The next wealth stealing lie is: “Live in your own house.” Or “Own your house.” As with all these lies, it makes sense on a certain level. But at a deeper level, it is designed to keep us poor!
When we buy a house, we always buy the best property we can afford. Nothing wrong with that. The problem that now arises, though, is that we have no or very little income left for investing of any kind, leave alone buying more property!
Yes, your house will increase in value. Yes, you are converting an expense to an asset. But let’s look at that last statement again. Are you really converting an expense? As long as you live, you have to live somewhere. The normal procedure is: buy small. Then upgrade as the first child comes. Then upgrade as the second child arrives. Then downgrade as the children leave the house. Move to retirement village. Move to … Every upgrade and downgrade costs more money. You always have expenses, such as rates and taxes and maintenance. And, this might come as a surprise, but you may have to pay in a substantial amount of money to move from your last home to the retirement village.
All along this process, you are spending money that gives no or very little return. And your cash flow does not improve. So that, when you finally reach retirement age and are kicked out by your employer, you have a nice house, but not enough income to maintain your lifestyle. In fact, you might be like a lot of other retirerees – poor, dependent on children.
On the other hand, if you rented a place and bought a couple of investment properties, your income will keep track with inflation. You are a lot less reliant on markets for your retirement. And you always have the income to rent a property. Or if you then decide to buy, your assets will pay for your home.
In a nutshell, I am not against buying your own home. I am against the lie that encourages us to buy our own home before anything else. To benefit from the long term growth in property prices, you must be in the property market. To be able to become financially independent you have to have a couple of investment properties. To acquire these properties at low risk and become financially independent at a young age, you have to start as young as humanly possible.
Buying your own house first, is going to keep you back for a very long time.
I am very curious to hear what you think about this post. Please leave a comment and share your thoughts!