Email: You’re right about houses

Hello Malstrom,

 

You’re right about houses being a liability and not an asset. At least if you’re not a landlord (you’d still need your revenue to beat your costs every year). People buy a house, they live in it and they spend their money and time on maintaining it. They pay taxes in order to keep “owning” it and in some areas they have to keep overly expensive insurance with a limited set of options to choose from. 

 

The worst scenario is “owning” a home in a neighborhood with a homeowners association. So not only do you need to maintain the house, pay never-ending taxes and keep it insured but you also have an association run by people that dictate what you can and can’t do with your property. It’s one thing if it was only to maintain property values but some of the things these associations can demand is pretty damn arbitrary and possibly taxing. Heck, you even have to pay dues so that you can listen to a guy whine about the color of your curtains or something insane.

 

With an asset you are actually making money. Unless you’re somehow making money (more than you put into) your property, it is not an investment. If you’re just going to live in and hope to sell it for big bucks later then you are simply gambling, you’re playing an incredibly stupid version of roulette that in most cases can’t even double your money – let alone multiply it many times over.

 

When you think about taxes, maintenance and insurance you pretty much are renting your home. If you aren’t, stop paying your taxes or mortgage and the real owner will come and take it. Stop maintaining it and get fined due to ordinances (if you’re in a good area anyway). Stop paying insurance and you will be renting in the future after an accident if you can’t afford to fix your place out of pocket, all of your “investing” up to that point retroactively becomes rent money.There are many reasons to own a home. However, it being an ‘asset’ when you live in it is not one of them. Ever.

You mention the many downsides of home ownership. There are some upsides. You can remodel and do so radical changes. Put in a home theater or something. Owning a home seems great if you have time to spend in it. It would be fun to retire in one.

But I don’t have time to cut the grass, to paint the walls, and to fix the toilet. And I certainly don’t care about remodeling. I couldn’t care what color the walls are so long as they keep me insulated and keep the noise out.

The ‘buy a house’ as the ‘American Dream’ was a marketing strategy performed by Fannie Mae forty years ago. However, people see it as gospel for whatever reason.

There are many things people do today which they think are ‘the proper way to do things’ that really came from a marketing campaign. The engagement ring is one of them. My grandparents and great grandparents (et all) just decided to get married and didn’t need to give an ‘engagement ring’ let alone a diamond in it. But De Beers made an effective marketing campaign that if you don’t give your girl the biggest diamond ever, then you don’t truly love her. Of course, De Beers has a monopoly on diamond production.

Appeal to your financial statement first before you appeal to ‘society’.