Wednesday, April 4, 2007

Your Home is THE BANK'S Investment . . . . Not Yours!

Repeat after me. "I will never again utter the words, 'my home is my best (or biggest) investment.' "

It drive me crazy when I hear people say that. And it isn't because they are stupid. That is what people are taught . . . by inexperienced real estate agents, by many lenders, and it is repeated in the newspapers, magazines and on television. First off, your home is not an investment. Unless you are renting rooms to your kids, it just isn't! the only other way it might possibly turn out to be an investment -- by accident -- is if your home is suddenly "in the path of progress." Meaning, the highest and best use for your property may no longer be a residence, but might be a retail development. A development that, per acre, is worth far more than if you stayed in the home. True, most homes do appreciate in value. But it is not an investment.

Investments provide income. A home -- whether it be a single family residence or a condominium -- is just that . . . YOUR HOME! Frankly, it is a liability -- a debt that you pay on. But it is a debt that most people want to pay on. It isn't meant to provide income. A home is your shelter, your domicile, your escape, your (relatively) peaceful island away from the madness of the daily rat race.

Why am I getting all worked up over this misuse of the language? Because it goes deeper. People talk about their homes as if they were investments. But when you ask them what kind of return they are getting, they'll say, "oh, you know what I mean." They themselves are confused, and worse, they confuse their kids. We have a generation today that doesn't know a lot about money nor investments. Things are handed to them, or they are taught the government will help them. They need a good lesson on the subject, which they don't get in today's educational system.

So the next time you hear someone say "my home is my biggest investment" or "wow, we invested in our home at the right time," please, please, PLEEEAAASEE set them straight!!!

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