The general wisdom that is handed down from grandparents and our parents is that the best investment you can make is to purchase your own home and pay it off as soon as possible so as to own it outright. However, in recent times, this wisdom is no longer a given, with many people choosing to rent instead of buying out of fear of losing great sums of money if the housing climate were to go bust like we saw happen in the U.S.A. We can’t argue with the fact that many people lost their homes, their investments and retirement portfolios that were tied up in real estate. Is this likely to happen here in Australia? Well, it’s impossible to say for sure that this will never occur on Australian soil. Financial gurus have warned that several factors including excess supply for the demand for housing, or foreign investment, or even the baby boomer generation downsizing all at once could cause the housing bubble to bust in Australia, but so far there is no concrete evidence to suggest that these theories are anything more than just that.. theories.
So putting fear of a great housing bust aside, is buying a house still a wise investment? Well, buying a house is still an excellent idea for all the reasons that you have undoubtedly heard from your parents and grandparents. Buying your own home is still a wonderful investment if you have the intention and the means to pay out your mortgage as soon as possible. If you can have your home paid off before you retire, that is your biggest recurring bill that you will no longer have to afford once you finish working. It is a great source of equity should you want to invest in a second or subsequent property in order to grow your portfolio and create passive income streams. Furthermore, should you wish to downsize in the future, you have the ability to free up reasonable sized chunks of cash allowing you to buy that boat, take a few trips overseas or buy that new 4WD and caravan and hit the road. Or even better still, hang onto your home and rent it out while you travel Australia or the world and collect rent which can help fund your travels! You certainly can’t do any of the above if you have paid the equivalent of a mortgage repayment to a real estate agent in order to rent somewhere to live. When you add up all those rental payments over a lifetime, we here at Home Owners Club feel that we would much rather know that we have a tangible asset in the form of a house that we can sell, rent out or pass on to our children in our senior years, rather than have nothing to show for all those years of payments, whether they are to a bank or a real estate agent.