Review - Renters Win, Home Owner's Lose by Tom Graneau

There are lots of good thoughts in this book and it could help many take a serious look at their financial situation.

Renters Win, Home Owners Lose: Revealing the Biggest Scam in America by Tom Graneau.

• Paperback: 176 pages
• Publisher: AuthorHouse (June 17, 2009)
• Language: English
• ISBN-10: 1438993188
• ISBN-13: 978-1438993188

Genre: Non Fiction

My Rating: 4.0 of 5.0 (this isn't necessarily exciting or entertaining but it is well written and informative allowing the 4.0 rating)

Product Description
Home ownership has been widely regarded as the "best financial investment" in the pursuit of wealth accumulation. Americans believe that the appreciated value of a home provides a great hedge against inflation, giving home owners an opportunity to make a profit when they sell the property. Today, two-thirds of American families own their homes. Nearly 80 percent of the 78 million baby boomers are homeowners. Many of them have bought and sold several homes. Yet, close to 90 percent of American families are broke. Nothing consumes more of our hard-earned money than "home ownership." What if this popular, "best investment" choice is nothing more than a dangerous Dream? Is home ownership simply a huge economic scam designed to KEEP buyers broke? Could homeowners be working to pay a mortgage that make their lenders rich while they stay poor? What if "home equity" is only an illusion? Could renters be in a BETTER financial position than those who own their home? RENTERS WIN, HOME OWNERS LOSE: REVEALING THE BIGGEST SCAM IN AMERICA is a bold approach in unraveling the long-term financial reality of home ownership in America. The book compares buying a home vs. renting and reveals that renters clearly have tangible, financial advantages over the majority of home owners. RENTERS CAN TRULY BE WINNERS! Tables and models are used throughout the book to poignantly demonstrate that most homeowners receive no more than a zero percent return on their investment, and many lose money in the deal. Renters Win, Home Owners Lose: Revealing the Biggest Scam in America will get you to rethink the way you view home ownership vs. renting. The book is a thought-provoking masterpiece.

Review:  I welcomed the opportunity to read and review this book since I am in the real estate industry. I want to say at the outset that I had a hard time writing the review without jumping into “debate” or soap box mode. I have another whole page of commentary that I could post but decided not to include in the review.

The book is well organized and the author systematically points out that there are more costs to home ownership than just the downpayment and the mortgage principal and interest payments which are part of buying a home on credit, as most people do. At about the time the homeowner closes on their purchase they discover that they will need to pay money for real estate taxes, home insurance, homeowner maintenance or condominium fees (where applicable) and, of course, endless house repairs or remodeling.

Mr. Graneau uses “the Financial Chessboard” graphic to show income, expenses, assets and liabilities as they relate to home ownership. These graphics show a huge outpouring of money (paid to banks who get to make a profit by investing the funds again) and a minimal savings or equity effect. It is not uncommon for homeowners to spend all their money, including 401K monies, to maintain their expensive real estate investment and then wind up after many years with no savings and possibly no equity if the market crashes, as it has, or if they pulled all the house equity out for repairs, college or other expenses. Mr. Graneau makes a strong case for renting and saving that extra outflow of money rather than paying homeowner expenses.

I had to agree with many statements made in the book. Part of the American dream is to own a home and this dream is promoted by family, friends, the real estate industry and even the government. One section in the book addresses the real estate market crash with discussions entitled “The Blaming Game” and “But Really, Who is Responsible for the Crash?” Here Mr. Graneau compares the American consumer to the quote: “Those who live by the sword will also die by the sword” rephrased to read: “those who make it a habit to live on credit will also die by credit.” As Mr. Graneau points out it is "greed" that drives the big construction companies and the mortgage lenders but it is also "greed" that drives people to live beyond their means by buying houses that are too expensive and buying luxury cars and living off of credit cards.

Mr. Graneau proposes that renters are winners if they rent and then save the extra hundreds of dollars, if not thousands, a month not needed for taxes, insurance and house repairs. The idea has merit and Mr. Graneau makes good overall summaries, but in my opinion the book skims over many issues, and he does not provide detailed solutions for implementing the idea other than suggesting that renters seek financial planning, which I think is too simplistic and unrealistic. Also the book did not address some of the drawbacks associated with renting such as displacement requiring moving and increases in rental fees.

Perhaps the author plans another book to address the savings and investing issues in more detail or perhaps he just hopes that renters and disheartened homeowners will seek financial planning.  Considering the number of people struggling financially I wouldn't hold much hope for them to commit money to planning even though the immediate expense might well reap a long term benefit.  In any event, this book is easy to read and provides some good arguments to be considered not only by people thinking about buying a home, but by renters who might wish to control the temptation to buy a home and redirect their focus to other savings.

$$$$$

Thank you to the author and Pump Up Your Book Promotion for the opportunity to read and review this book.

