All things, such as cars, shoes, mowers, etc, wear out.  More cars, shoes, mowers, etc, are produced to replace them.  Yet, the aforementioned items lose value.  A house, on the other hand, wears out too.  More houses are built as well.  The difference is property generally increases over time.

Despite the recent housing bust, when looking at history, I’m betting it is a safe bet that home prices will eventually rise.   (I show in detail the stats and reasons why in Barking With The Big Dogs.) They have too – property is a huge tax base for local governments to the IRS.

My point is not to discourage home ownership, but rather to simply say a house is not a good investment for most people.  Most people do not rent or buy and sell property as a real estate investor does.

A house wears out, has major expenses, such as roofs, foundations, termites (as I’m seeing in the house we live in), as well as small continual expenses.  Small expenses may simply be the air conditioner repairman doing tests, to having a bathroom faucet drip being repaired.  Think about all of the little things that happen over the course of owning a house.  Furthermore, lawn maintenance, utilities for operating the house, etc. occurs.

As you can see, just by driving around old neighborhoods, houses wear out, need repairs, renovation or torn down.  Therefore, why is a house considered a good investment?

Probably because the realtors tell us so in order to sell houses as well as politicians so they can generate tax revenues.

In reality, a house for the most part does not produce income.  A business’ building wears out, but the business produces revenue.  (Gold doesn’t wear out.)  Isn’t it really an expense?  Also, a house is not a liquid asset, meaning it cannot be sold quickly for cash.  Liquidity is another criterion for a good investment.  Lastly, when property values change, what does a similar house across the street go for as well?  Do you really have a true gain when all values rise?

So the next time you hear a home is a good investment, consider thing things just discussed…it may simply be a really nice place to house a family.

Check out more truths, myths, hype, etc. regarding property, income, interest rates, taxes, banking, etc.  by ordering a copy of Barking With The Big Dogs.  Your lifestyle just might be affected.

#1.  Sell it…

Selling the house is a great way to get cash, but selling the house plays to the advantage of the realtor.  Actually the equity in the house may be more for realtor protection than the homeowners’.  Here’s what I mean.  First, some people don’t like to borrow money.  Fine.  Sell the house.  Second, and possibly more importantly, look at history.  Until the late 1990’s, Texas did not allow home equity lending.  The realtors lobbied against it.  Common myth says equity is for homeowner’s protection, but in reality, it protects the realtors market.  They need sales!

#2.  Rent it…

Renting property can take a house of brick and mortar with a ton of cash tied up into a business creating income.

#3.  Borrow it…

For homeowner’s who do not go with option #1 or #2, borrowing can be done.  However, home equity loans come in a couple of ways with vastly different approaches.  The first way is a HELOC (home equity line of credit).  A HELOC is simply an amount of money available against the house, but generally uses the house’s original value and does not need new appraisals, etc.  Simply put, homeowners are borrowing their own money.  The next way is a cash-out equity loan.  The cash-out is different than a HELOC, because it allows the current market value of the home to come into play.  Simply put, if the house has appreciated in value, owners can take the profits out of the house without selling the house.  (See why realtors don’t like the loans?)

4.  Reverse it…

Baby boomers are a big target market right now and a reverse mortgage is a hot topic.  One might be lured into the idea of getting money out without ever making a payment.  True, no payments required (with a couple of stipulations), but any money borrowed has to be repaid…by the heirs or estate for example.  If traditional thinking, meaning pay cash or get a loan and pay off the mortgage worked for past generations, why a reverse mortgage now?  Fact is it didn’t work for many people.  Therefore, if an owner needs money, or potentially will need money, why tie up an enormous amount of money into brick and mortar sitting idle for so many years?

The bottom line is how to get cash out of the home should by why put it there in the first place?

Owning a house may or may not be the American Dream we commonly hear and the answers can be broken down into areas.  Real estate decisions and financial decisions.  People spend quite a bit of time looking for a house, but what appears to be minutes in deciding about a loan or paying cash.  In reality, both are huge decision and they are separate, but equal and should be looked at independently of each other.

Read about it in Barking With The Big Dogs and see what is happening to your (and my) money every day.

I told the client he owns his home no matter if he buys a house or rents because a home is the people and the house is brick and mortar.  (He was shocked when I stated I rent a house.)

With previous housing conversation started, I told my friend a house has no guarantees just as a business has no guarantees; which leads me to the following statement. ‘Which produces income? The house or the business?’ I went on to say a quote I heard several years back, ‘buy the company, rent the house.’

Income can buy the house, but a house doesn’t not produce income.

Don’t get me wrong, I am not against owning a house, rather I understand a house for what it is – shelter (basic to luxurious) and has income potential, but it must be rented or bought and sold. In the case of renting or “flipping”, a house is simply a product as any other in its basic concept.

More on this story later as it pertains to how he was getting some funding…check back, you’ll want to read it.

Chili’s has (from time to time at least) a $20 for two meal special. Is that a great deal, or value?

Maybe, but Barking With The Big Dogs is now available on Kindle for $15 – and the value here is the insight about banking and lending that affects a lifestyle, not just dinner for an evening.

Download today, or get a paperback copy!