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While some people that are not buying a home think that claim it’s “the American nightmare,” self-made millionaire David Bach is doubling down on his faith in real estate. He thinks that not prioritizing homeownership is “the single biggest mistake millennials are making.”
Being in the Real Estate Business in San Diego for over 13 years, I too feel the same way. Over the years I have seen the benefits of people who bought homes many years ago, even when they thought that it was going to be a challenge and costly; however, fast forward, selling that property now, these people walk away and have moved somewhere else where the cost of living is a lot less, and now they have a lovely next egg. If these same people had decided to rent instead of buying a home back then, they would be leaving with nothing but memories.
Buying a home is “an escalator to wealth,” Bach tells CNBC.
Young adults, in particular, aren’t hopping on this escalator, and it’s a costly mistake, Bach warns: “If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”
The self-made millionaire is quick to say that the smartest investments he’s ever made have been the three homes he’s purchased. He tells CNBC: “I first bought a home in San Francisco. It skyrocketed in price. I moved to New York and bought another home. It skyrocketed in price. My net worth has gone up millions and millions of dollars, simply because I’ve lived.”
Bach argues that you have to live somewhere for the rest of your life, so you might as well invest in a home that you could own permanently.
I have always said, “As a renter, you are still paying a mortgage; it is just someone else’s. Why not make it your own?
As Bach writes in “The Automatic Millionaire,” “As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end, wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end, wind up owning your own home free and clear!”
If you want to get in the game of homeownership, start by crunching the numbers, Bach says: “Actually do the math. Look and see what things cost, starting with the smallest options. This way, you’re really clear on your goals, and you won’t just say to yourself, ‘I’ll never afford this.'”
A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay. He also recommends having a down payment of at least 10 percent, though more is always better. Finally, recognize that “oftentimes, buying your first home means you’re not buying your dream home,” Bach tells CNBC. “You’re just getting into the market.”
A lucrative market, that is. “The fact is, you aren’t really in the game of building wealth until you own some real estate,” Bach writes.
As for someone who has helped many first-time homebuyers and experienced homebuyers that have bought many homes in San Diego, I have seen first hand the benefits of owning real estate and also the benefits of keeping it long term. Not only are you building wealth, but you are also helping families live in a nice environment they can feel safe in and call home.
If you are thinking a buying or selling a home in San Diego, contact the McT Real Estate Group at 619-818-8122. We would love the opportunity to discuss a plan of action that will help you achieve your goals.
This article was found at CNBC and written by Kathleen Elkins