Many treat his or her home as an investment while others not. If my memory serves me right, Robert Kiyosaki not only didn’t treat his home as an investment; in fact treat his home as a liability. For him, investments suppose to generate income for owner but owning a home incurs expenses to the owner.
From my perspective, whether a home is not an investment is really up to you.
Are you likely to move out in the future?
If your answer is NO, your home is definitely not an investment because it don’t generate income for you nor your can reap profit from selling it in the future when price increased.
If your answer is YES, you may reap profit from selling your home at higher price in future. But where are you going to live? Prices tend to rise across the entire market. So if you sell your current home and getting another new home, you are merely rich for a while before dumping profit from your old home to new home. In this case you can’t really enjoy profit from your first home. Hence, we shouldn’t treat your home as an investment. UNLESS you willing to go significantly downscale for your next home, move to a less desirable neighborhood or move out further away from city centre; those are the only way you can enjoy fruits of your home price appreciation.
Do you really make profit from your home when you move out?
Without most of us realizing, it cost more to buy, renovate and maintain a home than you think. Biggest home ownership costs are renovation and bank interest. Hence, it is important not to buy a home that is too big for your need or overly renovate and furnishing it. The profit that you make selling your home may just sufficient to cover your interest, renovation and furnishing cost. In fact, I personally have a friend that stretch his budget to buy a home in upscale neighborhood, over spent to renovate and furnish his home under the name of convenient, investment and “enjoy life”. In our previous gathering, he lamented cash flow problem he encountered in serving bank loan (for car and home) as well as credit card debt for his renovation and furnishing. He is obviously regretted; this is a good lesson not to over spend in home ownership.
Besides straining your cash flow, you almost certainly lost some investment opportunity (i.e. opportunity cost) along the way while you were spending your money buying the home.
No matter what, I would like to stress that buying a home is still better than renting home. For me, it’s even better if you can spend less on current home and invest in few investment properties (i.e. rental properties) that able to generate positive cash flow to fund your dream home; of course not immediately, but say 10 years down the road. I personally prefer to treat my current home as a saving instrument rather than investment instrument. 10 years down the road, I’ll sell my current home (and probably 1 or 2 investment properties) to fulfill down payment of my dream home in upscale neighborhood. Monthly installment of my dream home will then by funded by positive cash flow from remaining investment properties.
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