Why you should Rent a place to live in and Buy a place for Investment – Did you know that in your Bank’s Accounts “Your House” is placed in “Their Asset Book.” That means that the house you own and live in, is a “Liability.”
Rent Your Home; Don’t Buy It; That Seems A Provocative Thing To Say, Don’t You Think?
From the desk of Colm Dillon …
Hello Colm here …
So Why Do The Majority Of Us Do The Exact Opposite; We Buy & Don’t Rent?
Countless articles have been written over the years on the wealth ‘make up’ of the richest people. While the percentage may vary depending on the individuals leaning, the real estate proportion will vary between 20% to 35%.
Here’s a thought for the day; It’s the basis of this report; It’s one of the Tools you should use to create Wealth; so think about it before moving on!
In The Banks Accounts, Your House Is In “THEIR ASSET Column”
That Must Mean, That In Your Personal Accounts Your Home
“IS A LIABILITY”!
I want you to keep that thought in your ‘open mind’ as you grapple with this new concept. I write these articles to make you THINK and that can sometimes make you uncomfortable.
It’s Hard to Justify Borrowing Money To Buy A “HOME.”
Sorry, but it’s economically very difficult, in wealth development terms, to justify buying real estate for you to live in, if you have to borrow money to do it, unless you put a massive monetary value on your emotions.
Please understand my purpose in writing this report and associating it to a site about real estate development.
A lot of us have to be financially smart to be able to accumulate enough capital to do our first development … so this is for those people … but maybe there are a few ideas in it for the rest of us as well … so read on.
This wealth development concept, based on renting, was given to me many years ago by one of the most interesting and provocative speakers on economics I have ever heard.
He’s name is Phil Ruthven and he created a company, Ibis International, an economic analysis and forecasting company. Phil also writes for the Financial Review and is in high demand as a speaker on economics.
By any reasonably observation, Phil is successful; both professionally and financially and so can buy a home, if and when he wants.
He doesn’t, he chooses to rent and his reasoning goes something like this.
“When I started life as an adult,” he said, “I was a ‘single person’ and my single status defined my real estate accommodation needs.
Later I became a ‘twosome’ and my real estate housing needs changed for the first of many changes.
When the twosome became threesome or foursome, by definition, our housing needs changed yet again.
Later in life, when kids grow up I will become a twosome again.”
Now Phil contends that on top of our family profile changing, our work situation also changes; maybe a move interstate, which further complicates this equation.
In a scenario like this every time real estate is bought or sold and not rented, there are Stamp Duty, Legal Fees and agents Commission to be paid PLUS the costs you expended on decorating each home.
Add it up! You are talking about ‘many’ tens of thousands of dollars paid by you as a direct result of the choice you made to Buy Real Estate To Live In out of your net after Tax Income.
So Phil told his audience, “he has rented his real estate accommodation for more years than he cares to remember.”
“Renting,” he continued, “allows me to change my place of residence, at the lowest cost, having regard to my family’s changing needs.”
He further improves the deal by pre-paying his rent, sometimes for a number of years, and getting a handsome discount from the landlord. When his needs or mood changes again, he just moves on and repeats the process.
“But what about all that lost rent he had to pay?” I hear you say, “that surely reduces your wealth development.”
And I say, “what about all that interest you pay on your non tax deductible home loan?”
Understand ‘Rent and Interest’ are money that comes out of your ‘net after tax’ pocket, we just call them different names; that’s all!
In Phil’s case he has clearly segmented his personal real estate accommodation, as rental, from his real estate investment ownership accommodation, maximizing the benefits of the wealth growth tools and enhancing his wealth development with little interruption to his lifestyle.
The Real Estate Development Coach
Author of “Residential Development Made Easy”
Copyright Colm Dillon, October 2003
All Rights Reserved.