Do you own your home? Do you wish you did?

We love not having a mortgage but I can't shake the fact that we could double (if properly invested) every 5-7 years.
I don't know what rate of return you assume for investments, but finding an investment that allows you to double your
money every 5 years not realistic. Investment returns are proportionate to risk: the higher the return the higher the risk.
The first rule of investing is to avoid losses, because they tend to happen fast and can wipe out years of saving and
investing. At your age, you don't have time to recover from losses from risky investments. As someone pointed out,
you have to live somewhere, and owning a home is more than a purely financial decision: it provides security. When
I was working, my job required me to pass a medical exam every six months. If I couldn't pass the exam my career was
over. So, I had my first house payed off as soon as possible so that if I lost my career, all I had to do was pay the taxes
until I could get working again. Owning a modest home that doesn't cost too much and then investing in conservative
funds is probably a good plan. You should find a good financial advisor to discuss this stuff with.
 
I don't know what rate of return you assume for investments, but finding an investment that allows you to double your
money every 5 years not realistic. Investment returns are proportionate to risk: the higher the return the higher the risk.
The first rule of investing is to avoid losses, because they tend to happen fast and can wipe out years of saving and
investing. At your age, you don't have time to recover from losses from risky investments. As someone pointed out,
you have to live somewhere, and owning a home is more than a purely financial decision: it provides security. When
I was working, my job required me to pass a medical exam every six months. If I couldn't pass the exam my career was
over. So, I had my first house payed off as soon as possible so that if I lost my career, all I had to do was pay the taxes
until I could get working again. Owning a modest home that doesn't cost too much and then investing in conservative
funds is probably a good plan. You should find a good financial advisor to discuss this stuff with.
Good advice.
 
You have to factor in rent since you need a place to live. We paid off the house last year, so now just upkeep and property taxes. There are not many comparable houses for rent locally, but based on what is out there rent would be somewhere between $2000 and $5000/mo. I'm pretty happy paying my under $200/mo for property taxes instead.

Personally even if it hadn't been ingrained in me that owning your home is a must, I wouldn't be able to take the uncertainty of rent fluctuations at the whim of a land lord. I've seen more than one business up and move, or just close up shop when the land lord raised the rent an unsustainable amount. Housing usually have more limits in increases, but when I was younger I helped a number of people move after their rent went up and they couldn't afford the increase.

Then there is the landlord to deal with. Hobby machining is high on the list of hobbies that do not go well with renting.
 
Jeff , I'm going thru a very similar situation at home this very moment . More to come . :)
 
We own our property and it's paid for. I wouldn't have it any other way.
I think it's a wash. If I had invested the $ I paid for the house, taxes and maintenance I could now have a lot more tools.
 
The other way I have seen, is to invest a part of ones line of credit. That way one will not be over extended and a LofC is never the whole value of the residence.

There will always be drops, and no one can time that! Been steadily investing since ‘86 and have never stopped. Yes suffered downs, which are opportunities to buy stocks on sale. Always been dividend payers and quality ones. One cannot live on capital gains as you have to sell the stock to get that cash, while dividends give cash every month for a continuous income stream. Pitfalls of course and GE has been the current dog and got out as soon as they announced their breakup.

To avoid the worst of a drop is to be well diversified. Use mutual funds, ETF or build your own. 20-30 companies from across the whole market.
An example of diversity is a company called Main Street with the ticker MAIN. They hold 90 plus companies in many sectors. Another but smaller one is ticker GAIN.

One can not predict the future of the market but well managed pension funds invest in stock, bonds and even buy companies to cover their obligations.
Pierre
 
A lot of people put cash in their homes because they are protected from creditors (read plaintiffs.)
 
We own ours, cost us around $300K in 1993, paid off in 2010 or 2011. The wife and I tend to be fairly conservative with our money.

My father-in-law said we were stupid back in around 2000 because we were paying off our house. "Why do you want to tie up $400K in a roof over your head? Your kids won't want your house, pull the equity out and enjoy it, let the bank own your house in the end". They pulled their money out of their home/property and bought what I call a rolling tribute to capitalism: brand new 2000 MY Prevost 45 ft. motor coach at $850,000. Yes, it was nice, but I'd question $850K nice. . . His strategy was to invest heavily in the market and keep 3 years of "spending money" in a bond fund. "The market will drop, but it always recovers within 3 years". Well, the market tanked and didn't recover. They had to sell low to make the mortgage and coach payments. They were allowed to sell their coach short (yes, they depreciate a lot in a hurry) and avoided bankruptcy.

