Your Home Is Not An Investment

By September 24, 2011 BUY
House in Aspen Gardens, Edmonton

As an Edmonton real estate agent, I often hear people often talk about their homes as investments. And in a sense, they are – with a few major caveats. What you have to remember is that a home is a place to live. That’s the No.1 reason you purchase a home. If you aren’t thinking about that when you are shopping for your next house, you’re going to make a big mistake. Don’t get me wrong, all homes are assets and you want to make sure that your asset is safe and sound for the future, but where you live isn’t specifically an investment. This is because you can’t just sell your home as if it were a stock or a bond – you need a place to sleep, eat and rest. There are many advantages to having a home, but it’s not as if you can buy any property and be satisfied. So, before you consider anything else, you have to think about where and how you want to live.

What Kind of Home Do You Need?

Before you consider anything else, you have to think about where and how you want to live

What are the needs of you and your family? If this home doesn’t meet them, it doesn’t matter what it’s worth down the road. If the house or condo you purchase doesn’t work out, you’ll likely have to move before your “investment” pays off, leaving you with nothing to show for your time and effort. This is why you should try to imagine yourself living in a home for at least five years. Will this property accommodate you and your plans for the future? Are you planning on having children? Will there be space for more family members? Are there even schools nearby?

When it comes to real estate, location is more important than any other single factor. If you live near a busy freeway and you can’t sleep, or you get a job in a nearby town and have to commute, you won’t be doing yourself any favors by ignoring these factors in favor of a better deal or a better investment. And don’t forget that if you save money on your purchase because of location, the next owner will too. That means you pay less, but it also means you’ll get less. You can’t save any money that way in the long run, so it’s best to think about what you really want in a home and shoot for that.

Your Home and Your Net Worth

If this home doesn’t meet the needs of you and your family, it doesn’t matter what it’s worth down the road

Many financial advisors don’t consider a primary residence part of net worth. On some levels, I am inclined to agree. This is because you cannot sell this property anytime you want because you’ll likely have to purchase another one – or you’ll have to rent. You can sell bonds, stocks or gold and never purchase them again. A house is a stickier investment. After all, you have to live somewhere, so if a home is an investment, it is certainly a very illiquid one and not one that most people can afford to cash in, even when they do sell.

Furthermore, your home is not a bank account. Sure, you can borrow against any equity you have and invest it in something else, but beware: we’ve all seen many people try this lately and fail. Staking your home on an investment is a bet you can’t afford to lose, but you can afford not to invest.

I’m not saying that a house or condo can’t be used to obtain a business loan, or a line of credit. It can be collateral for any number of reasonable things. But don’t forget that it’s also the only thing keeping you out of the rain.

Your Home, Your Life

Your home, first and foremost, is where you live, and what you decide to buy will affect many aspects of your life

This is why when you buy a home, it is not the time to worry about making a good investment or getting a good deal. Your home, first and foremost, is where you live, and what you decide to buy will affect many aspects of your life. When you’re in the market for a home, choose the one that will be the best fit for the way you live. And don’t forget: if it’s a good purchase for you personally, it will be a successful investment in more ways than one.


 

by +Alan F Macdonald REALTOR® | Copyright © – gimme-shelter.com

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Alan F Macdonald

Author Alan F Macdonald

Alan F Macdonald is a real estate agent with Maxwell Challenge Realty in Edmonton, Alberta.

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