Explain to me why I should EVER purchase a home / condo?

I'm 24 years old, financially secure with a nice career, and I currently have a company-matched 401k and a few thousand dollars worth of stock and bond ETFs already.

Most of my peers (a good 80%) that I consider close friends are obsessed with purchasing a home or condo as soon as possible. I personally see homes as a terrible investment from a financial standpoint, and even worse in your twenties because it limits your career mobility.

Perhaps I am missing something or are they all brainwashed by the American religion of homeownership? I'm content with renting for quite a while.

Discuss.

 

There's nothing wrong with renting. Some people get snobby over it but fear of social taint is no reason to go into debt to buy a property.
Seems to me there are a few reasons someone may want to eventually buy and not rent.

1. The money being paid for shelter becomes money being paid for the eventual ownership of an asset.
2. Buying your own home is a sign of stability. On the other hand though it does tie someone down unless they get good tenants for their place if they want to move away.
3. I'm not sure about buying a home as an investment. It seems to me that that investment may take time to mature. I'd argue that a home should be bought for living in.

That's about all I have.

 

I am a person that loves to own land. I think land zoned for agriculture is a good investment and the taxes are reasonable.

You could buy land and either sell it later or build later. Ag. land taxes are pretty reasonable in most places.

 

Land is a cool thought. When you buy a house, you are essentially buying the land.

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I think it really is a social thing. Everyone balks at the idea of renting.

"I'm buying because we are just throwing money away renting."

Owning a home just seems like a giant waste of money for a single person.

 

If you are going to stay still it is a good hedge against inflation, and you have an asset after 20 years instead of nothing. Interest rates are rising, there is a good reason to get in before they do. A few points of interest on a big purchase like that can hurt. Homes are generally cheaper even monthly to own then what you can get for the rental price too if you know how to fix and maintain things.

 

After 20 years of renting you have nothing. After 20 years of paying mortgage payments you have equity.

But I understand the not wanting to be tied down to a place. There is more than one way to help ensure a financially secure future and home ownership is only one of many.

 

It doesn't limit your career mobility. You can easily rent it out to cover the costs and be getting free equity in an investment property (well except for the increased income taxes). A buddy of mine in the Navy buys wherever he is stationed and then rents it out when he moves to another place.

 

Ehh, they aren't cheaper. You have to account for higher utility bills, PMI, property taxes, and the 1% / year of home maintenance.

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That is the common argument I always hear but you have to keep someone in the place and if they (*)(*)(*)(*) it up it is on you to fix it.

 

Not usually if you use a reputable property management outfit that is selective, but pretty obvious nothing will curb your fear of long-term commitment, so carry on giving your money away. In fifteen years, do the math, and realize that would have been a lot of house you gave away in rent

 

Well...if you buy some land and put up a a good fence...horse high, pig tight, and bull strong, you could graze some beef or raise a few pigs. If nothing else you could have a big garden. The land could pay for itsef over time. And believe me nothing in the grocery store can beat your own home grown food. But forget about vacations and make sure the land is real close to where you live.

We have a few acres and we raise all of our own beef, pork, eggs, but we buy our frying chickens...I like store bought chicken better.

Another thing....always use what you have if you raise livestock....don't buy nuthin you don't have to. My smokehouse is built from used building materials from my job....my first pigpens were made from used pallets...and i bought a battery operated drill and use self tapping screws to put everything together. You can reuse the screws over and over again.

 

Mine is cheaper then renting. Newer construction, they make really good houses these days. Hurricane proof, super high efficiency. My house has a utility bill similar to my old apartment that was half its size. New washer dryers cost $15 a year to run. Crazy but true.

If your single don't do it. You may get married to someone with a house.

 

Well, it really depends. In the current market, it would be smart to buy a property that you could turn over for a better price. Prices are low. Not so smart when prices were totally inflated. I started buying my own home in my 30's and have done OK, not great, but OK. I lost money on one house before the collapse but it was a good move into an historic house that did not lose value during the collapse.

In my 20's I moved quite a bit and never considered ownership. It just was not me, like you. No problem as far as I am concerned. You should do it when you feel comfortable about doing it. Remember, it is the adventure of life that is important instead of the owning things.

Now that I am older, I am seriously looking at something like Tiny Homes. For instance, I live in a fairly small house, 1400 sq/ft yet I only really use 3 of the rooms. Bedroom, Kitchen, and TV room. That equates to about 450 sq/ft. Most that I know live the same in whatever house they own. I might downsize as I get older and consider retirement.

All in all, do what you feel is right for you. You cannot go wrong doing that.

 

Yea I'll definitely think about it when I have a wife, and will end up buying. I just don't get the push for single millenials to own homes. Thank you for your input.