Guest Post - Tom Graneau Author of Renters Win, Home Owner's Lose

Tomorrow I will be posting my review of this informative and thoughtful book, Renters Win, Home Owners Lose: Revealing the Biggest Scam in America
Today please enjoy a guest post from the author, Tom Graneau.

Renters Win, Home Owners Lose: 
A world-wind Reality

People buy homes for various reasons. According to the Federal National Mortgage Association, a government-sponsored enterprise also known as Fannie Mae, 43 percent gave safety as the reason for purchasing a home; 33 percent said that proximity to good schools was their number one reason; and 70 percent admitted that financial investment was their main motivation, down from 83 percent in 2003. It goes without saying that financial incentive is the number one motivation for home ownership in America.

This is not surprising when one considers the cooperative effort that goes into promoting the concept. The real estate industry, including banks, mortgage companies, the government, and various other organizations have come together with one voice, claiming that home ownership is the most reliable path to financial prosperity. Consequently, Americans are preoccupied over the idea of owning a home, thinking that it holds the key to their financial success.

However, when the long-term benefits of home ownership is examined closely in terms of financial gain, there is none. Statistical facts and historic trends show that nothing consumes more of people’s hard-earned income than the homes they buy. Furthermore, some of the most cash-depleted people in the United States are home owners, some of whom have purchased more than one home. For instance, more than 85 percent of the 78 million baby boomers in the U.S. have bought and sold several homes. Yet, close to 90 percent of them are broke. The logical question is, where is the wealth earned from the home. Additionally, more than 2/3 (78 percent) of American families are home owners. Nonetheless, the majority of us are strapped for cash, have little or no retirement savings, and are deep in debt.

What is wrong with the financial claim tied to home ownership in the United States? Renters Win, Home Owners Lose: Revealing the Biggest Scam in America unravels the mystery behind the push for home ownership. All told, the whole idea is a scam that benefits the super-wealthy people in this country while leaving the majority scraping to pay a mortgage for pennies or less.

Interestingly, the book focuses on home ownership in America, but the troubling issues associated with home buying are not isolated to Americans. The problem crosses international boundaries. From America to Spain, other than the differences in currency and cultural practices, the home buying process is the same. Since real estate is the most expensive commodity in every culture, those who don’t have buckets of cash to pay for a home must rely on a mortgage. It is this initial step that begins the negative, snowball effective that jeopardizes the long-term financial success of the home owner.

Realistically, banks and other mortgage companies are not in the business of watching home owners become wealthy. They are in business to make money through asset accumulation. No other debt instrument has been more lucrative for banks and investors than home mortgages. Consider, for example, the following simple mortgage scenario, based on American economic conditions:

• If you borrow $100,000 to buy a house for 30 years at 7 percent interest, your monthly payment will be roughly $665.00 for the life of the loan (principal and interest only). Your total cost for the mortgage will be approximately $240,000 (interest only), close to 2 ½ times the amount of money borrowed.

• To breakeven on this business transaction, your home must appreciate about 13 percent annually. This would cover the cost of the 7 percent interest loan, the 4 percent inflation rate, and roughly 2 percent property tax and home owner’s insurance costs.

• The average annual home appreciation rate is 4 percent, despite the real estate industry’s claim that homes appreciate 10 percent annually. Hence, a net zero percent return or less on the so called “investment.” The situation gets worse because this scenario does not account for other costs associated with the property—home owner’s insurance, property tax, maintenance, remodeling, etc.  

Granted, there are times when real estate prices go up, such as what we’ve seen in recent years. This rapid increase in home valuation is usually referred to as a bubble, suggesting an unusual increase from the normal trend, which poses its own dilemma. For instance, a  housing bubble always ends up with a bust, meaning that the high peak cannot sustain itself too long before leveling off again. When it does, people who paid high prices for their homes will most likely lose money when the market drops. Sellers who appear to make money as a result of selling their home at top price have two problems: (1) while they may have some cash on-hand, they are homeless, meaning no physical home address for the time being. (2) most people who sell their homes, almost immediately, buy another more expensive one,  which consumes any apparent profit made on the first home. In which case, they are left in a cash-depleted situation, which may encourage the accumulation of more debt in the future. Hence, the cycle continues.

For these reasons and more, when the opportunity for wealth building is compared between home buyers and renters, those who choose to rent have greater propensity for financial success. That also means that when conditions are equal in all countries, the outcome will also be equal, in favor of renters who decide to invest the extra money that would otherwise be wasted on a home. Renters can truly be winners, regardless where they live!

Tom Graneau is a personal financial management coach and author of a new book, Renters Win, Home Owners Lose: Revealing the Biggest Scam in America. If you are tired of the bondage of debt and want REAL answers to personal freedom and financial independence, begin by turning things around with a no-nonsense approach to your housing option. http://www.renters-win.com/