For us, the wife and I like being in a position of not owing a dime to anyone. Our place is worth $600K at this point with the property. We are both retiring in the next few months and will be able to do what we want, when we want, if we want. The money that wasn't dumped in our house was invested, mostly in the market. More bragging than anything, but a financial advisor will tell you as a rough rule of thumb to have 10X your salary in your 401K to be comfortable in retirement. I pulled the numbers for my wife a few months ago when we were at 30X. Sure, we could have gone a different route and continually pulled equity out of our house, invested it, and maybe be at 50X.

We tend to be conservative and will have to "get by" with more income per year in retirement, with a paid-off house. We could have made more, but we never put ourselves in a position where we were at a large risk. Risk being we would not lose our home, could pay our taxes, and put food on the table. I never had a sleepless night after the market tanked. My worst decision was I should have pulled out of my 401K about 10 years ago. Instead, I should have been taking the tax hit then and invested in a Roth. We looking at paying higher income taxes in retirement than we have during our working careers.

Bruce
 
As they say it is complicated, and depends on many factors. The investment companies always get their money, but do you. I have put money into 401/403B accounts for 30+ years, and contrary to the money doubling every 7 years, they are worth about 2X what I put into them. I have weathered portfolio drops of 30% and then had to wait many years for it to come back. As you get older you move toward more capital preservation, I may not have another 10 years for it to come back. Hindsight is great, sure I could have invested in the stock market and doubled my money, but for every one person who reaps the highs there are probably 10 people who have paid for it. As you get older your risk factor changes, I have had this discussion with our financial investors for the last 30 years. Sure I want to make more money, but I am 66 my wife is 70, do I really want to risk a big chuck of retirement savings playing the market and waiting another decade for it to come back.

We have always made money on houses and land, but usually it was because we bought at a low and sold at close to a high. So it is a timing game and depends on your income and how fast you can pay it down. I personally think it is foolish to get a 30 year loan and pay almost all interest for the first 15 years. One can also increase payments as wages go up, so you are not paying down the house until you are in the grave. Same goes for 2nd mortgages, in particular people who feel it is free money, my house is worth more. We have also had rental property through the years which helped pay down that house and/or provide an income stream. As we got older we no longer wanted to deal with renters, let alone get shafted by the city of San Francisco, and got out of there.

As you get older and if you have limited income streams, and or not diversified with different sources of income, then I feel owning your house is a much wiser choice then paying 2-3K a month for mortgage/rent on top of all the other costs. There is also comfort in knowing that you owning a house vs. renting. Return on investment for 400K might get you 2-3% these days in somewhat protected investments, 0.4% in a "high yield" savings account. You might be able to go out to dinner once or twice a month on the interest. Stock market, once you are retired is more like Russian Roulette with one blank chamber. My recommendation depends on where you want to live and current housing market prices, if they are high, rent or travel for awhile until the prices go down, and you do not need to worry about interest rates. Last two homes we have owned we came in with cash at times when the market was soft, and we dictated the price/terms. Now, is a bad time to buy a house in many markets, but the feeding frenzy is ebbing, As Dave mentioned if the stock market get the jitters, or takes a tumble, so will the housing market.

Last but not least, one needs to think about inflation over the years, and what that means/impacts you. If you own nothing, you will always be paying more for everything/living expenses which will go up and more than you might expect. If you own everything inflation only impacts those items you need to live on, so food and utilities (energy, water, etc.), as a percentage of total spend the impact of inflation is much less on your run costs as long as you do not spend like crazy on consumer goods. If you own your house, and you plan to stay, then owning the house just eliminates those run costs for years to come. It doesn't really matter as to the value of the house long term, as you plan to stay. Also do not do a reverse mortgage, you will regret it.

We own our house, I have a 9kW solar system, so electricity is paid for and I have enough reserve for and EV if I go that route at some point. We live in north county San DIego, so heating costs are minimal, house taxes are the biggest expense, but at least I know they will stay relatively constant in future years (when we lived in Tucson, AZ they went up 20% in one year). I been driving the same truck for 15 years, and wife owns her car and plans to keep hers for 10-15 years. I do almost all the maintenance and repairs, so we pay for food, gas and water. We have disposable income, but we are not big material consumers. I have multiple sources of income, and if needed I could loose one source and we would still be comfortable and have no worries. Why risk the money in the market at this point, I am more into capital preservation with consistent appreciation at 3-7%.
Mark
 
Another thing to think about is parents. If I had really planned ahead we would have a place with a separate granny flat.
 
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