Redditor Gets Called Out By Partner For Making A "Bad Investment" After Buying A Property Without Them Agreeing On It (2024)

FAQs

Is buying a house ever a bad investment? ›

A Home is an Unproductive Asset

Owning businesses, stocks and bonds are good examples of investments that pay you cash each year. Primary residences are unproductive assets. Not only don't they pay you dividends, they actually take money out of your pocket every single month like clockwork!

The average rental yield in India is around 2-3%. This means that for every ₹100,000 you invest in a property, you can expect to earn around ₹2,000-3,000 in rent each year. So, for a property worth 1 crore, you can expect to earn a rent of around 3 lakhs a year. However, you will not get to keep all of this money.

While the housing market has its ups and downs, your house is likely to grow in value over the long term. In fact, the median home sale price has greatly increased in the past 13 years, going from $221,800 in 2010 to $425,150 in 2023. The value of your home typically rises as you pay off your mortgage.

As mentioned above, stocks generally perform better than real estate, with the S&P 500 providing an 8% return over the last 30 years compared with a 5.4% return in the housing market. Still, real estate investors could see additional rental income and tax benefits, which push their earnings higher.

'You're Trapped for 30 Years' One of the reasons Cardone sees homeownership as a trap is that you are physically trapped in the same place, usually for 30 years. “You have to live in the same place every day for 30 years and pay for it,” Cardone said. “It is a terrible, terrible investment.

Homes are actually traps," Cardone tells Axios. "Buying a single-family home traps an individual for 30 years under the pretense that it's a savings account and that you're going to make money."

Unstable Market Conditions:

Market conditions play a vital role in the success of real estate investments. If the local real estate market is experiencing instability, such as declining property values, high foreclosure rates, or oversupply, it may not be an ideal time to invest.

Rental properties might be considered a bad investment for various reasons: Acquiring rental properties can require a substantial upfront investment in down payments, closing costs, and potential renovations. Dealing with tenant issues, maintenance, repairs, and property management can be time-consuming and demanding.

The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have cooled a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.

Key Takeaways: Most first-time homebuyers make a purchase when they are 35. Buying a house at a young age can mean building equity young and getting a home paid off sooner. Purchasing a house in your 20s or earlier can also mean you feel trapped, unable to move at a moment's notice.

How long should you own a house to make it worth it? ›

Before selling your home, there is a set amount of time you should stay in it to make a profit or break even on purchase costs. This amount of time varies by person and circ*mstance, but wisdom from the real estate world says an average minimum target is about five years.

Housing Market Historical Returns. In terms of averages, stocks have tended to have higher total returns over time. The S&P 500 stock index has had an average annualized return around 10% over very long periods (higher if you include dividends), while average annual real estate returns are often more in the 4-8% range.

It's harder to get rich off stocks than it is to get rich off real estate. The main reason why is due to the absolute amount of money you need to risk to get rich in stocks. Even if your $5,000 stock investment goes up 50%, that's only $2,500.

Investing in real estate can be a good idea if done thoughtfully and strategically. It offers the potential for steady income, capital appreciation and tax benefits.

Market Conditions

The economy can influence real estate or stock investment returns. "Stock prices are more volatile than real estate prices – and while stocks tend to perform well in the early stages of an inflationary updraft, under high inflation, real estate may perform better," says Earle.

A recent study reveals that 93% of homebuyers have regrets over their purchase. That's one stunning conclusion of a survey by Clever Real Estate of recent homebuyers about the state of the housing market.

Many people assume that owning a home is the best way to achieve financial stability. It's more than possible to become financially secure as a renter. It can be argued that renting is a better move than owning financially, because you're not dealing with ongoing costly surprises.

Potential risk: Lack of diversification and liquidity

Buying even just one investment property can often take a significant commitment of cash. Because properties are so high value in many high demand areas, it can be challenging even for wealthy investors to build a diversified portfolio of properties.

Buying a house can be stressful, especially if you're a first-time homebuyer. A June 2022 survey by Zillow revealed that half of homebuyers cried at least once during the process! However, there are strategies you can use to build confidence and alleviate some of that stress in the homebuying process.