Is a home investment
In true no, for most people home is not investment. As for most people it doesn’t generate income which is hallmark of investment and of course, some people make money by selling home but for most people buying house to live forever. For most people this won’t be the case for most people buying home is a security. Although I did say I have read interview were man rent out is whole three-bedroom house and live basement so some people do make money from their homes.
Look say a couple bought nice but normal three-bedroom house for 250,000. For some crazy reason the property market crazy ten years later. For some reason the house because of the location is now worth 5 million. On paper this couple are millionaires. However, if they don’t sell it really doesn’t matter how much the house is worth for the most part. In this example the couple don’t want move because near all their friends and family and the children really like this area and to buy house in similar location would cost about the same. In real life during the Celtic Tiger people were bragging about the house being worth half million when they only pay 1000 pounds years ago but in reality, it doesn’t matter how much house is worth until you sell it or remortgaging. For overall economy it is not good in long term if prices go crazy increase costs of business, wages etc.
Ok than why should you buy house. Buying house gives people peace of mind (for majority of people everyone looking for security be having a place you can live for the rest of your live give people great security) in Maslow’s hierarchy of needs shelter is the starting block of are basic needs and a wonderful place to live. The house can be passed on to your children or relatives. Gives you freedom you no longer have rent to pay make the house the way you want, you can rent rooms, you let your children, friend or family stay long term because for some rental agreement, you can start business and run from here. Things which if you rent maybe, you would not be able to do due to renting rules. People say when own property but still have to pay Property tax this is silly agreement to me. when you rent any property, the property tax is built into the rent anyway you still saving on rent if own the home.
I have seen many cases of old people who rent their whole life but rent increase much higher than inflation they have not be able to pay it or owner want to sell house these factors force people to move out of house they attach for sentimental reasons and area when they have friends and family and activates they like these people if they had of got a mortgage they would have own house as there rent had pay for house a few times over already at this stage. In situations like when you get older you have no rent to worry about and no one sell the house but you this is security.
Some countries like Germany have great renter rights most people don’t buy their homes, they rent. Which definitely has its positives. However, from watching documentary about old people living in Germany because they still have to pay rent which has increase due factors such as inflation it can force them in part time job were if they have bought the house, they one be fine. I remember case during migrant crisis in Germany woman who had live apartment for I think 23 years kicked out of her home of 23 years to make room for migrants. Here quote form news story about the event “The municipality says it has offered to help Gabrielle Keller find new accommodation, a claim she denies. while this decision is crazy and I don’t agree with it worth pointing out This happen in country with some of the best renter rights in the worlds. So, having house really does bring more security.
There also the fact when you die your home can be passed on to your loved ones. Believe or not from my own personal experience people and from research shows people who are dying will often worry about the people they leaving behind (yes this is weird but it shows what I said in the mental section is true we often care more for others than we do ourselves) so having the security of the home easier on their minds.
Now Of course, their people who will go against the conventional wisdom. People who say that owning house is a huge burden. The money use for house is better use to invest in which will make more money in the long term.
So, let’s look at example let’s say for argument’s sake that you have 100,000 for deposit on house. And instead, but all the money into investment fund. You added 1000 each month into the investment. Will say for argument’s sake 10% return each year. That fund value after 10 years one be 469,748.25. great returns. After taking out money you but each month and the principle you have made profit of 249748.25 in 10 years that pretty good. As we know even mortgage on your house the house increases at the same rate 10% it does not to you much good if you’re not selling house. Of course, the same fund in 30 years 10% of return would be worth 3,916,261.33.
Now this argument money use to buy the house can be better use to invest money have grown at better rates. I see that argument and it’s a very valid argument.
However what people don’t take into account the emotional issue of having place to call your own were raise a family be surrounded by a good community the sense of security. Look Shelter is start of Maslow’s hierarchy of needs. If the area is somewhere, you will live long term over 10 years or for the rest of your life. If you’re working in the area and or want to live area for long term for reason being near families and friends and of course liking area, you have been paying rent for last 10 years. If had got mortgage for 20 years term you would be half way of paying off by now. There was survey done by market watch survey was done by GoBankingRates.com they found that there were only 8 states in America cheaper to rent a home than buy. The analysis compared the monthly cost to rent the median-priced single-family home in each state with the monthly cost of owning that same home. The latter expense includes mortgage payments (assuming a 20% down payment and a 30-year fixed loan), property taxes and insurance.
Those states, Hawaii, Montana, Utah, Idaho, Colorado, Wyoming, Delaware and Oregon, are joined by the District of Columbia. Of course, even if rent just a bit cheaper short-term long term you can be better off buying because one the mortgage payments are made no more rent money to be pay. With that said still do homework do see if that is the case it will most likely be case and of course as I have said every price has its limit
Of course, the other argument is that with renting you don’t have to worry about maintenance costs and most of time these maintenance costs are build into rent as is the case with property tax. However, once you bought house Of course, I am presuming you had all the proper survey such as Structural House Survey, make sure not mold etc. the rule of thumb 1 Percent Rule that f the purchase price of your home should be set aside each year for ongoing maintenance. For example, if your home cost $200,000, you should budget $2,500 per year for maintenance. Which one be less rent than you would in year. Of course, this rule has limits if you bought in peak or bought house the height of the downturn.
Remember I am talking about this for people who want to buy long term.
You may be thinking if I want to travel for year or I have to move way for work for year. Look you can but some stuff into storage you rent out place for the year and it should be enough to cover your mortgage for the year. Most likely get let agent to all the work for you
You may be thinking is always right to buy house if you fit the above criteria. When shouldn’t buy house for long term. This really hard that’s like timing market it very hard to know when market has hit its peak or height of downturn. Again, we are talking about buying house long term. Look if you can afford the house use rule of thumb of 35% of income each month on rent anything over than this you can’t afford or 3.5 times your yearly income. While market can be seen to be overvalue it very hard to know when the bubble is going to burst. There was famous story during the Celtic Tiger in Dublin a man was bragging about selling house at the height of the housing boom. However, the man sold in house 2000 the bubble didn’t burst until after 2007. The peak of the market was 2007. So very hard to time market. If feel like market crash you can wait but this is your decision three sign the market going to down When interest rates rise, months of supply rates rise, and demand begins to go down. If their recession. Months of Supply is basically how long it take for house to sell while more than 6 months of supply mean there are more homes than buyers which mean house price are going to drop because of supply and demand. Of course, the middle of recession it can be harder to get loan. But house prices will be much cheaper.
If living area with good long term rent controls. Your rent may always be cheaper that actually buying a house in the area. But note of caution you have think will be this way when I am old and could I be kick of house for various reasons such landlord selling etc. These questions you will have to ask.
Of course, only buy home if going live there for 10 years or more and don’t buy house that 3.5 times your yearly income.
