Most of us dream about having our own space, where we could live our lives, customize our space, and be proud of things because buying a house is not a joke.
Yes, putting all the significant parts of your money is a big deal but at the end of the day, it is for us; couple spends time, children spend their childhood, it a place where we dream of things, a single place where significant episodes of our lives happen.
But buying a house is really a good investment??
My answer is, “No.”
The idea that your primary residence can be your good investment comes from the fact that our grandparent’s house or our parent house, which they bought a few decades ago, was even less than two lakh rupees, and now its cost is in crores.
Yes, it is attractive, and all you can see a significant price difference. But mathematically, is it really a good deal?
Just because people appreciate it does not mean it is a good deal.
For the sake of this discussion, we’re going to neglect the fact that, over the long run, average home values increase only slightly more than inflation.
Assuming a home’s value raised only at the inflation rate, a property purchased in 1980 for 100,000 rupees would be worth 60,25,873 today, more than 60%. The real reason your grandfather’s house price increased so much over 40 years? The simple answer is “inflation.”
I want to add that real estate can increase and decrease the value of any property drastically. But such changes are drastic; it can happen, but not always. It is crucial to understand the positive and negative points of all well.
The house has a crucial primary purpose.
The primary purpose of a house is to provide shelter. This is the most crucial purpose of any house, but let’s look at it from an investment perspective.
One of the most crucial and essential factors that make an investment as an investment is your capability to control your ownership timing. That means that you can buy it and sell it at times and under certain conditions that are prone to maximize your investment return. We can think of common investments, such as bonds, stocks, mutual funds—even rental real estate—as providing this ability.
These common investments can be sell or buy anytime, but a house requires time to buy or sell. In an urgency, if you look at it as an investment, it is the worst investment. Many people buy a house at a top market price but could not sell it at any profit.
These negative things cannot be neglected, which makes it a worse investment.
A house cannot be an investment if you are not planning to sell it.
House does not generate any cash flow but is generally gets increased in values over a while. More importantly, when you sell, you will most likely have to utilize the equity from the sale to purchase the next investment, i.e., a house. After all, you will be moving from one home to another home. This means that practically, home equity is trapped equity.
The only time when the house does not fall in this category is when you want to sell it. A good investment is something you can sell quickly, where you earn more money, which does not load you with debts. The real estate sector is vital, and houses, apartments are all significant investments. It is essential to understand how much a thing can benefit you. What’s your take on this?