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The only thing I don't get is when people say they make money on a house

You end up paying 2-3 times the cost of the house when you pay it back with interest. Then you have property taxes and the 1% / year for maintenance. You end up behind 90% of the time unless you are a self-made handyman who is good at flipping them.

 

It's an asset, but your home should not be considered an investment, it should be considered a place to live, or your home.

 

There is no requirement for you to have a mortgage when you buy a home. You can pay cash for it which does give you an advantage in price negotiation.

 

Owning a home can be an impeding burden because all repairs and emergencies, insurance and upkeep is your responsibility. A young mobile, single 24 year old really has better things to do---like save money for the home that will be a good fit for your possible upcoming family. Even if you have a family----nothing wrong with renting.

When you have a family and kids and the time is right... you know where you want to be, stable career, plenty of savings for those expensive emergency repairs, know what size home and neighborhood will work--then perhaps its time.

 

Well, when you buy a house for say 150K and sell it a few years down the road for 170K, you have not paid that much in interest and you make money on capital gains. I bought a house for 25K in 83 and sold it for 70K. You can make money on a house but you have to know what you are doing. I don't buy houses to make money (flipping) but you gain equity if you do not end up underwater (loan greater than the worth of the house) which happened to many during the housing collapse. When you rent you still spend the money but you have nothing in return. I just bought the house my daughter was renting for $575 a month and my loan payments with escrow is $320 a month. Right now I am helping her but I could rent it out in that neighborhood for $600 to $700 a month. That would pay for itself plus.

 

Good point.

We just don't usually have cash in our 20s unless we have a healthy bank of mom and dad

 

What he/she said.

 

There are a couple types of homes; those that you live in and those that are income property. Both are investments and both carry risks.

Generally speaking, real estate values increase over the long term. Mortgage interest continues to be a deduction to your taxable income.

Considering an investment portfolio, you might wish to use 25% on the purchase of property, with 50% in stocks and 25% in cash...all of which varies according to your age.

I'm an old guy and settled into my little slice of the USA but knowing what I know today, if I was to get a do-over in life, regarding buying a home/property, I would not buy a property prior to age 35/40 which required me to live in it. But I would as young as possible buy some rental income property and when I had an idea where I might retire, I would buy property in that area. Remember that everything can be sold so if the decisions are not working out then sell and punt. Having the rental income gives you the investment and tax advantages and business ownership. At retirement, whether a person desires a condo in Palm Beach or some acreage in rural America, acquire this early enough to have it paid off or down at retirement time so your expenses are minimized. And until you find a permanent home, either by choice, or because of spouse and kids, etc. there's absolutely nothing wrong with renting/leasing. Lastly, depending on one's career, at least until 40 or 50 years of age, they may require maximum mobility to maintain employment. A software engineer living in Silicon Valley is pretty much assured job opportunities, while a carpenter may need to relocate job to job. Just the fact that you are asking the question at your age is a good thing...

 

You should really purchase a home because you want to live there, not as an investment. Unless, of course, you already own a home. Then, in my opinion, any additional properties should be bought with investment in mind, because you can only live in one property at a time. If the inherent value in the property is not that it is your home, then it should be doing something for you financially.

A home is, however, a good financial investment even considering the recent real estate market troubles and even if you only ever own one home. As an anecdote, if you had bought my parents' home like they did in 1980 for $70,000 ($197,995 in today's dollars), you could sell it today for $350,000, having paid off the mortage 12 years ago. Not a bad return, considering you got to live in your investment for 33 years. Can't do that with stocks.

I rent because the military requires me to move every three to four years, so owning a home makes little sense. But, in my case, I get a pretty hefty allowance for rent, so the "throwing money away" thing doesn't really matter to me. You taxpayers are such wonderful, generous people.

 

Property is a fantastic investment, if you do it right. Most people's greatest capital increase over time comes from home appreciation.

I too am in my 20s, own a few thousand in stock and bonds, as well as electronic currencies and commodities (gold and silver), property will be my first "big" investment. Long way to go yet, though.

Also, renting doesn't fit my lifestyle. I like pets. I like smoking. I like my privacy. I like the legal rights that come with home ownership. I like not being dependent on a landlord. I like having my monthly payments going toward something I'll own at the end rather than something I won't.

 

You absolutely make more on stocks. You paid 2-3 times your home's initial price in interest alone so where is the profit?

 

I think you're looking at the issue too narrowly. If you only own one home, then you get to live in it and generally do whatever you want. Then when it's time for you to move, most of the time you sell it for more than you paid for it. You can fret about interest and making a true profit all you want, but there aren't a lot of things that appreciate a great deal in value while you use them constantly.

You're talking more about flipping homes and being a real estate developer when you look at home ownership purely from a numbers perspective, which is an entirely different ball game from buying a home to live in it.

 

Don't forget to calculate the savings on income taxes due to the mortgage interest reduction and property tax deduction, etc. and if you have the property as income there are other tax deductions...