Why buying a home is usually a terrible investment (vs buying bitcoin).

[headingnorth]

Most people buy into the myth that buying a home is the best investment you can ever make...but more often than not that idea is just a myth.

Take the US as an example. The average house in N. America appreciates 5 to 6 per cent per year, which sounds great at first glance. In 10 years the value of your house will almost double.

But  most people don't take into account the interest rate where the average homeowner is paying approx. 6% annual interest on a typical 30-year fixed mortgage.
So the interest alone is wiping out the gains on your annual 6% appreciation. On top of that you are paying 1% property tax year every year, maintenance and repair costs, etc.

Making matters  worse is that for the first ten years or so most or all of your payments are applied to the interest, so you wont have any actual ownership or equity of the home,
or very little...for the first ten years. And consider that much of the appreciation of your house is simply due to inflation. So if inflation is 5% per year then that alone is undermining your actual appreciation.

I'm not saying that owning a house is a bad thing, there are certainly benefits to home ownership. It provides you with a place to live, you can borrow against it,
you can pass it down to your kids, etc. If you just want to have a place to live and call your own then owning a house may be a great idea for you, but don't think of it as some kind of
incredible financial investment because it is not as great as you may think.

[Fiatless]

Owning a house might not be a good idea in the US, but it is lucrative in other countries. I know that there are countries where the price of houses appreciated more than 5%-6%. In my country, houses' value can appreciate 100% in five years depending on the location. If you live in an area experiencing a population explosion and increased tourism, you might understand my view.

There was an anti-tourism protest in Malaga, Spain because the the price of rent increased by 16.5% in a single year. House owners in such locations will be making good profits. There are also some countries where the government doesn't charge as high as 1% yearly property tax. In some countries, property tax doesn't even exist. Bitcoin is a good investment, however, diversifying your investment to the property business is not also a bad idea.

[Faisal2202]

Buying a home or owning a home brings more than what you said about paying taxes etc. We save funds that we spend on renting houses, and we save on food that we will buy from restaurants or hotels because in our home we will be buying in bulk, and cooking food at home for 5 people is much cheaper than in hotels or restaurants. There are many other things to consider besides just cooking and eating.

The point is houses are definitely not a good investment financially but inheriting to kids is a big investment.

There are houses in my place that gave 10 over the 10 years so yeah financially houses are not good investments. They won't be a good investment and there is a study that shows that renting a place is much cheaper than owning a house.

[d5000]

If you just want to have a place to live and call your own then owning a house may be a great idea for you, but don't think of it as some kind of
incredible financial investment because it is not as great as you may think.

It depends enormously on the market situation on the real estate market. But also on the risk you're willing to accept.

Bitcoin has performed really well in the last 15 years. It was maybe the best-performing asset (besides from some pennystocks, memecoins and other assets with far less value).

But while there are lots of theories trying to tell new investors that "Bitcoin must go up forever", this is not a law of science. It is an assumption based on the past performance, and often taking into account the limited supply, and perhaps an "adoption curve" like Metcalfe's law based on network effect.

I however think it's time to move to a new kind of analysis to predict Bitcoin's future, an analysis based on the market niches it can occupy in the future. I for example expect that indeed Bitcoin could become a real alternative to gold, at least for the private sector and a few governments who can use Bitcoin to diversify. However, this will only occur if the volatility to the downside lowers. Nobody wanting a "stable investment" will invest in Bitcoin if some local economic problems in Japan drive down the price 15-20% like it occurred last Monday.

So I believe that Bitcoin is still a risky asset. For me, the probability that it continues to grow is very high, but it is not 100%. And it's very likely that the growth will continue to be bumpy, with highs and lows. What if you need your money just in the middle of a crypto winter?

So there are several investor profiles where an investment in a home (or real estate in general) is a better decision than an investment in Bitcoin.

[Helena Yu]

True, let alone the calculation, if you rent the house you bought and the renters commit suicide, your property price will down more than 50% because no one want to rent in your house anymore except you offer very cheap price.

Nowadays there are many people commit suicide due to high social expectation and people become more individualism.

