Is owning a home a good investment? “Never put all your eggs in one basket” is one saying everyone should remember when it comes to investing.
I was in real estate for many years and often told prospective purchasers that they should buy a home, but that was 20 years ago and my viewpoint was changing even then.
The reason my opinion on owning a home was changing 20 years ago was that a home was quickly becoming a main source of expected future wealth. In other words, housing had become part of the “greater fool theory” in that there will be someone dumber than me to take this turkey off my hands in x-number of months or years down the road. We all know what happened in the United States and other countries where the “greater fool theory” was fully realized.
Government mandated inflation of 1% to 2% per year assures some assets, as well as taxes, increase each year. Mandated inflation also assures a tipping point will be met at some future time. The idea is to get out of your investment before the masses realize the tipping point has been reached.
Smashed investment bubbles, like real estate in the United States and elsewhere, remind people not to keep all their eggs in one basket.
So how do you know whether or not to rent or buy a home? And how do you know when it is a good time to buy a home? Every real estate market is different, with many cities having areas where prices will increase while other areas of the same city have prices decreasing.
If you decide to rent instead of buy, you should place the money you would have spent on a mortgage in other investments. Spending the extra money on non-investment items like holidays or cars or TV’s or furniture or clothes is just pissing your money down the drain.
Owning a home means property taxes, mortgage, insurance, maintenance and repairs, lawn and gardening expenses, utility expenses and all the other little expenses that can easily exceed the cost of renting a similar or better abode.
To find out if you should rent or buy try this handy little calculator from Vancouver City Credit Union.