Everyone loves Tony, and he is prolific at using social media to inspire people. I respect what all three guys said below, and I’ll add: Do something!
For generations past, home ownership was a significant rite of passage that signaled stability, commitment, and, often, prosperity.
But, in this as in so many other cases, millennials are different.
As of 2015, adults under age 35 made up 19 percent of U.S. households but less than 10 percent of homeowners, according to a report released by Harvard University’s Joint Center for Housing Studies.
Entrepreneur and bestselling author Tony Robbins says that, while millennials might be missing out on the social upsides of home ownership, real estate is not the best investment they could be making.
“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,” Robbins says. “It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.”
Instead, millennials in a position to buy property should be considering how to do so in a way that will provide them additional cash flow, he says.
“If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable,” says Robbins.
Opinions on the imperative of millennial home ownership vary.
Self-made millionaire Grant Cardone tells CNBC that home owners are forced to continue to spend unceasingly, and that he regrets buying a house at age 30.
“Unless you have 20 million bucks in the bank, in cash, you have no business buying a house,” says Cardone.
In personal finance classic “Rich Dad Poor Dad,” author Robert Kiyosaki notes that houses should be viewed as a liability, as opposed to an asset, and points out that it’s not a given that a home will appreciate in value.
“I am not saying don’t buy a house. What I am saying is that you should understand the difference between an asset and a liability,” Kiyosaki writes. “When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.”
Not too bright this chap, is he. The income on your personal real estate is the rental you are NOT paying after the mortgage bond is paid up! Plus capital appreciation at the rate of inflation as long as you paint the bloody thing and keep it otherwise maintained.
Perhaps Jim will dig up some of my comments from 8 or 9 years ago to explain current S.D. house prices 🙂
Indeed – from June, 2009:
Andrewa: The American government is creating vast quantities of “money” (paper dollars) out of thin air as we speak.
This WILL cause inflation (see previous U.S. / Foreign wars like Korea/ Vietnam and the Breton Woods agreement allowing this to take place)
At this point in time it REALLY MAKES SENSE to invest in hard assets that can generate inflation linked (in real terms) income like property.
Buy now, fix your mortgage rates and pay your mortgages off with HIGHLY INLATED FIAT CURRENCY DOLLARS in later years while earning rents tied to the present price of eggs milk and petrol etc.
Ask your parents “how many dollars did your house cost 20 years ago and how much is it worth now?”
“Those who will not learn from history are doomed to repeat it……….ask JTR if you dont believe me, he’s old enough (like me) to have lived through this sh!t before”
Thanks Jim, just as a matter of interest can you tell us what the median S.D. house price was in 2009 versus its present value?
P.S. If O.C. renter still audits this site perhaps he will be kind enough to tell us how the value of his house has changed?
We know the San Diego Case-Shiller Index is +59% since April, 2009.
The median price of SD houses sold in April, 2009 was $332,312.
Last month it was $563,000, which is +69%.
So 10% a year, tax free in the U.S. if its a primary residence I believe? Not too shabby a return on investment PLUS you have had somewhere (hopefully nice) to stay where the landlord will not mind you hanging pictures on the wall as YOU are your landlord and I believe that ones rates and taxes do not increase annually in California as the rateable value remains the purchase price.
Not every renter is in a bad situation though…I left my “House money” in S&P stock market instead of investing in median house and…
“The S&P 500 has gone up a stellar 228% since March of 2009 when stocks bottomed out after the financial crisis. To put that another way, your money tripled since March of 2009. (NASDAQ has gone up 313% and the DOW 185% same time period)”
I have had no maintenance repairs or remodeling costs or upkeep expenses for 8 years. I have rented 2 blocks from the beach in both Carlsbad and Oceanside for $2500/mo for 6 years ($180,000) and $1800/mo for last 2 years ($43,200). I have spent $223,200 on rent but my $332,312 (median income house portfolio) is now worth well over 1 million. Subtract my rental costs and it’s still worth well over $750,000. My house would have been worth $563,00 (median today). I am still up over $200K and I lived in nicer homes than a median income home for 8 years.
Nice Job!
Andrewa has a point though about paying off a house, and reducing the annual housing expense to just taxes, maintenance, and insurance.
Scott – do you expect to buy a house at some point?
Bought a rental property in Florida as I plan to retire there in 5-10 years. If I was buying one here in CA you would be the first to know! I think you are one of the finest agents I have seen. I have silently followed your blog since 2007.
We thought about putting our deposit money into stocks, but they are so overvalued right now and the rate of return won’t be as good as having invested in stocks during the down years. Past performance is not indicative of future results. 🙂
The problem we have with renting is we’re getting hammered with income taxes (dual income, no kids) and there’s no guarantee that our current rental home rate will continue to hold steady in future years or that our landlord won’t decide to sell the place.
So, we decided to get off the fence and go house hunting. The lessons we’ve learned from the last housing downturn was that the state, the federal government and the federal reserve will go to great lengths to kick the can and keep the real estate market stable. They’ve changed policies to allow the banks to keep underwater homes off the books, they’ve pumped trillions into the market via quantitative easing and the list goes on and on.
Couple this with rising interest rates and this should give people more investment choices that are less volatile than stocks, meaning that stocks are overdue for a correction. Whereas if there’s a correction in housing, they’ll let you squat in it for years while the feds work their money magic.
Thank you Scott!