November 14, 2014
A personal home is a poor investment in the vast majority of cases. Why? Other Real estate options?
A personal home is a poor investment in the vast majority of cases. Why? Other Real estate options?
Owning a home is very expensive. Home cost a lot of money to maintain and they can depreciate in value. You also need to pay property taxes on a house you own. Another option for people is to rent a house. If you rent a house you don’t need to pay property taxes on it or worry about it depreciating in value. If you rent a house it is also a lot cheaper and eased to move if you decide to do that.
A home is a poor investment due to all the costs a house come with. You have property taxes, interest, upgrades and many other expenses people dont think about when they have the final sale of the home. You are better off renting if you are not going to live in that house for more than 10 years. You will pay less renting and be more mobile if you need to leave. You also can buy REITs they are stock in commercial real estate that perform better on average then owning a home or rental property. Reits are less work and have better odds of a good return then a home.
Many fine comments, gentlemen. Let’s review.
A personal home is a decent investment BEFORE costs and a poor investment AFTER costs. It is very easy to spend 10% of the value of the home per year ($20,000 on a $200,000 home) through interest on the loan, property taxes, insurance, maintenance, upgrades and other (combined fees involved with buying and selling the home). This cost negates any possible appreciation and tax deductions you will have as a homeowner.
What’s the point? Stop looking at your personal home as an investment. Start looking at it as a place to raise a family and stay put for a long period of time (beyond 10 years). You are going to lose money on your money AFTER costs. Just accept this reality as you invest elsewhere in Real estate with public traded index mutual funds that own REITS (commercial Real estate). The returns will be higher, the expenses will be lower, and the headaches will be minimal if not eliminated.
Not so sure? Learn more here:http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/. You can also learn more on this topic by going to the buying a home tab on this website and hitting on the illustrations provided by Salmon Khan from Khan academy. Awake!