Real Estate: Asset vs illusion
Is a real estate really an asset? Or is it because all our lives we been told it is an asset hence we would just naturally assume it is.
I just bought an apartment for a million dollars with my fiancee. Needless to say, since we are average working couple, we took a mortgage loan for 80% of the amount and we would need to finance the loan for 30 years. Being in Singapore with the limited amount of land we have, housing prices has been increasing year by year. The government has made efforts to control the prices but there is a limit to how much it can be done.
I couldn’t help but think of why are we always told we need to buy a house. We have always been told a house is an asset and always better to own one.
But seriously...is it really true!! Somehow when I signed the sales purchase, it gives me the feeling I am in a big debt for the next 30 years. It feels good since I own the asset, but is it actually worth it putting myself in a big hole..
.jpg)
Come to think about it, I might have been able to save more if I rented. But of course, because the scarcity of land, we were told land prices will always go up. But when I think about it, there will be a limit to what we can pay for. It’s not like we are earning big bucks.
Robert Kiyosaki kind of sums it up nicely in his Rich Dad, Poor Dad book:
Your financial planner, real estate agent, and accountant all call your house an asset. But in reality, an asset is only something that puts money in your pocket. If you have a house that you rent out to tenants, then it’s an asset. If you have a house, paid for or not, that you live in, then it can’t be an asset. Instead of putting money in your pocket, it takes money out of your pocket.
That is the simple definition of a liability.
This is doubly true if you don’t own your home yet. Then it’s the bank’s asset, and it is working for them, but it’s not earning you anything.
Well in any case, I have signed on the sales purchase so can’t be reversible. Guess I must work my butt off for the next 30 years. So what do you guys think, is having a house, a boom or bust? Is it just a scheme to get us in debt so we will forever work? Do share what is the real estate situation like in your country. Do you purchase it or rent?
A 🏡house/condo/townhouse are investments. If you purchase a home and you decide to stay in that home for most of your life then at least after it's payed off (It doesn't have to take 30yrs to pay off) you have no payments (Easier retirement). If you decide not to stay then it can be rented out and you have residual income.
You can cut the 30yrs mortgage by like 5 to 7 yrs just by splitting the monthly payments by half (No extra payments out of pocket). Instead of paying once a month, you cut the monthly payment in half and pay twice a month. Exp: $1000 monthy mortgage payments to $500 every two weeks. By doing that the interest is lower. You'll pay a lot less after paying off home. Also consistent extra payments or paying more of the agreed monthly amount will drastically reduce final price and/or amount of time it takes to pay off.
Most of mortgage cost is interest. A $100,000 house would be about $300,000 in 30yrs mortgage, so the faster it's payed off the more savings it's earned. Yup... rip off. 🏡 🏡 🏡
Yeah i understand what you mean. But to look at it from another point of view, the amount of extra payments which i use to pay out the mortgage loan faster could have been invested and earn more. So its kind of a balancing act. Well i guess money is the root of most evil but yet it is a necessity. what irony.
I understand what you are saying and it is true that perhaps with correct investment porfolio much profit can be gained but also everybody needs a place to stay and it's not free (Often times rent is more than mortgage because all of home cost plus profit). That money to stay somewhere is going to be spent for rent or mortgage no matter what, unless people stay with parents or family and they don't charge rent which usually is for a limited time.
The love of money is the root of all evil.
Well your last sentence says it all. lol.
On that last sentence, I stated that because often times is miss quoted as "Money is the root of evil" in which the true quote is "The love of money is the root of evil". They each have different meaning. "Money is the root of evil" is stating that money itself is root of evil. "The love of money is the root of evil" is stating that loving money is the root of evil (Greed). That misinterpretation can effect someone life in several ways by seeing money as evil instead of the love of money being evil.
Ah i see what you mean. Since money is just a thing, Money can't be evil unless our desire (greed) of it makes us think that money is evil. Nice. Thanks for showing the clarity.
Anytime... I once thought that too since most people including church going people and pastors would say that while growing up but I gained clarity once I read the scriptures for myself without external influences.
An asset is certainly something that should be earning you money. I have opted out of buying the house I live in for renting partly for the flexibility and partly because I know the money can be be working harder for me elsewhere.
Coming from Australia, our real estate prices are out of control at the moment. If I had purchase a house in Sydney around 2011, I would probably have doubled my net worth by now. Purchasing the home you live in isn't a bad decision especially if you live in an area like Singapore where values will be rising consistently but you do need to consider the opportunity cost of where that money would be if you hadn't purchased the house. If you would have spent on holidays, a new car or a shopping spree then purchasing the house was a wise decision. If you were going to spend it on investments such as stocks, bonds, property or mutual funds then there is a lesson to be learnt.
Yup thats what i was wondering, whether the money which i used on the house could be worked harder for me something else.
But while i do know it should appreciate, but sometimes wonder whether is it really the value of the house appreciating, or is it due to the value of fiat currency depreciating that gives us the illusion the value of house is increasing.
Part of it is illusion because Rothschild money is bad.
questions worth thinking about...
but what is the definition of asset you considered?
also I don't have an answer but I think it could be somehow related to the region or the area of the house/property
yeah i guess there isn't an answer. But for Singapore, as the land is owned by the government hence most houses here can be owned for only 99 years. There are houses here which can be bought for freehold but that would cause way more.
Well technical assets should be generating income. While technically, real estate should rise in value but yet it is not something tangible as we don't see the cash.
Nice @gaming360