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Diversify your investments
Or if you have extra dough, you could do both.
The acquisition of the new property has one major downside: it’s a liability that likely adds significant debt to your net worth.
After purchasing a new house, most people’s net worth doesn’t increase; it decreases unless they put a significant cash down payment on the property and/or their net worth is already positive.
Reminder: If your home is not reeling in income, it’s a liability.
Question: Does a home make sense for my needs and financial goals? Sure, you’ll have equity if you invest in your house for a certain number of years, but you could also reach the same amount investing in ETFs or REITs. Is one way better than the other? It all depends on your goals.
Many people forget you can acquire significant wealth without investing in a property.
Many people also forget to continue investing after they purchase a property.
I’ll give you two examples:
Guy 1
Guy 1 is approaching 60 and almost owns his home.
He doesn’t have any investments outside of his home.
I asked about his retirement plan, and he said he’s banking on his house and the equity he builds.
His current equity is modest at best.
He hopes his home provides enough for him in retirement. But he didn’t mention selling it or planning what to do with his home after he pays it off.
Guy 2
Guy 2 is approaching 50 and uses his home as an Air BnB as his income and investment.
He’s turned his home into an asset by renting it and making a profit.
Smart.
Guy 2’s strategy is more productive than Guy 1’s strategy, who is hoping for an equity payout to cover him throughout his retirement years, but there’s one thing poking at the situation.
He’s got all his income and investment tied up into one property.
He has no diversification, income sources, or other investments.
An Investment No No
Never put all of your bucks into one property, or in my favorite words:
Never bet your entire net worth on a dying horse.
Maybe your one property will hold you down for your entire life, but why settle for all that risk?
Why not diversify into ETFs, REITs, and other digital assets to safeguard your investments and bring in additional income?
Guy 3
Guy 3 is in his 30s and already has half a million bucks net worth.
He owns no property and has no intention of getting one any time soon.
He will have a million+ dollar net worth in a few years or less.
His investments will reel him in an average annual income of $60,000 – $100,000/ year.
What does he intend to do? Continue investing.
Who’s Got The Best Situation?
I think we all know the answer.
Even if guy 3 decides to buy a home within his means, he will still be better off because he has a much more diversified portfolio and isn’t banking on his home as his primary investment and income source.
Summary
If you buy a home, be sure you continue investing in other assets, which also means you shouldn’t buy a home that eliminates or mitigates your ability to invest and save resources outside your home.
Your House Is A Liability Until It’It’sking You A Profit, Or You Own Itmedium.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.