When we speak about investments, one of the first things that comes to mind is buying your own home, whether it is an apartment or a house.
Contrary to popular belief, this is a terrible investment.
Sure, there are a lot of advantages of owning a home.
You can tear down that wall,
paint this room pink with unicorns,
and generally do whatever you want (in the framework of the law and other people's comfort, of course).
Let's talk about investments
But when we are talking in terms of investments, we must admit that it's a bad idea.
Why? The answer is straightforward.
Owning a house takes money from your pocket, rather than putting it there. You need to pay taxes, insurance and maintenance. This is called carrying costs, which are often overlooked by novice investors.
Of course, over time, the cost of a house can increase. But with high probability, this growth will not cover all costs.
Here is an example. Let's say you bought a house for €200,000, and after 10 years you sold it for €280,000. It seems like an excellent investment! But let's figure it out.
Suppose you spend €800 each month on principal, interest, taxes, and insurance (PITI), and another €250 on utilities. It's €1050 per month or €126,000 for 10 years. Add the repair and maintenance costs here, and you get all of €150,000. It turns out that you paid €350,000 and sold for €280,000.
The investment no longer looks so attractive, does it?
Оwning a house
Of course, owning a house is an important element of our life, and we have nothing against this statement.
The only issue is that it can’t be considered as an investment.
It is much more profitable to invest in assets that will bring you money in the long run. Among them — bonds, stocks, crowdfunding or other tools.