I believe that most of you guys are looking forward to owning your own home and trying to get a house that is huge and comfy. After all, we all want a better life and to have a comfortable place for you to chill and relax after days and days of work.
A lot of people would claim that their home is their biggest investment, but is it actually a good investment? Well, we will find out more in this article.
Is your home an Asset?
In simple terms, Assets are simply something that would generate money for you. I have learned this from reading a book named “Rich Dad Poor Dad”, it taught me about how a lot of people are mistaken about our home as an asset.
But have you think about how your home may be just making you pay and pay for fees, maintenance, taxes, or even loans. Think about it, if your home is constantly making you lose money in your bank account, is it really an asset? Or is it a liability where it causes you to pay fees every month?
In some cases where you are renting out rooms and getting paid for it, then yes your home may be an asset. Assuming that you have fully paid for your house, you are collecting $500 every month from renting out a room then it is definitely an asset as it helps you to earn money. But the fact is that people are just buying a house to stay in it so a lot of times your home is not going to be an asset in terms of talking about financially.
Most of the time people are buying a house using a mortgage they get from a bank. This would need them to pay back the loan and interest every month. This is clearly a liability as you are just deducting your money in your bank to stay in your home.
What to consider when buying a house
Adding to my saying that a lot of people are looking for huge houses, I feel that we should put in more thoughts before committing to buying a big house.
Having a bigger house usually leads to higher costs overall, for the house itself, renovation, maintenance, and taxes. This means that if your house is big, you are pretty paying a larger amount to live in it.
Instead of living in a house where it costs you to spend almost all your money just to get the house, why not buy a smaller house and put the money into other uses. Imagine if you buy a smaller house that costs you 100k less, you now have 100k to invest and this is actually smarter.
Other than money, you may want to consider if the location of the house is good. This is so that as time goes, the appreciation of your property may shoot up higher especially if the location is accessible with facilities, malls, and transport. If your property’s value rises, you may want to consider selling it and getting a profit to upgrade your house. It is up to you to decide.
Don’t get me wrong, if you are able to afford big houses and you love living in big houses then sure, go ahead. At the end of the day, it is your choice but just ensures that your home is not where most of your money go to. Strike a balance, and choose your house wisely.
What about Real Estate Investment?
If you are financially dependent enough and you have fully paid your mortgage loan, then you may want to consider getting your second property. You buying that second property will be an asset as it is expected for you to generate income.
You can rent the entire house out for at least $2,000 a month which is huge. If the value of the property increases over the next few years, you can also sell it away making quite some profit. The best thing is that real estate investments are generally more stable and their value usually appreciates.
This would then possibly be your source of passive income where you just to have to ensure that the tenants are taking good care of your property and wait for them to pay your rent every month. This can be really good especially if you are looking to achieve financial freedom as passive income means that you spend less time on it but gets some earning along the way.
To Conclude
I feel that it is fair that everyone wants to live in a place where it is huge and comfortable, but we should all be smart financially to ensure that we calculate the amount we need to buy and maintain a house.
You should only consider buying a house that would fit your financial stability and that would help you to put your money into better use.
