b&b203: When is Homeownership an Investment? with Kathleen Boyd

“Buying a home is an investment.” “Renting is just throwing your money away.” “The property value could double in the next decades.” All of these are go-to phrases for realtors.

The property value could also drop to half. Buying a house, or an apartment, is not a guaranteed good move. In some cases, it’s a very bad one. How do you tell the difference?

Kathleen Boyd, MS, CFP, is here to answer your questions and put common misconceptions straight. Kathleen earned her Bachelor in Economics and Masters in Finance from the University of Utah, as well as a Certified Financial Planner designation. Homeownership is a decision that should be influenced by personal values as well as plans for the future and the housing market.

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Music Featured in this Episode:

Ownership by Will-Ro & Maniphest DestiNE

UMMA BUY A HOUSE by TC DA DON

Proof of Ownership by SoulJazz

Episode Highlights:

Pam: The common [misconception] I hear among realtors is buying is always better, is always a better deal than renting. Or–renting–if you’re renting you’re just throwing your money away.

Kathleen: Anyone who is telling you that is lying. It’s a bold-faced lie. And it’s a way to shame people who rent. Anytime that you’re using your hard earned money to put a roof over your head, it is not a waste of money, whether you’re renting or you own a home. ….The second misconception that I hear is that a home is an investment and a guaranteed one. So let me tackle the investment part. I think folks really need to be careful about that belief that owning a home is an investment. Yes, it’s true, with homeownership you have the opportunity to accumulate wealth over time as you build equity, but if you’re buying a home with the sole objective of making big profits in short periods of time, then there are definitely risks to that, the biggest one being that price appreciation is not a guarantee.

Kathleen: On average, real estate only grows at the rate of inflation.

Kathleen: The third misconception that I think is really common is that homeownership is the best way to build wealth. It can be, as I said before, a good way to build wealth because it acts as a forced savings vehicle.

Kathleen: I would argue that the best and fastest way to build wealth is not homeownership, but it’s really saving and investing in a consistent manner. Maximizing your retirement account and your investment accounts. That’s the fastest way to building wealth.

Kathleen: I believe that homeownership can be a beneficial way to go, particularly if your financial situation is right for it. So, for example, if you know that you’re going to be living in a city for a very long time, I would say at least ten years or more, and you’re really invested in that community and you really wanna lay down roots, then homeownership is a great way to do that. And again, it’s that equity building piece. If that’s something that you’re really interested in and being able to pass that equity down onto your children or the next generation, then homeownership can be a great thing.

Kathleen: So a buyers market simply is when the supply, that is the number of available properties, exceeds the demand, which is the number of buyers looking to purchase properties. And so if you’re in the market for a new house, really a buyers market is the ideal time to make a move because chances are you’ll be able to buy a great home for a lower cost. In contrast a sellers market is when demand exceeds supply, so in essence when there are more buyers looking to purchase properties than there are available homes in the market.

Kathleen: There’s no rush. You can buy property at any time, and sometimes it’s best to just wait.