Should You Buy Or Rent Your Own Home?
Your own home could be your first investment into real estate, but is your own home the right investment? Depending on who you talk to, some people will encourage you to invest into owning the home you live in, and others will tell you to chase investments elsewhere and to rent instead. I believe the answer to this question is based on your current situation.
One of the most important concepts to understand in Real Estate is that not all deals are equal, and not all deals make sense. A good investor will know that for every 100 properties that are on the market, maybe 10 of them make sense, and only 3 of them are true winners. When most people purchase their own home, they are looking at it as a place to live, instead of analysing it as an investment. If you understand this, you have an advantage over the majority of people who are looking for their own home.
When you are looking for your own home you need to treat the purchase the same way that you would treat an investment. When you look at the property understand what that property is worth, what it would rent for and what the expenses will be. Put yourself into the shoes of a landlord and a tenant. How much would you need in rent to make the investment worth while and how much rent would you be willing to pay to live in that property. If the numbers don’t overlap the property likely isn’t worth the investment.
In some cases you will be able to find a property that makes sense as an investment; in others you won’t find anything. Depending on where you are in life and what you need in your home, it may not make sense to buy.
What If You Can’t Find The Right Home For Yourself?
Just because you can’t find the right home for you, it doesn’t mean you shouldn't invest in real estate, or give up on real estate investing. My first investment in real estate wasn’t my own home. It wasn’t until I had two investment properties that I found a property that made sense as an investment for my own home. If you are looking to invest in an income property that isn’t your own home you can read my thoughts on what type of property you should buy here.
Why Is This So Important?
One of the most important reasons that you need to look at the purchase of your own home as an investor is that life changes and you won’t necessarily live in the same home for as long as you anticipated. When investing in real estate buying/selling is expensive and time consuming.
If you purchased your home based on feelings instead of through the eyes of an investor and you need to move, you will lose money on the purchase/sale of your home, or you won’t be able to rent your home out for enough to cover its expenses.
I no longer live in the property I purchased as my home, but because I made sure it was a sound investment, I transitioned the property into an investment property and moved without worrying about being forced to sell.
This article is for informational purposes only; it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
