Right-sizing rent and housing🏡🏢
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by Wealth of Geeks in an article — by Amaka Chukwuma, “Many American Renters Are Cost Burdened: Here’s How To Curb Overspending on Rent” — regarding right-sizing rent and housing costs.
Are you an owner or renter?
Many people consider their home a savings vehicle alongside stocks and bonds; this is especially true for those with low mortgage rates where a larger fraction of every monthly mortgage payment goes to paydown principal.
You need to look at the big picture of your income plus benefits—hopefully with the help of a financial advisor—to determine the percentage of your income that feels appropriate to allocate towards housing. There is no magic number, but if you have more than just pure salary, consider your home part of your savings plan, and interest rates are not too high (or drop from today’s levels), then maybe that percentage bumps up from the common perception of 30% to 38% or even close to 50%. Similarly, if you rent, a financial planner can help you balance the pros and cons of that versus buying.
If you are looking at a 2nd, 3rd, or 4th home, then a financial advisor or multifamily office like Running Point can assist with finding efficient and effective financing and protection of your purchase.
Quoted article excerpt is below:
Michael Ashley Schulman, Partner, Chief Investment Officer at Running Point Capital Advisors claims that the Brooke Amendment of 1969, which mandated a 30% down payment on public housing, is the genesis of the 30% rule.
It dates back more than half a century when access to healthcare, workplace perks, retirement funds, and government support systems was much more limited. For this reason, it might have made sense to allocate a smaller portion of your salary toward housing out of concern for your safety.
He notes that while everyone’s financial situation is unique and evaluated on its own merits, in the grand scheme of things, improved supplementary benefits could mean that a larger portion of your income is now available for mortgage payments. This is particularly true in households where both partners or spouses are gainfully employed, something that was not an assumption in the 1960s.
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-30