Why Do Tenants Rent Instead of Buy?

Who in the world wouldrent a $40,000 home? Why wouldn't they just buy it? That's today's video.

Let's dive in.

Hey, everybody.

I'm Clayton Morris.

I'm the founderof Morris Invest.

I'm a long-time realestate investor.

And this channel isdevoted to helping you take action, go out thereand become a real estate investor.

And we focus here on the channelabout buy-and-hold real estate, because we want tocreate cash flow– passive income.

That's what this channelis all devoted around.

So today we're going totalk about a question I get a lot from differentpeople, who want to know, why would anyonewant to rent a home in the $40,000, $50,000 range? I mean, those are the typesof houses that I, personally, like to buy as a realestate investor– single family homes in theMidwest part of the country, or in the South,or in Pennsylvania, those types of areas– that then have ayard, a driveway, a three-bedroom, one-bath,two-bedroom, one-bath.

But they're affordable.

They're not San Francisco.

They're not Miami.

You know, they'renot $500,000 homes.

They're $40,000 homes.

Those are my favorite.

And, number one, the returnon investment is super high.

And, number two, it's,you know, affordable.

I am able to get alot of properties.

And I have a lotof great tenants who stay for a longtime in my properties.

But a question I get is, well,who would rent that home? Why wouldn't theyjust buy that house? Why would they rent from you? It's a great question.

We're going to diveinto three key areas as to why they wouldn'twant to own that property.

All right, numberone– the first reason why they wouldn't want to ownthat property– it's mindset, mindset.

They don't– not everyonethinks like you do.

Not everyone thinkslike I do, that, yes, we want to own our home, you know? You might have beenbrought up in a family that lived in a home that wasowned by your parents.

Well, maybe these folks don't.

You know, maybe they don't.

Maybe they weren'traised the same way.

And, therefore, theirmindset around home ownership is simply not the same as yours.

So that's one reason– mindset.

Number two reason whythey wouldn't want to own this property is money– down payment money.

Think about this, right– on a $40,000 home,you're going to have to come down with about20% down, if you're working with a bank.

What is that? That's $8,000.

Now that might not soundlike a lot of money to you.

But to someone who'sworking paycheck to paycheck as a blue-collar employee,works really hard– but they don't have $8,000sitting in the bank in order to make a down payment.

Think about that.

You might think to yourself–well, that's simple.

I'll do that anyday of the week.

Yeah, well, some people can't.

And, therefore, renting makesmore sense to that person.

And the third reason thatthese individuals wouldn't buy a house that's$40,000, $50,000 is because bankssimply won't lend.

That's the bottom line.

Banks don't like lendingon properties that are below $50,000, even $60,000.

It's really hardto find banks that are willing to do thaton a primary residence.

So it can be reallydifficult.

And, especially, if you do have that$8,000 as a down payment, they're going to, obviously,check credit score, verify employment, doall of those things.

And, still, they don'tlike to be in that $40,000, $50,000 range for purchasing,for your primary residence.

I don't know why.

It's the same thing withrental ownership of a property.

If you're trying to buya property like that as a landlord, and youlive 50 miles away, you're also going to run intoroadblocks and headaches trying to work with banks inorder to finance a property that affordably, that cheap.

It just doesn't makethat much money for them, to be honest with you.

They're going to financea $40,000 property? That's peanuts to them.

Why would they do it? To them, it's riskier.

They don't want to be inthe home ownership business, so they don't want to haveto go through a foreclosure, take that property back,and, at $40,000 or $50,000, it just does not makemuch sense to them.

I've talked tobankers about this.

And that's the bottom line.

So those are three reasons– mindset.

They just don't thinkabout home ownership, maybe, the way that you do.

So, you know– and theydon't want to own the home.

Maybe they want to move a lot.

That's what they like to do.

Number two– down payment money.

Simply don't havethat money to do a big down payment on aproperty and own that house.

And three– the banks.

Banks simply won't lendon properties that cheap.

Add them all up, andthere's your answer– it's not that easyto buy those homes.

And, therefore, whyshouldn't we buy them? And why shouldn't wehave them out there– great property forgreat tenants to live in that we own and we createcash flow for ourselves? It's a win-win for everyone.

There you go.

I hope you foundthis video helpful.

We have tons of greatvideos here on the channel.

We have all kinds ofplaylists that you can click on and go seeon how to set up and get private money;how to get started with turn-key real estate; youname it, we've got it here.

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We'll see you nexttime, everyone.

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