Often I will hear people associated with real estate talk about someone’s most important asset being their home. For the sake of argument, let us forget the importance of health and the ability to work which I hope can easily be argued are more important than one’s home.
I will say this: if your home remains your most important asset, chances are that you will never become wealthy. Let me reiterate, if your home remains your most important asset, chances are that you will never become wealthy.
For some people this may come as a shock. After all, we have been taught about the importance of having a home and not flushing down money with rent. There is a certain degree of truth to this. I will even suggest that there is a large degree of truth to this if we are comparing similar spaces. The problem lies in that the average owned home is not similar to the average rental. They tend to be substantially larger, nicer and more expensive.
This may not in and of itself be a problem, but for the average American what value does a home provide other than a place to live? I will suggest not much. If you are skilled at restoring and fixing up houses in order to flip them, you may be an exception to this rule. If you rent out rooms of your place so that it is actually generating money for you, then definitely consider yourself an exception as well. For many, however their home is a box where they live that is taxed, subject to utilities, and serves as a storehouse for their stuff. If all you do is keep on upgrading to a larger and fancier box, and get used to a more expensive lifestyle correspondingly, you may be setting yourself up for failure.
The problem is simply this, for most people, one’s home does not serve as a source of generating wealth. It tends to rather be a means of forced savings assuming that one does not continually take out money in the forms of lines of credit, etc.
In order to become wealthy, you need to have assets that either grow or produce income in some fashion. This could be through a variety of means whether through the rental of real estate, a successful small business, or through the growth of securities in a portfolio. It is unlikely that this will occur
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