The 5% Rule: When Renting Is Smarter Than Buying Explained

Is renting really just "throwing money away"? 🏠💸 For years, the common wisdom has been that paying rent is dead money, while buying always builds equity. But in the economic reality of 2026, with interest rates hovering near 7%, that math has flipped.

In this video, we break down the concept of "Unrecoverable Costs"-the money homeowners lose to interest, taxes, and maintenance that they never see again. We introduce the "5% Rule," a simple formula used by financial analysts to calculate whether renting or buying is the smarter financial move for your specific market. Don't trap your wealth in a mortgage without checking the real numbers first! 💡💰

Timestamps:
00:00 – The Big Lie About Renting
00:40 – Defining the Terms
01:27 – The Common Belief
04:35 – The Interest Rate Bomb
05:01 – Introducing the 5% Rule
08:00 – The Maintenance Trap
08:22 – The Myth of Improvement
11:07 – The Transaction Drag
11:37 – The Cost of Selling
14:17 – When Buying Actually Wins
17:11 – Re-Framing the Narrative

Sources:
✅ PensionCraft: Buy or Rent a House?
✅ Investopedia: Renting vs Buying in 2025
✅ Econ Soapbox: Renting Is Not Throwing Money Away
✅ OwnRight: The 5% Rule Explained

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⚖️ Disclaimer: I am not a financial advisor. Content is for entertainment & educational purposes only. Investing involves risk. Always do your own research.

🤖 Production Note: This channel utilizes AI tools for voiceover & visual rendering, but every single video is originally researched, scripted, storyboarded, and manually edited by me, Tom. The sketch-style visuals are designed to simplify complex topics. This is a human-led project dedicated to high-quality financial education.