Why owning a home maybe a mistake

Homes are the largest single purchases for most people. Owning your own house is a dream most people aspire to. Owning a home can give you a sense of pride and security. The house can also be used as collateral for an equity loan. Plus your kids can inherit the house.

However owning a home may not necessarily be the best use of your cash from a purely financial perspective.

Houses are not cheap and most people take out mortgages to acquire one. This leaves you trapped in debt for several years.

There are huge maintenance costs to bear. Houses need to be repainted and remodelled. This cost can be quite high.

Houses are not mobile. So when you get a job in another town you can’t move with the house. You then end up maintaining a new rental plus your house. 

It is very difficult to sell your home. Everyone is emotiobally attached to it including the entire family. Even banks require spousal consent before they can mortgage your family property. This means therefore that your home is not really an investment because you will never liquidate it. 

Homes can tie down a lot of capital. Especially when you build an extravagant house. Some people make this worse by building village mansions which they only sleep in once a year on Christmas. This is a classic case of inefficient allocation of resources. Why don’t you build a factory in the village instead and employ your relatives?

Owning a home can be way more expensive than renting. When I used to rent I didn’t have to worry about maintenance, security, landscaping, etc. Now I have to bear all these costs. 

Owning a home gives you no positive cashflows. You have to repay the home loan and then add maintenance and landscapping. There is no income generated by owning a home which you sleep in.

If I was any wiser a few years ago I would have invested the hundreds of millions in treasury bills. I would then have used some of the interest to pay rent. If the peer pressure to build became unbearable, I would use the accumulated cash to build modest rentals. I would then move into one of the units and rent out the rest. 

This way I would have solved the home owning conundrum without going broke!

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