Apr
11
Make Sure you CAN Buy a Home
April 11, 2007 | 1 Comment
Sometimes ideas cross my mind:
I travel a lot. Sometimes I have thought: “what if I sell my primary residence, invest the proceeds in the stock market, and live out of dividends in temporary locations wherever consulting gigs or vacation ideas take us?”
One of the few thoughts that cross my mind is: What if I ever want to go back into having a regular residence and the prices have increased so much that I am out of the market? I almost always end up telling to myself that the best way to make sure that I can buy a home is to have one already (or a few smaller ones that could be converted/traded into a nicer one).
Make Sure you CAN Buy a Home:
I am a big advocate of home ownership. In the US, around 70% of the families own their residence, and for a reason: it is the easier step towards financial independence. I have even advocated my tenants to buy a residence – not the best business strategy, I must stay (I have lost two tenants to home ownership). I am not the only one advocating homeownership: Uncle Sam does, in the way of a better tax refund for most homeowners, due to the interest and real estate tax itemized deductions.
For as many home owning benefits as there are, I still get excuses from friends, family and coworkers that haven’t purchased their own home. Some of them say they don’t want to tie themselves to a property yet – too young they say. Others say that the real estate markets have peaked and are now tumbling down in prices: something I would rather see as the perfect opportunity to buy. And there are those who have destroyed their credit and are rebuilding it before they can buy one.
Whichever the reason for not buying a home, if you do not have a home you must make sure you can buy one! I have way to many acquaintances giving excuses for not having a home and having no net worth or even negative net worth and doing nothing to fix it. People also keep complaining that having their own home becomes increasingly difficult. A few years ago people complained about the increasing prices. Now they complaint about the increasing interests that do not compensate for the decreasing prices. Either way, it seems that houses get less affordable over time for those that do not have the means to have one already.
This means that even if you haven’t decided to have the home today, you should be building up your investments so that you can put a sizable down payment (20%) on the purchase of a home when the time is right. You should also be taking care of your credit so that it costs you the absolute minimum to purchase the property. And you should invest your money in a way that gives you more than the expected 6 or 7% annualized expected return on investment that houses give: without the leverage factor, even such return on investment will be small.
Not having your own dwelling may or may not be the right action at every particular point in your life. Not trying hard to having the means to acquire a property is one of the most financially irresponsible things someone can do.
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(Originally published in www.AnesHome.com on May 2006)
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Sure there may be reason why you don’t want to buy a home, but I think if you want to buy a home you can. I think anyone can by a home. I bought my first home during my senior year of college. I then moved out of state, bought another home and rented out the first one.
You don’t have to commit to a single place. If you want/need to move, do so , and rent out the old place.
Nice post by the way,
-limeade