How to Get Rich - Know Your Housing Market

Do you think you can get rich by paying too much for your home ?

Do you think the wealthy ever get caught on the wrong side of a real estate deal ?

The answer to the above is a resounding NO !

Your Home as an Investment

A common phrase often heard is that your home is the biggest investment you will ever make. I am not sure how this old saying ever got started, but my money is on the banking or mortgage industry. They are generally the ones with the most to gain from you having too big a housing debt.

First of all, the real estate that you live in is not really an investment. If you can't draw an income from it, then it is really just a place to live. I find it amazing how most individuals have been convinced to think otherwise. Why is it that everyone seems to be obsessed with buying a home well beyond what they can afford or even need? The answer is marketing ! From the banks, the home improvement companies, and yes the numerous reality tv shows. What a scam !

A Place to Live

Yes, a place to live. That is all your home really is. Now that you hopefully understand that, how do you know when purchasing your home is the best option ? Simple. When you can afford it. Decide what percentage of your income you feel is wise to spend on housing and don't go over that amount.

If your local housing market forces you to pay more than you are comfortable with, simply don't buy. It may be wiser to rent your home ( if it's more cost effective ) and invest the difference in income producing investments. This will help you in two ways. Firstly, it will increase your level of income. Secondly, it will give you time to really think about how you will be able to someday afford your dream home.

Home ownership is not always a good thing. Just look at the thousands of foreclosures in the US over the past few years. Many of those individuals will never recover financially from the housing market disaster.

Market Bubbles and Collapses

Most things go in cycles and real estate is no exception. Real Estate has a much longer cycle than most commodities, which is why many people lose money in real estate. They don't have the patience or the resources to wait out the cycle. Many simply don't believe that prices will ever fall.

I live in a current real estate market where buyers actually bid on properties, often paying thousands more than the asking price and often far more than the real value of the properties. Insane. Needless to say I have not been a real estate buyer locally for some time. I have however, been a seller on a few occasions taking advantage of the insanity of the buyers. Very profitable for the seller.

Buy low, sell high is my motto even when it comes to Real Estate that you live in. If you pay too much for your home, it could eventually become the noose that may  hang you financially. Don't buy it if you can't afford it. Invest your money instead in something that will pay you an income.

As always, I welcome your comments and suggestions for future topics.