How do real estate investors deviate from homeowners? Are they really all that different? To adequately answer the questions, we first must deconstruct the labels.
The seemingly obvious factor is that home ownership is an emotional process first and a business deal second. Conversely, real estate investors are business people first whose whole approach to property ownership is based on the numbers.
Buying a home
Here at KForce, we believe everyone should own a home; even if you’re a remote-working, digital nomad, traveling the world most of the year. We all need a place to lay our head. Life happens and having a home base can do wonders for regaining your edge and efficiency.
So here’s a crossover; you don’t plan on living in your home anytime soon. It may be several years before you intend to move in so why would you want to buy now? Fact is it’s a good time to buy. The home market is affordable with a combination of low interest rates and good housing prices. Purchasing a modest property now can mean you’ll be free and clear of housing debt later in life.
Even if you never intend to become a real estate investor, buying now can be powerful for building up equity and cash. Later on, this could be useful for upgrading your home or housing.
Is a home the best investment?
Many folk, including Warren Buffett, consider their home their best investment ever and the same will be true for most people. Seeing that your housing costs will make up the majority of your life’s expenses, the faster you stop paying for housing, the faster you will be financially free.
Even with market fluctuations, the housing prices have consistently moved up over the long term. For most of us, the majority of wealth we create will be in our homes. And this is why data shows homeowners are tremendously wealthier than renters.
Not a true investment?
Then there’s the argument that because everyone has to have a home, it’s not really a true investment. Unlike stocks, gold or other investments, you can’t liquidate your home equity; you will always need a roof over your head.
Second homes, vacation property and retirement condos are another matter. While not falling into the exact definition of an investment, they offer serious tax benefits, income and wealth building potential.
True investing is different
Take another line from Warren Buffet who believes “Investment is best when most businesslike.” To be truly businesslike about your own home is hard because there’s a lot of emotional attachment.
Buying, managing, and selling of pure investment properties is easier. By being more objective, risk is lowered and real returns increased. Free from the constraints of location, price range, and looks, you are able to hone in on the facts and figures.
In an ideal situation, everyone should be a homeowner and then invest in real estate for profit and wealth protection. Buying a home first, will give you experience in the process and create a financial foundation.
Investing in real estate first can create the wealth to buy your own home from the proceeds. One good strategy if you’re just getting started is to select a duplex or triplex for your first purchase. Both goals can be achieved at the same time.