Homeownership, good idea/bad idea?
Branched from RandomRoger's post. I'm making my list before viewing his. (Although I saw "Yardwork" on his).
Despite all I say, below, though, I own a house. Reason below.
Despite all I say, below, though, I own a house. Reason below.
1. Cash gone
“But its an investment,” you might say to me. Historically this isn’t true. Housing returned 0.4% per year from from 1890 to 2004. And that’s just housing prices.
It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”
Now, you can say, "well, I owned a house and sold it and made money." That's great. Some do, some don't. It's very hard to predict. I do think you can make money in the long run with the right real estate decisions. I, unfortunately, have not (so far) done that.
2. Closing costs
3. Maintenance
People say landlords pass down maintenance costs via rent to the tenants but this is not always true since maintenance is so unpredictable.
4. Taxes
5. You're trapped.
6. If it's an investment, it breaks all the rules of good investing.
Illiquidity. You can’t cash out whenever you want.
High leverage. You have to borrow a lot of money in most cases.
No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.
7. Stress
I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust when I first owned a home. I saw what people went through in 2008. People were killing themselves. I don’t like that sort of stress
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