Here we go again. I just read an article where the author says home ownership is a "bad investment."
I say instead, "Your home is NOT an investment. It's a commodity."
What's the difference?
Many dictionaries define "investment" as money that is spent on something that provides income or profit.
So, investment real estate are really rentals which provide an income stream.
A commodity is an economic good such as your personal residence. Why don't I call your home an investment? Because it doesn't produce income. Instead it costs you money every month. It's similar to your personal car. It costs you money every month. It's a commodity, not an investment in my opinion.
But what if your car earns money like a delivery service? Then that car is an investment since it gives you a monetary return on your money.
It may be worthwhile to borrow money to buy that investment car since it produces enough money to make your car payment. However, if it earns no money, it would be best for your wallet to buy that car in cash or pay off the loan as soon as possible to stop paying more money than necessary.
That applies to your personal residence. Since it makes no money, pay off your mortgage as fast as you can or buy the house with cash if you can to stop throwing money away in mortgage interest.
However, a piece of rental real estate may generate enough money to pay its own debt, thereby borrowing money against that property may be justifiable.
I know so called real estate experts and TV shows indicate that you can make money fast in houses. But that's not really how it works when it comes to your personal home. Values grow slowly over time. There are ups and downs, but generally with the passage of enough time, one comes out ahead buying a home.
Look at the alternative to home ownership, renting. With renting you get no possible return on your money. At least with a personal residence, you can most of the time, at least get some of the money you spent owning a home back.
Have you ever met a millionaire who rents? I haven't. Real estate may be one of the reasons that person is so wealthy!
Watch out when you hear people speaking negatively about real estate. Either they haven't lived long enough to see the power of real estate at work, or they're promoting a get rich quick scheme.
Most wealthy people in America got rich SLOW. And most of them had real estate in their portfolio.
David Jurewicz, Broker
RE/MAX Gold 00661096