Tuesday, February 19, 2008

Your House is a Home, Not an Investment

I cringe every time I hear someone tell me they are buying their new home because it’s a good investment. Your home is not an investment – at least not a good one. If your home was a good investment it would be generating positive cash flow. I don’t know anyone who generates positive cash flow from his or her home.

I often hear a home is a good investment because property taxes and mortgage interest are tax deductible and paying rent is like throwing money away since you can’t deduct your rent payments. Trust me, paying property taxes and mortgage interest is not a good thing as it’s never wise to spend a dollar to save thirty cents on taxes. Also consider that purchasing a home has large upfront expenses in closing costs, annual insurance premiums, high utility costs and frequent maintenance expenses.

Consider your house a home. Live in it, enjoy it, and love it, but don’t consider it an investment. If you are fortunate enough to see your home appreciate substantially over the years, consider yourself lucky.


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