Thanks for sharing. How about purchasing home for primary resident? Most people who buy home for personal residence believe they are making a sound investment. I contend that the opposite is the case.
A lot of people in America use the word “investment” to mean something more holistic than just “financial investment”. A house is commonly referred to as:
- An investment into the future (guaranteed housing, assuming they can pay the bills)
- An investment for their children (safe neighborhoods, good schools, etc)
- An investment into the community (homeowners tend to stay in their house for much longer, and are more interested in participating in community politics as a result)
You seem to be fixated on houses as a financial investment. They aren’t a great investment, you’re right. But you also can’t keep yourself warm and children sheltered with a million dollars in stocks.
Most personal finance experts recommend viewing your primary residence as a liability, not an investment. Although housing prices generally increase over time, it's never a guarantee. Plus, you are always paying something on it over the course of ownership, such as mortgage interest, taxes, maintenance costs, renovation costs, utilities, etc. Over the time that you live in the house, those costs can (and often do) outpace the gains made by a rising real estate market.
There is a sub-branch of real estate investment, however, that has come to be known as "house hacking" where you explicitly DO treat your primary residence as an investment. Typically this includes buying a home larger than you need and renting out the extra space to roommates. Or buying a duplex and renting the other half. Purchased right, these can cover the cost of the mortgage, meaning you're sort-of living in your own home rent-free.
Another thing people do is move into a run-down house bought at a discount, live in it for two or three years, fix it up the whole time, sell it at a profit, and then move onto the next one.
Neither of these are usually palatable to those with families, but they are pretty popular as a way to get into real estate investing for those that are young, motivated, and have otherwise stable jobs.
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Thanks for sharing. How about purchasing home for primary resident? Most people who buy home for personal residence believe they are making a sound investment. I contend that the opposite is the case.
A lot of people in America use the word “investment” to mean something more holistic than just “financial investment”. A house is commonly referred to as:
- An investment into the future (guaranteed housing, assuming they can pay the bills)
- An investment for their children (safe neighborhoods, good schools, etc)
- An investment into the community (homeowners tend to stay in their house for much longer, and are more interested in participating in community politics as a result)
You seem to be fixated on houses as a financial investment. They aren’t a great investment, you’re right. But you also can’t keep yourself warm and children sheltered with a million dollars in stocks.
Most personal finance experts recommend viewing your primary residence as a liability, not an investment. Although housing prices generally increase over time, it's never a guarantee. Plus, you are always paying something on it over the course of ownership, such as mortgage interest, taxes, maintenance costs, renovation costs, utilities, etc. Over the time that you live in the house, those costs can (and often do) outpace the gains made by a rising real estate market.
There is a sub-branch of real estate investment, however, that has come to be known as "house hacking" where you explicitly DO treat your primary residence as an investment. Typically this includes buying a home larger than you need and renting out the extra space to roommates. Or buying a duplex and renting the other half. Purchased right, these can cover the cost of the mortgage, meaning you're sort-of living in your own home rent-free.
Another thing people do is move into a run-down house bought at a discount, live in it for two or three years, fix it up the whole time, sell it at a profit, and then move onto the next one.
Neither of these are usually palatable to those with families, but they are pretty popular as a way to get into real estate investing for those that are young, motivated, and have otherwise stable jobs.