What if you need your money just in the middle of a crypto winter?

No one ask to invest all of your money in Bitcoin, that's why you need to have emergency funds that can cover your 1-2 years expense.

[davis196]

True, let alone the calculation, if you rent the house you bought and the renters commit suicide, your property price will down more than 50% because no one want to rent in your house anymore except you offer very cheap price.

Nowadays there are many people commit suicide due to high social expectation and people become more individualism.

What if you need your money just in the middle of a crypto winter?

No one ask to invest all of your money in Bitcoin, that's why you need to have emergency funds that can cover your 1-2 years expense.

What? I don't believe this. If somebody offers me a house at a 50% lower price I would definitely buy(or rent) that house. I wouldn't even care who committed suicide or who got killed inside that particular house. I'm not superstitious. Committing suicide due to "high social expectation" seems like the dumbest thing ever.
Anyway, investing in a house/apartment can be really lucrative, but it depends of the location. Buying in a home is a necessity in most countries around the world. I can't imagine having to live in a rented house/apartment across my entire life. I live in an inherited house and I'm glad that my grandparents bought that house 70 years ago(for a pretty cheap price).
We don't have to compare housing investments with investing in BTC. They don't belong to the same category.

[avikz]

Most people buy into the myth that buying a home is the best investment you can ever make...but more often than not that idea is just a myth.

Take the US as an example. The average house in N. America appreciates 5 to 6 per cent per year, which sounds great at first glance. In 10 years the value of your house will almost double.

But  most people don't take into account the interest rate where the average homeowner is paying approx. 6% annual interest on a typical 30-year fixed mortgage.
So the interest alone is wiping out the gains on your annual 6% appreciation. On top of that you are paying 1% property tax year every year, maintenance and repair costs, etc.

Making matters  worse is that for the first ten years or so most or all of your payments are applied to the interest, so you wont have any actual ownership or equity of the home,
or very little...for the first ten years. And consider that much of the appreciation of your house is simply due to inflation. So if inflation is 5% per year then that alone is undermining your actual appreciation.

I'm not saying that owning a house is a bad thing, there are certainly benefits to home ownership. It provides you with a place to live, you can borrow against it,
you can pass it down to your kids, etc. If you just want to have a place to live and call your own then owning a house may be a great idea for you, but don't think of it as some kind of
incredible financial investment because it is not as great as you may think.

US example doesn't work every time! Buying home can be very lucrative in growing markets. If someone buys home at a location which is already at the peak, is not a good idea if you are looking from an investment perspective. But at the same time, if you are buying a home in a growing locality where developments have just started, it can give you 3x to 5x returns in 5-7 years timeframe. Also do not forget about the rental yield in the meantime. Even though rental yield is lower in most cases, it surely gives you a constant source of money flow.

Owning a home is not necessarily a bad thing if you have some plans for the future. But it all depends on where you are buying it. Also, let's not forget about the tax implications of buying and selling bitcoins in most of the countries. So a lot of factors to consider.

[un_rank]

There are lots to factor in when you consider buying a home alone, when you compare that with buying bitcoin those different possibilities almost double. This I believe makes it impossible to compare and not necessary too. You only considered the US, but other countries have different economic conditions and even in the US it varies from state to state.

Everyone should do their research and come up with actions suitable to their economic conditions.

Nobody wanting a "stable investment" will invest in Bitcoin if some local economic problems in Japan drive down the price 15-20% like it occurred last Monday.

If they are buying for stability will they also be bothered about rises that may occur along with crashes? Or will they need it to be completely stable or just fluctuate between the 2-4% range for long periods of time?

- Jay -

[Poker Player]

The OP's post is full of half-truths, and therefore half-falsehoods as well. Starting with the fact that you may or may not buy Bitcoin, but you don't need it to live. On the contrary, you do need a roof to sleep under, and if you don't buy you will have to rent, and there are places where rent is worth the same as a mortgage payment. So it is better to build equity than to waste money on rent (although there are exceptions, as if you have to move very often for your job).

Take the US as an example. The average house in N. America appreciates 5 to 6 per cent per year, which sounds great at first glance. In 10 years the value of your house will almost double.

