While many of us believe buying a home is the best investment you can make, there is a growing group of people who argue against home ownership. So, is buying a house a good idea? Or is it better to rent?
However, people like real estate investor Grant Cardone, think buying a house is for suckers. The truth is for most homeowners, the home we live in is a liability, not an asset. That is because the home you live in does not bring in any revenue. It’s a one-way flow of money out, which goes to paying a mortgage, repairs, and maintenance. While there is appreciation with real estate, that does not make it an asset.
Cardone and other savvy investors suggest that there are many reasons why buying a house is not a good idea. They suggest renting for the following reasons.
When you rent, you can move more easily than if you had a mortgage. While you can certainly sell your home, it’s a process that requires more time and money than deciding to move as a renter. In today’s world where job-hopping is on the rise, being able to move with short notice is a huge benefit.
2. Low initial investment.
Buying a home not only requires a down payment that is often 10 to 20% of the home sale price it also requires closing costs that can be another 2 to 5% of the home sale price. When you rent a home, you only need to pay a deposit of one or two months rent. Home buyers often end up paying a whopping 5 to 10 times more to move into a home they bought verse someone moving into a rental.
3. Limited responsibility.
As a renter, you have much less responsibility when compared to a homeowner. When something breaks and needs to be repaired, it’s the landlord’s responsibility. As a homeowner, the burden is on you. For insurance, you only need to
4. Lower costs allow for investment.
The Simple Dollar does a great job breaking down the true cost of owning a home and also determined buying a home is not a good investment. They look at the purchase of a $300,000 home and what looks like a $90,000 gain after 10 years, turns out to be a loss of almost $80,000! The reason for this is once you factor in insurance, property taxes, maintenance, and interest on the loan, appreciation gets wiped out. When you rent, you can take this money and invest it in assets like stocks and bonds or into your business.
Is buying a house a good investment? It can be with multifamily properties.
While buying a home that you live in may not be a good investment, you may want to consider buying a duplex, triplex, or quad. You can live in one unit and rent out the other units to earn passive income. You can use tools like gross rent multiplier to help you determine the value of a multifamily investment.
If you are interested in buying a small, multifamily property, instead of a single-family home, you should read Investing in Duplexes, Triplexes, and Quads: The Fastest and Safest Way to Real Estate Wealth by Larry Loftis. Loftis describes the advantages of cash flow, appreciation, tax benefits, equity buildup, and leveraging. He believes real estate may be the only vehicle that can carry the average person to retirement wealth.
Do you own or rent your home? Let us know your thoughts on which is the better choice below.