I was just watching James Altucher on YouTube who said that buying a property is a bad investment choice.
Wait, no. He didn’t say it was a bad investment choice. He said it was a bad lifestyle choice.
So why would he say such a thing? Well, it seems to me that he’s talking firmly with his investing cap on.
He feels that it’s foolish to invest all your net worth into just one asset, which is what most people seem to do. Further, he says property is illiquid, meaning you can’t get out of it quickly if you need to.
Plus, there are so many costs involved in property that many people don’t account for. Fees, taxes, maintenance costs, mortgage increases etc. All this leads to one thing… stress.
Rent or buy?
Although Altucher owns property himself he says renting is a much better lifestyle decision.
Renting means you’re not tied down. Renting means you don’t have to pay huge deposits or agents fees. Renting means you don’t even need to pay maintenance repairs. In short, renting equals less stress than buying.
Better to buy
But although I agree that there are huge costs involved in buying your own place and yes, it is more stressful, ultimately buying has to be the only option to consider.
First off, there’s the classic counter argument to renting. That is – why pay $1000 a week to a landlord when you can put it towards your own pocket? Instead of lining the pockets of your landlord you can begin to invest in your own future. Something that will give you increased wealth further down the road. Property protects you from inflation too.
Second, and I think a lot of people forget this, buying a house isn’t just about return on your money. Buying a house has added utility – it puts a roof over your head and gives you security. It therefore fulfils your basic human need for shelter. That’s something that no other investment (stock, bond or commodity) can claim. At the end of the day, when you make a stock investment all you get is a piece of paper.
Third, I’ve rented many different places over the years and it can be a major pain in the arse. Landlords come round to check up all the time (sometimes without asking first). And they throw a fit if you do anything to change the place, such as – god forbid – paint the walls. When something breaks they do anything to get out of paying for repairs and they furnish the place with the cheapest appliances they can get their hands on. The apartment ends up turning into a dump, not the kind of place you really want to spend time in.
So it’s not always more stressful buying a place than renting as some very irritating and stressful landlords can attest.
Obviously if you’re young and you don’t want to be tied down renting is a better choice. But if you’re planning on staying in one place for a good amount of time you should choose to buy over rent and you should stay within your means when you do.
Interest rates change so you don’t want to go crazy and get a mortgage that you can only just afford. In this respect, I totally agree with Altucher, because this kind of stress is not worth it.
But buying a house has many benefits.
And let’s face it, you can buy stocks and bonds all day long but ultimately, you have to ask yourself why are you buying them?
Chances are you’re buying stocks to make more money. And you want to make money because you want to be able to afford nice things. Things like fancy cars and fancy houses. But if you’ve got a nice house with a view of the sea, what else do you need?