Don’t Buy a Home … Part 7: You Can’t Live in a Mutual Fund

But you can't live in a mutual fund.

Okay, I’ve been tough on real estate for the past few posts. In case you need a recap, here are links to my previous points of caution about real estate. Now, I'm not a real estate agent, but I think these are some key points to consider:

Don’t get me wrong, I’m not against real estate on principle. I just think it’s worth a balanced discussion as you plan your finances and frankly that often seems missing in the media and around the inter-generational dinner table. Even after this discussion, some folks I’ve chatted with are still focused on owning real estate. Even after they’ve heard and understood all my points of caution. Even after we run some predictions about possible different scenarios where they’re further behind financially when they purchase their home. Even after all this, they still want to buy deep down, they just want to own a home. There’s little that I can do to argue with that and that’s fine. If you really want something as big as this, my job is to build a plan to help you get there.

After all, you can’t live in a mutual fund.

You might want to want more stability than you feel you can get renting. You might want to have a place you can imagine yourself staying for a long time. When it comes to emotional logic, any numbers I might crunch often fail to compete.

Now, There’s a savings strategy I often recommend to clients who are considering buying a place. Say your rent is currently $1,500 a month and your costs of ownership would be $2,000 a month. In the interim, why not put an extra $500 a month into savings? That way you’re testing out what that new monthly expense would feel like while increasing your savings.

You can put those savings in a safe investment like a deposit account or GIC so that you have them on hand for a larger down payment. Or you can add them to your retirement or other long-term savings. Either way, you’re increasing your net worth while testing out a new monthly financial reality before leaping headlong into home ownership.
As always, I’d be happy to discuss real estate as a part of your financial life.

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