Not everybody needs to own a home

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Real estate is sizzling hot these days.

 

You know it’s a hot topic when you go to Starbucks on the corner hoping to get some coffee in peace and quiet but end up listening to people having conversation how investing in real estate is a sure way to make money. Then on the front page of Financial Post you’ll see an article how prices of real estate in Vancouver are more expensive than London and Hong Kong combined. On TV you’ll see yet another real estate investing show. Your cab driver will inform you he’s thinking about investing into rentals. Your friends will ponder about becoming real estate moguls while consuming copious amounts of pizza on Friday night.

Seems like everybody is talking about it, prices are going nowhere but up, and today is your last chance to buy it; otherwise you risk spending the rest of your pointless life in misery while paying rent. Paying rent is now a synonym for throwing your money away because you simply pay someone else’s mortgage and have nothing to show for it at the end of the month.

But what everybody fails to mention while praising real estate as an excellent investment opportunity is that owning your own home is not for everybody. You can go on living your life without having your name on the property title. In fact, some people should be prohibited from even thinking about buying real estate yet thanks to the media frenzy they go down this road and in most cases it ends very badly.

 

 

If you are a student going to school you have no business owning your home.

 

I’ve met somebody who actually bought a condo while going to school with no considerable income. I have no idea how she got approved for a mortgage, but somebody should have pulled her aside and told her that buying a condo while going to school is a very bad idea. Sure, you have to live somewhere but your income is low and unstable. Also, there’s a very good chance you’ll be moving to start your career after you finish school or simply move away closer to work. And 2-4 years it takes to finish school isn’t long enough time for your property to appreciate – between listing fees and all associated costs you might end up losing money on the transaction. Just finish your school in a nice rental. There will be plenty of time to buy some real estate once you’re out of school.

 

If you don’t have a sizable emergency fund, you should stick to renting.

 

Knowing what I know now about owning my own home, I would not buy a place without having at least $15-25K sitting in a separate bank account as an emergency fund. While having emergency fund is a good idea for just about anybody, it is especially important for those who are homeowners because things happen. Issues come up, and you no longer have the luxury of simply calling your landlord to take care of them. Now it’s your own money on the line, and you have to pay. Appliances need repairs or need to be replaced, insurance rates have been raised and you may need to send them a bigger cheque, your roof needs to be replaced, and you have mold in your basement. Either you have money to solve these issues or you’re in big trouble. Under no circumstance you should be consider buying a home without small pile of money tucked away in case things go sideways.

 

If you still don’t know what you want to do when you grow up buying your own home might be counterproductive.

 

Let’s be honest. Life in your 20’s is pretty awesome. You party, you go to school, you make new friends, you date, and you have fun. Life in your twenties is about discovering yourself. If you’re like an average 20-year old, you’ll probably change the direction of your life three times before lunch time because …. SQUIRREL!!!

Basically what I’m saying is that there’s no shame in waiting till you settle down to start thinking acquiring real estate. Perhaps by that time you’ll pick a place where you want to live, your career will be on the way, and you’ll be ready to commit. Because buying your own home IS a commitment. Treat it like one.

 

If you have debt, don’t even think about buying your own home

 

I’ve been in debt, so I know a thing or two about living with it. Debt weighs you down financially. It sucks juice out of your financial well-being. It drastically reduces your options and puts extra stress on your life.

If you have troubles repaying X amount of debt, does it make sense to go and sign up for XXX more debt? I’m not the sharpest tool in the toolbox and I’ve met dogs and cats smarter than yours truly, but it doesn’t make sense to me. Ideally, you slay all of your debt and life debt-free for a while before you commit to borrowing hundreds of thousands of dollars. Just like before lifting Olympic-size barbell at a gym, you become comfortable dealing with much smaller weights first. Only then you move on to bigger challenges.

 

Anyways, the moral of the story is this:

 

Everybody is screaming at you that you need to invest into real estate right now or forever be left out (including a giant real estate industry and everybody who benefits from it). Granted, investing into real estate if done under proper conditions can be quite beneficial. But renting for a while until you meet these conditions won`t change your life so don`t lose your sleep if you`re not quite there yet. Finish school, work on your career, have some fun in your 20’s or 30’s, pay off your debts, and become comfortable with your finances. There will be plenty of opportunities to buy later in life. Millions of people enjoy perfectly normal lives despite paying rent instead of a mortgage. Don`t give into the hype and do what makes sense for you personally at the moment.

Just my two cents of opinion.

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