It’s no secret that I believe real estate is a smart investment. It’s what I’ve built my career on, I’ve had great success with it, and I encourage others to do the same. But making money in real estate is not a given, and buying a house is not the gateway to financial freedom. In fact, if you’re not smart about the investments you make, buying a house can be a costly mistake.
There are a lot of great reasons why you should buy a house, but there are also plenty of reasons why you shouldn’t. So if you’re thinking of taking the plunge make sure you’re doing it for the right reasons.
Here are 5 reasons NOT to buy a house.
Buying a home feels like a rite of passage for most people. You hit a certain stage of life, and buying a house seems like the thing to do. But if that’s the only reason you’re buying a house, you’re doing it for the wrong reason. A house is the most expensive thing you’ll ever own, and your decision to buy should have everything to do with your financial situation, and nothing to do with your age.
Watching your friends take certain steps can be tough when you feel like you’re lagging behind. Whether it’s marriage, having kids, or buying a house, no one likes to feel like the odd man out. But buying a house just because you don’t want to be the only one who hasn’t could be a huge mistake. Forget what everyone else is doing and focus on yourself. I believe it’s never too early to get into the real estate market, but it has to be for the right reason.
Having a life plan and being prepared is great. But there’s such a thing as being too prepared. I’ve heard many times of single people who purchase large homes because they hope to get married and have kids, and they want to be ready when it happens. But life is unpredictable. If you want to buy a house and you can afford it, great. But buying a three-bedroom house before you need one or can properly afford it just doesn’t make sense. Plan for the future, but live in the now.
Is buying a house a better investment than renting? Common sense tells us yes. But this doesn’t mean it’s always the case. Getting into the housing market is a great idea – and quite frankly, in my opinion the sooner the better – but if you’re in a precarious financial position and the rent in your neighbourhood is significantly cheaper than a mortgage payment, you might be better off staying put. Save the difference between the rent you’re paying and what your mortgage payment would be, and then when the market turns and/or your financial position improves, you’ll be in a great position to buy.
It’s easy to look at a house and want to buy into the lifestyle you imagine it comes with. But just because you have the house it doesn’t mean you can afford the lifestyle. In fact, a lot of people find they have to make some compromises to their lifestyle in order to afford the house they want. Buying a house will not change who you are – you’re kidding yourself if you think otherwise.
Photo courtesy of iStockphoto.com/BostonREP