But  most people don't take into account the interest rate where the average homeowner is paying approx. 6% annual interest on a typical 30-year fixed mortgage.
So the interest alone is wiping out the gains on your annual 6% appreciation. On top of that you are paying 1% property tax year every year, maintenance and repair costs, etc.

Making matters  worse is that for the first ten years or so most or all of your payments are applied to the interest, so you wont have any actual ownership or equity of the home,
or very little...for the first ten years. And consider that much of the appreciation of your house is simply due to inflation. So if inflation is 5% per year then that alone is undermining your actual appreciation.

Do you know that there are people who take a 15 or 20-year mortgage? There are even people who amortize, so what you say that in 10 years you do not build equity is another half truth, and another half falsehood, as you prefer.

but don't think of it as some kind of incredible financial investment because it is not as great as you may think.

Maybe not so much in the 21st century, compared to technology investment and Bitcoin, but it certainly was the biggest deal of the 20th century, where the biggest fortunes were either made in real estate or once the money was made in other sectors they invested a lot of real estate.

In your example you have only taken into account buying a house to live yourself, which according to Kiyosaki would be a liability, but let's now look at buying to rent, if you do it professionally:

1. You can buy with very little money down and it is financed by the bank.
2. You receive cash flow from rentals.
3. You have tax advantages such as depreciation.
4. It also revaluates in the long term.

Therefore, it is a much better investment than you want to make it seem in your simplistic post.

[Fiatless]

What if you need your money just in the middle of a crypto winter?

No one ask to invest all of your money in Bitcoin, that's why you need to have emergency funds that can cover your 1-2 years expense.

Some problems can consume 2 years of emergency funds in a few months. Loss of job or health problems are unpredictable issues that can distort your investment plans. Considering the economic situation in some countries do you think it is possible to save up to two years of emergency funds? You might never be able to invest in Bitcoin if you are waiting to have such an amount in an emergency account.   

True, let alone the calculation, if you rent the house you bought and the renters commit suicide, your property price will down more than 50% because no one want to rent in your house anymore except you offer very cheap price.

Nowadays there are many people commit suicide due to high social expectation and people become more individualism.

I would gladly rent or even buy a house where the renter or owner committed suicide. Was it the house that made them commit suicide? Maybe this might be related to the cultural or religious orientation of your location. In my country, people are buried inside houses and immediately after the burial, the rooms are worked on for rentage . People don't care who was buried there because there is a shortage of accommodation. 

[Sobz]

I don't think owning a house is a bad investment. Paying house rent is one of the most expensive things people struggle for, and everyone are complaining how expensive the rent for apartments is. For people who can afford to get a house as property it is not a bad idea for them because no matter how expensive a house is their are people who can still afford it. Rents always increase with time even if the standard of the house is losing value. I don't see this investment to be a bad one when it comes to physical investment. Having bitcoin as investment this is another investment I'd like to go into. It is a lifetime investment even if you no longer exist in this world it will still bring profit for your as far as the building still stand strong.

[Hewlet]

Owning a house as an investment choice is a lucrative investment which in most cases starts yielding profit immediately you're done building the house. I don't know how it works for the state in terms of taxation policy but in my region, the only bills you mostly pay as a house owner involves obtaining the necessary document at the time you're about to start building the house. After you've done all the spending in the building phase and you've probably rented the house out, you don't spend on  any other fee and no tax policy affect house owners in any way. In most instances, even when you're to carry out maintenance on the house, it's usually a combined effort from both the house owner and the tenants which means it involves less expenses for you as a house owner.

The only reason why investment into building of house isn't all that lucrative or considered the best choice for most average person is due to the cost of carrying out the investment process and knowing that you have to get the complete funds including the amount you're to use in obtaining the land, erect the house, do all the tilling, painting and wiring  which will amount to nothing less than 10 million Naira in my local currency. If after you've rented out a building that's worth this amount, let's say it's a 5 room apartment, the average pay per room is 200k of my local currency multiplied by the 5 will give you a million Naira. So in essence, for your 10 million naira investment to gain twice the invested amount, it has to stay an interval of at least 10 years before you get such returns. But If you consider investing such amount in an alternative thing, it's sure you will get more than that profit before the 10 years elasp.

