The recent housing collapse exposes that fallacy. The people who can walk away unscathed are the renters, while the owners are in dire straights indeed.
In reality, you can't own real estate. Real estate owns you. Once you have engaged it, it starts to dictate your life to suit its own needs, while yours are marginalized.
Unless you have enough money to pay cash, real estate is essentially a 20-30 year rental agreement, vs. the typical 1-year agreement of renting from someone else. It takes a lot of self-confidence to enter into a 30-year contract for anything. It implies that you know where you are going to be in 30 years and have your life all worked out. You MAY be able to get out of the contract at an earlier date by selling the real estate, but this is by no means guaranteed. At the end of the 20-30 years you may own your home outright and no longer be required to pay rent, but at that point you're approaching the end of your life, and the value of the home—indeed the value of money itself—may not be the same to you.
You can make a lot of money in real estate, but you can also lose your shirt. Life is too short for that kind of speculation with the bulk of your resources. It's like going into a casino and wagering everything you have (and everything you will have for the next 30 years) on a single roll of the dice. No matter how good the odds look, you don't need that kind of risk.
People will always need places to live, the conventional wisdom goes, so the value of real estate is always going to rebound in the long run. Think again! People need places to sleep, shower, changes clothes and eat, but that don't need the vast spaces they have come to see as their birthright. Especially in the post-internet era when so much of people's lives is virtual, they need very little space to live comfortably or impress others—e.g. 100 square feet and an interesting website, not 2000 square feet plus 5000 square feet of empty lawn.
What happens when people have more living space than they need? They start collecting Things They Don't Need! Whatever space is available, it will soon be filled with junk—dubious art objects, needy pets, appliances that are never used, clothing that is never worn and food that will probably never be eaten. Instead of just being a place to stay, the home become a shrine to its owner, a tastefully decorated personal museum that hardly anyone ever sees and that will eventually be liquidated in a garage sale.
Then the space itself needs maintenance, so you need cleaning supplies and tools. You need a lawnmower for the lawn, vacuum cleaner for the carpet, ladders to paint the house and a security system to protect it all from theft. As soon as it is "owned", a home can quickly mushroom into a vast, unwieldy empire that absorbs all of ones extra time, energy and money.
If you merely rent, you may also collect TYDN, but the tendency is much less, knowing that you may move in a year. Renters are less invested in their home, which may be bad for maintenance of the property but good for every other aspect of their life.
Your highest calling is not necessarily to be a financial investor or a museum curator. Shouldn't you be, above all, a creative entity? Creativity implies and requires the ability to move, to shift gears and change location, to follow the muse and opportunities wherever they lead. Real estate ownership inevitably constrains that.
The choice often comes down to: Do you want to accomplish great things, see the world, solve important problems, explore new creative avenues—or do you want to spend your life paying for and maintaining a piece of real estate?
You can't take it with you. It's cold comfort to eventually live in your home rent-free only to discover that a huge portion of your creative potential has already vanished.
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To make a good real estate investment, you have to plan very carefully. This means that you have to get all the information that is available about investment. The real estate investments are not cheap therefore you should be aware of what you are getting yourself into. Never rush into making any decisions about investing because this may be very costly at the end. When you have all the information, you are now able to make a good decision regarding the amount of money that you are ready to put into the investment. It is at this stage when you decide the method of payment that you use. This includes loans, mortgages, credit or private financing.
ReplyDeleteYou should research on the expertise and knowledge of the ex- students, while selecting a real estate investing course is that. Inquiring from students who have formerly taken the real estate investing course in which, you are keen will provide you a better idea whether or not the real estate investing course is helpful. Make sure, thus, to inquire from ex- students what their views are on plunging into a real estate investing course.
ReplyDeleteI have been enjoying many of your posts today - some idle surfing while playing hooky from work.
ReplyDeleteI can appreciate your perspective on home ownership (and homelessness for that matter) however, your arguments here are narrow. A home need not be tying up all of your time and resources. Folks can and do purchase homes in less than 30 years. Those same people *do* save money over renters. Painting home-ownership with broad strokes of financial slavery is, while true for many who make poor decisions, not accurate.
Often doing what you want, being creative, etc etc are enhanced by having a piece of property that you can legitimately call your own and do on/with what you want.
I see and appreciate your perspective, but find it as guilty of one-size-fits-all as much of the preconceived notions you challenge.
Great couple of blogs (this one and the homeless by choice).
But the sad thing is you have just spent more bucks to learn what you have already known for a long time. You are deeply disappointed and you feel somewhat conned. You feel maybe you should stop at participating at these real estate investing courses, buying books, and whatever stuff they shove posing as worthwhile of your time, effort and money because the results are all the same.
ReplyDeleteThere are actually many ways you can earn money from real estate. And of the best means is to flip the property. This is done in two significant ways. The first means is to purchase the home in a below asking price, have some repairs so that you can get the high price than the ones that you have paid and close the deal.
ReplyDeleteI can see merit in your point of view, and appreciate the simplicity of the non-home-owner's lifestyle. I also see merit in the opposing point of view, but that's beside the point right now. But I found it rather grating to find "needy pets" among the list of "things you don't need". They are not "things". They are living beings with which you form a real bond. Yes, having a pet complicates your life considerably - primarily due to the fact that in our sterile society an animal - no matter how clean and well-behaved - is viewed as a nuisance, and thus you can't easily travel with your pet - neither to another continent, nor to the corner store. But that only says something about the modern society, not about pets themselves.
ReplyDeleteAnother THING YOU DON'T NEED is an automobile. Work close to home or from home-use a bike or walk to get groceries. With creative planning anyone can live without the financial enslavement and convenience of an automobile. Live better.
ReplyDeleteI can fully appreciate home ownership. But for me, it has to be the RIGHT home. I cannot bear to live in a typical piece of suburbia. For me, a home is land somewhere where you can build something relatively cheap and easy to maintain. A place where the industry that thrives on cutting grass does not intrude. These are the homes I consider real places of freedom to me.
ReplyDeleteIndeed I agree that the buying and selling of real estate can be lucrative for the people who specialize in it. But for regular folks who just need shelter like me, it is a game that is way over my head and not worth my time.
The truth is, even after 30 years, you don't really 'own" it. You still pay taxes annually which I argue is just another form of rent. just try not paying your rent to the government and you'll quickly find how much you truly own the land.
And the way contracts are structured now, you really don't own the house. You are just an upgraded renter. You cannot mine or dig deep or have any other rights. If you discover oil there, it is not yours. Go look at your contracts and see for yourselves.
At the very end, we all don't own anything. When we die (which is soon after you finish your 30 year mortgage), you lose it all no matter how many homes or wealth you collect.