Mark Twain once said: "Buy land, they're not
making it anymore."
Real estate is one of the oldest industries in the world.
It's not a coincidence that we have been told that a house is the best investment you can
ever make.
Of course, in the 21st century, we have far more investing tools than generations before
us had.
Derivatives, options, bonds are no longer the instruments that only the rich have access
to.
With a simple investing app on your 200 dollar smartphone, you can start trading stocks.
And besides, best-performing investments are not even coming from the rich but from the
bottom, such as the Cryptocurrencies that are challenging the status quo.
Regardless of all of these investments, real estate still remains the king of investments.
Because unlike anything else, it simple, you can touch it, and easy to understand.
You don't have to look far for some evidence,
once worlds richest man, bill gates is also pouring millions into real estate,, Bill Gates
now is America's Biggest Owner Of Farmland.
he purchased 242,000 acres of farmland across the U.S. — enough to make him the top private
farmland owner in America.
But regardless of how great this market is,
it still goes through ups and downs, and if you end up buying a house when the market
is at its peak, you are going to lose because sooner or later, the value of your house will
crash.
And there is a huge difference between buying a house and investing in real estate.
They might look as if they are the same thing, but your needs usually do not align with what
is better from an investing point of view.
So as a real estate investor, I want to share with you why millennials should not buy a
house, or at least, if you are buying a house, you have to consider all these factors that
I am about to share with you.
So give this video a thumbs up, and let's jump right into it!
Bidding is a bad sign.
A house with an asking price of 3.5 million
dollars was sold for 4.5 million dollars because the seller received 7 offers, and the price
bid kept rising to the point where the house was sold for an extra million dollars.
If you are the seller, that's a good sign.
If you are a buyer, then you might be wondering whether it worth paying an extra million dollars
or not.
And this is not a single case.
It's happening all across the market.
Even when it comes to houses that cost just a few hundred thousand dollars, people are
overpaying by 30, 40, or even 50 percent just to be the one who is going to buy that house,
and that's normal in a market when there is a shortage of houses.
This graph explains it all (show it from the
year 2000).
It illustrates the number of Monthly Supply of Houses in the United States.
Starting from 2010, when we got out of the last housing crash, the supply of houses was
at a stable rate, so house prices grew steadily, but there is a clear sign of how the number
of houses in the market dropped significantly in April 2020.
And even though we are almost out of this pandemic and the future seems a little more
predictable Than it was a year ago, the number of houses didn't increase much in the market.
And that's probably because the sellers are looking at how fast home prices are rising
and are like, "why should I sell when I can wait and keep getting wealthier doing nothing
unless I will get an offer that's really good?
I am not selling."
That's why in a single year, home prices rose by 17 percent.
In a single year, home prices rose as much as they did in the last ten years.
That's a good reason not to sell.
It's psychologically difficult to convince yourself to sell when everything is rising.
It really doesn't matter if it's a stock, bitcoin, or crypto.
When it's rising, for some reason, you imagine it's going to rise forever, and if it's falling,
you imagine it's going to fall forever; that's why people often quickly sell to minimize
losses.
Most people are short-term thinkers and not long-term thinkers.
In these kinds of times, I like to remember what Warren Buffett said once: be "fearful
when others are greedy, and greedy when others are fearful."
Now is the time when everyone is greedy.
I am not saying there is going to be a crash or how much more prices are going to rise.
All I am saying is that just take a look at what's happening in the market.
Do you think you can find a good deal?
A good deal is to when the house price is at least slightly lower than markets average
so that you can renovate it, it will rise significantly in value, or you can rent it
out for a much higher price or at least a deal that's not above the markets average,
but that's never going to happen when you are in a bidding war against dozens of other
buyers.
Don't get me wrong, owning a house is far
better than paying rent your entire life, especially if you are going to live in the
same area for a long time, even though homeownership comes at a higher price.
It includes renovation and other expenses.
However, you also have to consider the opportunity cost.
This is the cost that people don't count at all when they are thinking of purchasing a
house.
Every penny you use to buy a house is a penny that could be invested elsewhere like the
stock market, bitcoin or anything else, including your own business.
But let's take something more stable like the SP500.
An index fund that invests in the top 500 US companies.
It usually grows by around 10 percent in the long run, but lets be a bit conservative and
take 8 percent, just to be safe.
When you take a mortgage, it's a 30 year investment, you are going to become a homeowner, but you
have to keep making your monthly mortgage payments.
So let's take a look at what if you invest that money instead and rent a place.
Let's take a 300K dollar house.
With a 20 percent downpayment and 3 percent mortgage rate, you are going to pay 1017 dollars
per month.
That's significantly cheaper than renting since that house would be rented out for at
least 2000 dollars.
But if you count property taxes (300 USD), renovation which is another 1 percent of the
total price of your house ( 300 USD), insurance which let's say another 100 dollars, you will
end up with 1700 dollars.
Not bad.
Buying a house still looks like a far better deal.
But now, let's count the opportunity cost.
That 60K dollars you paid upfront as a downpayment, let's say you are going to invest it in the
sp500, and as I said earlier, we are going to be conservative and take just 8 percent.
With the compound interest, it will grow to 603,759 dollars or 1677 dollars a month, which
makes your real cost of ownership 3377 dollars.
Of course, the price of your house is also going to rise but if we have learned anything
from 2008 crises, home prices can also crash.
Especially since home prices had risen by 17 percent last year, only time will tell
you how this astronomical rise is going to end.
But in order to invest in the stock market,
you have to understand how the stock market works and that means you have to spend months
to master it!
But I have some good news for you.
I have spent years investing in the stock market and to save you time.
I have summarised all my experience in the stock market into a short, straightforward
fully animated course and the best part is that it's available on skillshare and you
can get it for free if you use the link in the description.
At the end of the course, there is an assignment that I will personally check and provide you
with a feedback.
Anyways.
Buying a house isn't always a bad decision.
In fact, it can be a great decision, especially when you are setting down and building a family.,
but right now, when we are getting out of the pandemic, we are not sure if we are going
to continue working remotely or we are going to get back to how everything was pre-pandemic,
when there is a bidding war in the market.
Finding a good deal has never been more difficult.
Especially all the headaches you have to go through when buying a house.
You might buy a house now and then realize a year later that it was a mistake and life
is getting back to normal, so that house that seemed attractive during the pandemic is no
longer that attractive.
And who knows where the market is going to be at that time.
Chances that you will lose money on that house is way higher than you make money.
And now it's your turn to let me know in the
comments below what do you think about buying a house now?
Is it a good time or its better to wait until things calm down?
If you have enjoyed this video, You will also
enjoy this custom playlist that we have created specifically for you that has our most popular
videos on business, investing, and the stock market that can potentially change your life.
And now give this video the thumbs up that it deserves, and make sure to subscribe if
you haven't done that yet.
Thanks for watching and until next.