The investment choice one chooses is totally a preferential thing and based on region and how favourable the policies of the government works for your case will go on to affect your investment decision.

[pooya87]

It is not that easy.

Most people buy into the myth that buying a home is the best investment you can ever make...but more often than not that idea is just a myth.

I disagree. Like any other type of investment, if you know how to do it then it can be very profitable.
For example the simplest thing I can think of is the cases of neighborhoods that have a good potential to grow. And in a year or two the value of said house would be a lot higher than the average growth elsewhere.

You also can't generalize this for everyone in all situations. For example if someone doesn't own a house and is currently renting, I personally find it stupid to not buy a house if they can. Specially when the inflation is high like these days in majority of the world.

But  most people don't take into account the interest rate where the average homeowner is paying approx. 6% annual interest on a typical 30-year fixed mortgage.

Borrowing money to buy a house is not always the only option. People can buy a small house that is cheaper in a cheaper neighborhood and then work their way up that way.

On top of that you are paying 1% property tax year every year, maintenance and repair costs, etc.

Another reason why you can't generalize this. For example we don't have property tax here like this. That only applies to "expensive" properties not to everything.

but don't think of it as some kind of incredible financial investment because it is not as great as you may think.

It may not be as profitable an investment as many other things (compared to bitcoin) but also it is not as risky for example the chances of your house dumping in value by 50% is very low while bitcoin can dump 50% tomorrow!

[Crypt0Gore]

Say what you want but having your own house is not terrible at all, but I prefer doing this only if I have the extra money, minus my investments and stocks, when free money comes that goes into my housing project.

I said this because I've seen people building houses and months later they can't even feed themselves well, you have to be making many incomes from different sources before you consider a house. ..

Its also possible that the house you build for business will not favour you much, because I have someone who spend lots of the money he makes from the house back on the same house, due to  mismanagement of the tenants, even damages fund isn't enough.

[$weetne$$]

I'm not saying that owning a house is a bad thing, there are certainly benefits to home ownership. It provides you with a place to live, you can borrow against it,
you can pass it down to your kids, etc. If you just want to have a place to live and call your own then owning a house may be a great idea for you, but don't think of it as some kind of
incredible financial investment because it is not as great as you may think.

It might not be a great investment in the US but it is a great investment in other counties. In my country, land appreciate very much when development comes to the environment that the land is located therefore when you own a home there, the value of your land and your house appreciates. House ownership is a great investment and if you have the money you should do it. You can own a house and still buy Bitcoin therefore you should not do one and leave the other one. Owning your own home give you long term investment because everything that you do to improve your house, stays that way forever until you are ready to move from the house to a bigger one or a different location but doing those modifications to rented apartments gives value to the house owner and not yourself.

[Ishicryptic]

I don't know about the housing laws in America, but in my country, real estate is one of the best investments that anybody can go into, so far you did you investigations before buying to determine whether it's a disputed property or certified place to build. You don't need to worry about dip in real estate, from the time you own a property it'll keep increasing in value as the years goes by, except if their are issues Ike the ones that I mentioned. I think that the edge that Bitcoin investment has over real estate is that you don't need to be rich or gather too much money to start hodling Bitcoin, any average income earner can start buying Bitcoin in Satoshi, but you need a lot of money to start real estate investment. Starting Bitcoin investment is very easy but real estate requires starting with a lot of money.

[BALIK]

If I remember correctly, you were the one who created the thread saying that selling gold in the US is difficult, right?  

I don't know what's going on in the US, but according to my understanding, billionaires, millionaires or rich people are the ones who own the most real estate and gold. In addition, in the remaining countries, owning a house or real estate is something that everyone from young to old dreams of.
In my country, owning a house will help us save a lot of costs as well as help us feel most secure because we can ensure our family has a place to live without having to worry even when we don't have money. In my country, renters have never had a better life than people who own homes, let alone people who own many homes. From what's going on around me and what I see, people are fine without bitcoin but if they have to rent a house it means they don't have the stable life they expected.

