If You Are A Millennial Who’s Looking Into Buying A Home Soon, Here’s Your Sign Not To.
You didn’t come across this by accident.
Robert Kiyosaki got a lot of criticism for saying that a home is a liability and not an investment.
Maybe it’s not entirely true. But it all makes sense in today’s day and age.
If you read classic finance books, most of them will claim that real estate properties, including your house, are good investments. Modern investors say otherwise because of current economic situations.
Stay away from the trap
According to this article, mortgage rates are now at their highest since February 2011. People were buying because they are afraid that they will miss out on the low-interest rates, which are now slowly trying to climb back up. Even with a low-interest rate, the expensive price of the house is not worth buying. Another Yahoo! post published just in March 2022 states that the number of for-sale homes is at historic lows — the high demand for houses is one of the reasons for high prices.
A few years from now, the price of real estate properties can start going down again, due to the higher supply and less demand. For instance, the $800,000 home that you bought will only be worth $600,000. So unless you buy your house during a recession, or at a good time (buyer’s market), you can’t say that your house is a good investment.
If you buy your house at a low price even with a higher interest rate, you have the option to refinance to get a better rate.
Don’t get a liability
Unless you are renting it out, your house doesn’t provide you with any income. Your money just keeps coming out of your pocket — paying property taxes and repairs. It also doesn’t give you liquidity since it takes time and effort to sell it if you decide to. You also need to pay commission and other transactions. If you want to sell at a high price, you will need to look for a new place to stay (unless it’s your secondary home), so you end up buying or renting at a high rate too.
Don’t be in debt.
People always say congratulations when someone buys a new house.
Shouldn’t they feel bad for them for accumulating debt? Just kidding, but not really.
Once you buy a property, you are looking at almost a lifetime commitment of paying thousands of dollars. Take a moment to think if this decision will improve the quality of your life or the other way around. There is nothing wrong with dreaming to have your own home for yourself and your family but there is also nothing wrong with renting.
Here’s a tweet from Elon Musk, one of the world’s richest men, stating that he was renting:
Think about how big of a chunk from your paycheck will go towards your mortgage payments. The famous author JL Collins believes that a house is a terrible investment. It all makes sense when you think about spending the money on more liquid investments that could generate higher returns.
A house can just be another shiny object. Don’t spend all your days working too hard because you are a slave for your mortgage bills.
One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income. If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable.
So unless you have so much cash that you don’t know where to spend, save yourself and don’t buy a home. At least not yet.
Disclaimer: No legal advice intended.