week, which is about a 6% annual growth

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rate. Stay with me here, because what I'm trying to explain to you is how this

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works from a cashflow standpoint. So for the last 11 years,

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our rent's gone from 500 a week to 850. That's 6% a year. Inflation is between 3% and 4%. So the reality,

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is our rent has only gone up 2% a year. I really hope

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my landlord doesn't watch this because I don't want him to put the rent up even more. And I can

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see my wife over there saying, why are you recording this episode? But

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I'm trying to explain to you why I rent instead of own when

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it comes to a mortgage. Now, it's different when you buy a property investment, you've

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got a tenant paying it, that makes a bit more sense. Okay, and it's more tax

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effective. I'm talking about buying a home that you live in, you pay

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a very hefty price to buy a house with debt that

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you then live in, there's no tax deductibility, the debt, you've got to

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service all yourself. And if the market falls, you're stuck in

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negative equity. I've seen people stuck in negative equity where they actually owe

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more than what the house is worth. You want to avoid that at all costs. But

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most importantly, the reason why we've made these decisions to rent instead of own

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is because it allows us the flexibility to take the cash flow

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we're saving, invest into more productive assets, but

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also invest in our own businesses, and most importantly, invest

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in ourselves. So here's the bottom line. Just

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make sure that you know the details of what it's going to cost you

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to get into a mortgage before you sign the loan contract. Understand the

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numbers, do the numbers with your broker and absolutely under all circumstances,

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know that even if one of you loses their job, that you can easily

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afford the mortgage. And if that's not the case, don't do it. Nothing

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wrong with renting, it's okay. I know you're gonna be a peasant like

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us if you rent, but it's okay to be a peasant if you're happy,

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all right? You don't wanna be rich and unhappy, all right? You gotta make sure

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that money buys happiness, not sadness. So

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make sure you understand the numbers before you rush out to

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buy a house with a mortgage and become house poor.

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What I want you to be is cashflow rich and happy, not

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cashflow poor and sad. Now that I've covered that, you're

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probably thinking, yeah, but Lloyd, rent money's dead money. And Lloyd,

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the value of my house has gone up massively and it's built wealth. I get it.

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But what I'm saying is that you don't want to blind yourself

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just to get this capital gain that you can't even realize. So for example, when

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people say rent money's dead money, I say interest money is

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dead money. Whether you're paying rent or interest, it's not your money. It's

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going to someone else. It's either going to your landlord in rent or it's going to the bank in

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profits. So rent money and interest money is dead money,

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okay? But then you might be thinking, yes, but the value of the house

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goes up and I understand that But most people don't

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realize the value of that house until they sell it So if they were to

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sell it, then what? Then what are you going to do, right? You're

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going to downsize and get something smaller? Unlikely You're going to sell it

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at the age of 65? Sure, but how much life do you got left? So

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yes, the value of the house does go up under certain circumstances, not

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always. In Japan, real estate's gone down for 35 years. In

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the US, it's pretty much gone down since 2008 and then plateaued. And

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in China right now, it's falling drastically. They all went through property booms. Property

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doesn't always go up. So if you've got to own this thing for 30 years, you

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can't just bet that it's gonna keep going up and keep going up and keep going up because it doesn't. In

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2008, here where I live, property fell by half. Okay,

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so just be aware of that, it does happen. Sure, the value of

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the house goes up and that's why I like property. That's why, yes, under

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the certain circumstances, it's effective to buy a house. I'm not suggesting don't

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do it because you wanna capture those non-taxable gains in

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your principal place of residence. Yes, but don't do

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it if it's gonna bind you to a prison sentence and put you in

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a job you hate for the next 40 years. Why would you compromise that for

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what? Some capital gains in the future? That's a big price to

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pay, 40 years in a job you don't like to get some capital gains in the future. What,

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so you can start living your life after the age of 65? I like living my life now.

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That's why I think renting is more flexible, more fluid, gives you more

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cashflow to do things like start a business, buy a business, invest in

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other assets and travel the world like what we've done. That's the flip side.

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But of course, if you don't want to do those things, and you like the certainty of having a mortgage, go

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get it. But make sure when you get it, you understand the numbers. Because

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I don't know how many times people have said to me, Lloyd, I'm just stuck here. I'm like, why? Because

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they've bitten off more than they can chew. They have to spend $100,000 a

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year just in the mortgage to live. I just don't want that to be you. That's

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all. All right? So yes, there is a flip side to this. And I believe in

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the flip side to an extent, but only under the right circumstances. Just make

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sure you're smarter than your bank. Another counter-argument is,

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Lloyd, I've got kids. I need steadiness and certainty and so forth

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and security. That is just a lie you tell yourself. How do

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I know? Because I was a kid, and when we went through lots of

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rental properties, I couldn't give two hoots. Could care less

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if my parents owned the house or didn't own the house. At one point, they owned a

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house, then they didn't own a house. Then they owned a house, then they didn't own. I rented, I

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rented. I've been through 20 houses in my life, and look at me. I'm

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well-adjusted. I'm not saying don't get it for security,

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but we've lived in our rental property for 11 years,

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and we've been able to treat it like our own home. So that whole notion that you can't

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have security is BS, because in my past, when

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we've moved house, it didn't affect my security and safety, okay?

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At all. It didn't affect how I grew up, because I like moving houses.

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I like new environments. It taught me to actually adapt to new environments, okay?

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So this whole thing that, oh, a lot of got kids, I got to say, and people are

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saying to me, yeah, but when you have, I'm just saying that I was a kid and

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it didn't have an impact on me. In fact, I preferred it. And

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if my parents were more financially secure so we

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could go on more family holidays because we didn't have a crappy mortgage we had to

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pay for, it was way better. So just think about

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it. Is it really security or is it pretend security that

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you're creating? Because real security is in the love you have with

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your kids and your family and having a great relationship with them and the adventures you can go

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on. It's not, hey, by the way, in 40 years it'll be worthwhile. I know we can't go

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on any holidays. I know we can't buy this. I know we can't do this. But in 40 years

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time, we're going to have some capital growth. They're going to be adults by then. They

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won't care. So what do you mean when you say it'll

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give us stability and security? Not every single renting experience is like, we

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have to move every five minutes. You will find a steady one and a long-term one. It's

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just better than being in financial prison. So just weigh it

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up, okay? If you can get away with getting a mortgage and owning a property and

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a house where you can have stability for the children, you can have capital growth,

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by all means, absolutely go for it. But right now, buying a million dollar

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home is a massive stretch for most families. So just be

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careful. Buying a house to keep up with the Joneses is not always the

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best strategy. Do it for the reasons you know to do it for, for

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understanding the data that's there, blah, blah, blah, blah. If you've

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enjoyed this, leave me a comment below. What's the number one learning from this episode

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you've had? Hit the subscribe button, follow us on Spotify as well. Leave

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us a five-star review, but most importantly, share this with a friend who needs

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to hear it because this must really be

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understood by you and others before they buy a mortgage. Okay,

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see you on the next episode. Thanks for listening to Money Grows on Trees. If

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you enjoyed the episode, leave a five-star review on Apple Podcasts and

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Spotify and subscribe to us on YouTube so you never miss

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an episode. And if you're serious about building wealth, make sure to check out

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the links in the show notes and follow me on all social media platforms at