Dr. Helen

Lies We Are Told about Real Estate

I have always wondered why in the world people think houses are a good investment. Sure, if you bought 30 years ago in California or NYC and held onto the property and sold it, you might have made good money, though this article points out that it is often less than you think. But for everyone else, real estate often turns out to be a bad deal. In this article from The Observer, they confirm the lies we are all told about real estate:

Why do so many people think buying a house is part of the American Dream?

The cultural programming around buying a house—not renting—is so strong, most people don’t even realize where it comes from. Our parents tell us “real estate is the best investment.” Schools teach it. Even the government encourages us to buy.

I’d like to talk about the lies, cover-ups and half-truths about real estate. Housing can be a great investment, but usually it’s not. And almost nobody runs the real numbers when they buy.

Would it surprise you to know that if there are two equally expensive houses—one for rent, one to buy—the person who buys will pay 40 percent to 50 percent more each month? That’s what happens when you factor in property taxes, insurance, maintenance fees and assorted fees like repairs—which almost nobody does.

And even after all the high costs of owning a house, there are also other factors such as the time involved in taking care of it. Sitting around waiting for the cable guy or repairman can cost you money, and your precious time that could be spent enjoying something more fun; or if you are in a market where it is hard to sell the house, it takes a great deal of time to advertise, clean and fix up the house, even if you have a decent agent.

My smart father always told me that a house is a place to live, not an investment. He was so right.