You’ve probably seen all of the “get rich by investing in real estate!” posts while scrolling through social media the last few years. You also most likely heard the argument that most millennials can’t buy houses because they splurge on avocado toast (newsflash, that’s not the reason). But in a time where many people can barely afford to put a down payment on a house, let alone pay for all that a house needs, is home ownership as great as it seems?
Is Home Ownership As Great As It Seems?
This post has been written Kimberly Studdard
We’ve long been a society where home ownership is the epitome of “making it” in America. If you own a home, your life is perceived to be stable and your future is bright…but not everyone shares this viewpoint any more.
Let’s dive into the details. Is home ownership as great as it seems?
It Can Be A Smart Investment
If done correctly, homeownership can be a great investment. Buying properties like duplexes, multi-family dwelling, or even a home with a suite that you can rent out can help you earn extra income. Many wealthy people own investment homes too, including millionaires and billionaires, so there’s clearly some basis behind home ownership being a smart investment.
Your First Home Doesn’t Count
Want to know the only way you can consider homeownership an investment? If you’re making money from it. In other words, if you buy a home as an “investment”, you have to sell it, rent it out, or earn some type of income from it. If you buy a home and live in it for the rest of your life, while paying a mortgage, and not earning anything back from it, it’s not an investment.
For some people, their first home won’t count as an investment. Unless they sell it for a profit, or turn it into a rental property later, their first home won’t be anything more but a liability. Granted, your home’s value is considered part of your net worth, but does it really count when you aren’t gaining anything from it?
Related: Your House is a Terrible Investment
It Doesn’t Mean You’re Wealthy
Is home ownership as great as it seems if you’re still broke? Even with the government offering assistance programs, many people find themselves in dire circumstances when they can’t pay their mortgage, can’t fix a major home problem, or if their neighborhood takes a turn for the worse.
Unlike with renting, you can’t just pick up and leave when you own your home. Remember those people who lost their homes during the 2008 recession? Some of them were saying what a great investment owning a home was…until they lost theirs.
Consider All Costs
Home ownership can still be great in some cases, especially if you’re able to find one that’s relatively cheap, doesn’t have a lot of maintenance costs, and is looked at as more than just an investment. Homes are there for a specific purpose, like providing shelter, not just to make a quick buck. But, if you still wonder if home ownership is as great as it seems, think about all the money you will spend over the life of owning it.
Those nifty little mortgage calculators don’t count all of the costs associated with buying a home, like closing fees, insurance, maintenance, and more. So before deciding on whether or not you should,or can afford to, buy a home, make sure you plan ahead for all of the extras that will come up.
You Have To Know What You’re Doing
All in all, a home can be a great for someone who plans on living there long-term (not looking at it as an investment), knows how to invest money outside of putting it into the home, can keep up with maintenance, and plans on passing the house down from generation to generation. Home ownership can be a great thing, but only if you know what you plan on doing and what you’re trying to accomplish.
While I wouldn’t consider buying your home as an investment, it all boils down to how smart you are with your money. Are you still able to invest? Do you plan on having rental properties or renting a part of your home for income? Is home ownership as great as it seems? These questions and your answers to them will ultimately answer if home ownership is a great choice for you.
Will you ever own a home? Why or why not?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.