After truly looking at all the expenses in maintaining a house, the lack of liquidity and having a realistic expectation for how much it can appreciate, buying a house doesn't look like a good return on your investment. My thinking is of course tainted by what has happened in the real estate market over the last year but that has to be taken into account. Am I right that you shouldn't think of your home as a major part of your nest egg?
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a house is an investment you cannot cash out of unless you die, go live on the streets, or otherwise downgrade your lifestyle. Moreover most people buy houses with 5-20% down, i.e. at 20x-5x leverage, which makes it the equivalent of selling lottery tickets, a recipe for possible bankruptcy and ruin. The principle of diversification alone would suggest against any such investment. on the other hand, if it is almost cheaper than rent, or you can buy with cash while consuming a small percentage of your net worth (40% tops), it may be profitable in the long run. |
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