U Covered


REDBOOK - November 2015 Issue
In this issue Finance Pro Nicole Lapin talks about "3 Money Rules that get you a happier Home".  "Dont expect a house to make you rich". . . Nicole says: "Weve all heard over and over that home ownership is a good insvestment and it can be, if you have a low interest affordable mortgage and you're going to live there for five or ten years. But, it's typically not going to make you money the way other investments like stocks might. Thanks to Inflation". 

Nicole gives this example - "You bought a house for $75k in 1990 for Cash and today it's worth $200k. You made a killing, right? Well No. When you adjust for inflation and subtract the cost of repairs and taxes, you're basically
breaking even on that house. Now, keep on renting and invest that $75k cash in steady index funds like the S&P 500. Today, even with inflation (and the occasional crash, if you can last without liquidating your stocks) you would likely have nearly a Half-million dollars. Which one was the money maker?"
I have some issues with this. . . First, hardly anyone has $75k cash under their mattress these days. Now, let's say that you rent a 2 bedroom place and your rent is $1,200 per month. To start with, you have to come up with First, last & security ($3,600) and if you live there for 2 years ($28+k) of your income is gone. Then, an increase in rent push you to move to a different apartment complex. Now you have to come up with the First, last & security plus moving costs before you can rest your head, on that bed you hope the movers bring in one piece. Your investment for this move can be as high as $4k. If you had invested the initial $3,600 + the cost to move towards the downpayment of a mortgage, and got an affordable mortgage because of your good credit rating, why not buy?  Yes, inflation is killing home prices right now, but only if you are the Seller. If you are happy in your house. . .how can you lose?  What say you. .

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Disclaimer: It is not my intention to offer Legal/Medical/Technical advice and urge you to consult the professionals who excel in their field of expertise!

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