232244
Money-Ramblings-of-a-Financial-Underdog

Don't buy that house - yet

Real estate is sizzling these days. You know it’s a hot topic when you go to Starbucks hoping to get a coffee in peace and quiet, but end up listening to people talking about how investing in real estate is a sure way to make money.

Then, on the front page of Financial Post you see an article how real estate in Vancouver is more expensive than London and Hong Kong combined. On TV, you see yet another real-estate investing show. Your cab driver tells you he’s thinking about investing in rentals. Your friends ponder about becoming real-estate moguls.

Seems like everybody is talking about it, prices are going nowhere but up, and today is your last chance to buy it; otherwise you risk spending the rest of your pointless life in misery while paying rent. Paying rent is now a synonym for throwing your money away because you simply pay someone else’s mortgage and have nothing to show for it at the end of the month.

But what everybody fails to mention is that owning your own home is not for everybody. You can go on living without having your name on the property title. In fact, some people should be prohibited from even thinking about buying real estate.

1. If you are a student going to school you have no business owning your home.

I’ve met somebody who bought a condo while going to school with no considerable income. I have no idea how she got approved for a mortgage, but somebody should have told her that buying a condo while going to school is a bad idea. Sure, you have to live somewhere, but your income is low and unstable. Also, there’s a very good chance you’ll be moving to start your career after you finish school or simply move closer to work. The two to four years it takes to finish school isn’t enough time for your property to appreciate – between listing fees and all associated costs, you might end up losing money. Just finish your school in a nice rental. There will be plenty of time to buy real estate once you’re out of school.

2. If you don’t have a sizeable emergency fund, you should stick to renting

I would not buy a place without having at least $15-25K sitting in a separate bank account as an emergency fund. While having emergency fund is a good idea for just about anybody, it is especially important for those who are homeowners because things happen. Appliances need repairs or need to be replaced, insurance rates have been raised, your roof needs to be replaced, and you have mould in your basement. Issues come up, and you can’t call your landlord to take care of them.

3. If you still don’t know what you want to do when you grow up, buying your own home might be counterproductive.

Life in your 20s is pretty awesome. You party, you go to school, you make new friends, you date, and you have fun. Life in your 20s is about discovering yourself. If you’re like an average 20 year old, you’ll probably change the direction of your life three times before lunch.

There’s no shame in waiting till you settle down to start thinking about acquiring real estate. Perhaps by that time you’ll have picked a place where you want to live, your career will be on the way, and you’ll be ready to commit. Because buying a home is a commitment.

4. If you have debt, don’t even think about buying your own home

Debt weighs you down financially. It sucks juice out of your financial well-being. It drastically reduces your options and puts extra stress on your life.

If you have troubles repaying X amount of debt, does it make sense to go and sign up for XXX more debt? It doesn’t make sense. Ideally, you slay all your debt and life debt-free for a while before you commit to borrowing hundreds of thousands of dollars. Just like before lifting an Olympic-size barbell at a gym, you become comfortable dealing with much smaller weights first.

The moral of the story is this. Everybody is screaming at you that you need to invest into real estate right now or forever be left out. Granted, investing in real estate if done under proper conditions can be beneficial. But renting until you meet these conditions won’t change your life. Finish school, work on your career, have some fun in your 20s or 30s, pay off your debts, and become comfortable with your finances. There will be plenty of opportunities to buy later. Millions of people enjoy normal lives paying rent instead of a mortgage. Don’t give into the hype and do what makes sense for you at the moment.


Photo Credit: Liane Metzler (unsplash.com)

 

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



More Money Ramblings of a Financial Underdog articles

231364
About the Author

As somebody who grew up in a poor family, I lacked common knowledge about money from day one. If you can think of one dumb thing to do with your money - I did it. No paid college education for me. No inheritance, no financial help from my parents.

I may be a financial underdog, but through building good personal finance habits and educating myself about how money works, I hope one day to achieve financial independence for myself and my family.

Yes, I do believe an average person can enjoy a wealthy lifestyle as a result of smart decisions. Given enough time and proper education, anybody can change their financial future for the better. This can happen even if you start very late into the game - but your financial habits have to change.

If you'd like to know more about my struggles and wins with money, feel free to visit my website http://www.MoneyRamblings.com where I ramble about everyday money issues.

Contact me by email or connect on Twitter 

 

 

 



231492
The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

Previous Stories



230127