S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20

6 Reasons Why Some Experts Say Owning a Home Messes Up Your Finances

Monday, October 11, 2021 | Melissa Brock
6 Reasons Why Some Experts Say Owning a Home Messes Up Your Finances

You've heard it: "You throw your money away when you rent."

Whether the advice came from your grandmother or it came directly from a financial professional, you've likely been entrenched in the "buy" or "rent" camp for a while. 

Even though 100 million Americans rent, they're outnumbered by Americans who own their own home, according to data from the U.S. Census Bureau. In the second quarter of 2021, owner-occupied housing units made up 58.2% of total housing units, and renter-occupied units made up 30.8% of the inventory 2021, according to the U.S. Census Bureau.  

So why do some financial experts say buying a home is a terrible idea? Let's explore the reasoning and logic for staying firmly planted in the decision to rent.

Reason 1: You lock up your money in a non-liquid asset.

First of all, what's a liquid asset? A liquid asset refers to an asset that you can quickly convert to cash when you need money. A few examples of liquid assets: cash in checking accounts, savings accounts, and money market funds. 

On the other hand, you'll find it trickier to convert non-liquid assets into cash and may face a decline in value if you hurry to do so. And what's the perfect example of a non-liquid asset? 

Yes — real estate. 

The only way you can really get money out of your home is to sell it, which could take several months. And where will you live after you sell it? 

It's true that you can tap into your home's equity, but that means you'll need to qualify for a home equity loan or home equity line of credit — but you'll pay interest and closing costs. It'll cost you more money on top of your mortgage. In addition, you could lose your home if you don't make the payments on it.

Reason 2: You're never done paying for a home.

You may think you're done paying on a home when you make your final mortgage payment. However, that's never the case. Consider property taxes, maintenance, insurance, homeowners association fees, landscaping, and lawn care, and more. You might also want new countertops in the bathrooms or new cabinets in the kitchen — styles change over the years. The point is, you're never done paying for a home.

In addition, if something goes wrong — issues with the roof, HVAC system, electrical system, plumbing, structural damage (think termites), mold, and more — you could be on the hook for thousands more.

Reason 3: Investing the money could net you more in the long term. 

What if, instead of sinking $1,500 (or however much you pay for your mortgage each month) into a portfolio that offers diversification over a long period of time? It'll grow far larger than your home equity if you instead sink that money into a house. (Of course, this comes with the caveat that you still have to pay something to live somewhere, such as paying for rent every month.)

However, buying an extravagant home in an expensive suburb can cost far more than rent in the same area, therefore posing the question: Will you make more money on a well-composed portfolio compared to real estate appreciation?

You might want to do the math if you're still on the bubble or if you're thinking about selling your home. 

Reason 4: You may find it harder to manage cash flow when you own a home.

Some people may find it comforting to know how much they'll shovel out the door for a home each month, but you may find it harder to budget. (Again, because of those unpredictable costs.) You know you'll never have to worry about the HVAC system when you rent, or rather, you don't have to worry about replacing it. At the most, you'll just spend a few days freezing in your apartment while your landlord takes care of the problem and pays for the replacement.

When you're not sure what costs will occur next, you may have a harder time figuring out how to budget your money each month. Therefore, you may eat into your savings goals. For example, if you have to buy a new HVAC system, you might have to skip investing in your kids' 529 plan for that month.

Reason 5: Insurance costs and property taxes can be unpredictable.

Many people think that you gain stability with a fixed-rate mortgage because rent goes up every year. Well, that's not exactly true. While it's true that your payment doesn't change over the course of 15 or 30 years with a fixed-rate mortgage, you'll still have to pay extra if your property taxes go up or your homeowner's insurance premium costs jump as well.

If you have an adjustable-rate mortgage (ARM), this means that the interest rate could change and you could owe more. 

Reason 6: It might not work in your favor if your job requires you to move around.

Does your job require you to move around a lot? (Such as belonging to the military.) If you don't plan to stay in a particular city for very long and it will be that way for the foreseeable future, renting might make the most sense. In most cases, you’ll need to stay in a house for two to three years to make buying worth the investment.

Does Owning a Home Mean You'll Sacrifice Wealth?

Unable to resist the tantalizing American Dream of buying a home? 

That's completely understandable.

However, it's a good idea to do some math before you make a decision or switch gears from currently owning to renting. How much more wealth could you accumulate if you invest instead of coming up with a down payment? What's the difference between the cost of rent and a monthly mortgage payment in a diversified portfolio?

It's possible to rush into buying without considering all the angles, so before you do, make sure it's the right choice for your needs.

7 Virtual Reality Stocks That Can Deliver Very Real Profits

Are you ready for the metaverse? Yeah, I’m not either. But many people are enjoying living their life in a virtual world. However, virtual reality and augmented reality goes beyond the world of video games. The applications for this technology include remote assistance, training, and education.

And like e-commerce, this was a sector that experienced significant growth during the Covid-19 pandemic. Necessity frequently inspires new ways of thinking and so it is that millions of Americans had to figure out how to do things remotely.

But what you want to know as a prospective investor is whether there’s more growth in store. Fortune Business Insights reports that the global market for VR gaming will reach $45.2 billion by 2027. That’s up from $5.1 billion in 2019 and $17 billion in 2020. That comes out to a compound annual growth rate (CAGR) of 31.8%. That should get your attention. It’s certainly drawn the attention of many of the tech giants. Many of the FAANG stocks are investing in this market with the expectation of massive future growth.

If you’re looking to invest in this growing sector, we’ve put together this special presentation that highlights seven virtual reality stocks that, while they dabble in the virtual world can deliver real profits for your portfolio.

View the "7 Virtual Reality Stocks That Can Deliver Very Real Profits".

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