I meet people who do not want to buy real estate. That’s fine, owning a home isn’t for everyone. However, when they give their reasons, sometimes it makes me cringe, because in the bigger picture, it doesn’t make sense. Here are three reasons people don’t buy, and why it doesn’t make sense:
1. I don’t want to deal with the maintenance: The cost of a new roof could be in the thousands. A new sewer line could be $10,000 or more. When these and even smaller problems arise, if you rent, then the landlord must deal with it. The reason this comes up is because back in the day people didn’t do the plethora of inspections that we do now. While under contract (also known as “in escrow”), you can inspect just about everything. This reduces the risk of issues later. Yes, eventually the roof would need to be replaced, but you would hopefully be in a better financial position to do it and you can plan accordingly.
2. What if the market crashes? If you plan on owning the property over a long period of time, who cares? If property values drop, that’s a paper loss, not actual money in the bank. If you are still working and can pay the mortgage, then you just hold on to the home. So many people have sold their homes for double or triple their purchase price, and they went through the same recessions as everyone else. The same could go for stocks. If you invest in companies that go under, you will never see that money again. At least here real estate generally comes back because at the very least there is land value.
3. I can put my money elsewhere that can provide a better return. This is very true. There are other investments that could yield higher than the typical 3% per year an average home does. The difference is you must have a roof over your head, whether it is through renting or owning. But if you are renting, then nothing appreciates in your favor. When owning, at least your home will appreciate. The other difference is the average first-time home buyer puts less than 7% down which means if your home appreciates 3% per year the return on your cash is 43% per year. Look at some of the wealthiest investors in the world. I wouldn’t be surprised if 99% of them own their own home.
There are many more reasons to own property than just this. For every reason someone doesn’t want to buy, I’m sure there is a way to turn that around and make it a positive.
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