[franky1]

all investments come with risks, especially if you bought during the wrong economic period

yes although you bought a property at market rate of $200k but later sell for $400k this can be seen as a capgain of $200k however if you then take out the cap gains tax which in some places can be 40%(chile, turkey) then the ongoing costs you incurred while living in it and the mortgage interest leaves you with no real terms profit

for instance buying on the high where 'comps' of the area have rose way above inflation rate, means you might have bought during the premium at $200k where as your neighbour just 6 months earlier bought the same design suburban home for $150k
and then another neighbour about to sell might be pushing to sell for $180k next month due to wanting to rush a sell to escape the area to look for new work elsewhere

then adding on mortgage interest to your $200 purcshase price, and then if in a hoa having to pay hoa fee's, property taxes, maintenance and such are all an ongoing cost that adds on, which may come to a $400k total cost in many years,
..so you then hope the inflation/comp's continue to rise above the rate of your ongoing extra costs to get you a ROI when its time to sell (emphasis on hope)

risks are things like:
if your neighbour lost their job, house went into foreclosure and then sold at local gov/bank auction at a low price this then sets a 'comp' in your area of a lower amount which then affects your valuation

when nearby workplaces/industry's go bust, it causes alot of unemployment and then people migrate to other neighbouring towns where new work can be found, thus selling down their property to escape the dead town thus reducing the comps and thus affecting the max you can sell for in comparison(mass exodus of people seeking new work in other towns causes your town to become a desolate ghost town)

events like riots, school shootings, vagrancy can cause people to not want property in your area, thus dry up the pool of prospective buyers, causing you to lower your ask price to try to convince buyers

although real estate buyers look at comps as a guide to pricing similar properties.. each property has its own underlying costs and so prices vary.
if 2 neighbours had the same design home but you mortgaged at a period where you are paying 7% interest but your neighbour bought at a 4% interest and so they can afford to sell for less so when you both have a for sale sign and they want to sell for less, the prospective buyer then looking at your property with a higher ask will not pick your property

[Taskford]

Well if you want to start a family buying home is necessary since its maybe bad for you if you decide to rent because you decide to use your money for investment. Much better you secure your family first since money will just come and you can start whenever you want.

But if you just buy a real estate asset because you think the price of it will appreciate in future then maybe your decision is not good with that situation. Since everything is unsure with the asset we buy and sure there are lots of factor that can affect the value of the asset we bought. So with this situation I would agree that bitcoin is the best option since provably that we can earn more better profits especially if bitcoin would hit those big numbers just like what other people speculated to happen.

If you are capable to acquire both then grab it who knows maybe we can get more beautiful result in future especially if our asset is in good position which developments in that area is continuously growing.

[Odusko]

If I remember correctly, you were the one who created the thread saying that selling gold in the US is difficult, right?  

I don't know what's going on in the US, but according to my understanding, billionaires, millionaires or rich people are the ones who own the most real estate and gold. In addition, in the remaining countries, owning a house or real estate is something that everyone from young to old dreams of.
In my country, owning a house will help us save a lot of costs as well as help us feel most secure because we can ensure our family has a place to live without having to worry even when we don't have money. In my country, renters have never had a better life than people who own homes, let alone people who own many homes. From what's going on around me and what I see, people are fine without bitcoin but if they have to rent a house it means they don't have the stable life they expected.

The dream of every responsible person is to own a home and provides shelter to they family, because that is the primary responsibility of anyone, so who ever at whatever age you can own a house, it something that is worth celebrating and for sure there is a big relief in owning a home which money can not buy most especially when you own the home for your family.

Real estate also as a business is a big investment that billionaires rush into and aside from the profits merging, there is a guarantee of security for the assets and the believe that the value of the property will keep increasing yearly, this is what makes that big difference, Bitcoin on the other hand is a contemporary investment and only for smart people, only a few of investors will believe Bitcoin to be a better investment compared to real estate, because Bitcoin lack physical representations and the risk that comes along with holding Bitcoin compared to the risk of owning an estate, aside from the tax which make the difference.