Homeowner’s Blogs look through the eyes of someone who has succeeded paying off a mortgage and completed several house developments or renovations. Home ownership is not how much you earn, it is about cleverness using a property to its potential by reducing housing costs and sheltering cumulated wealth against inflation.
Secrets of happy Home Ownership
Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, residential properties and healthy lifestyles.
The passion of making experiences available comes from renting in different countries and working with people who are interested in home ownership. Helping people to avoid pitfalls has been most rewarding, when forming relationships, too.
Our philosophy to treat life, partnerships and hobbies as an investment has helped people in our circle. Life is a dream with a deadline, happiness comes from making the right choices by having realistic expectations.
Come along and participate — boost your confidence!
Homeowner’s Blog for the sake of clarity
The idea to contribute a homeowner’s blog came because of so much conflicting information driven by an industry to sell properties as an investment. An owner-occupied property is not a cash producing investment, in fact owner-occupied housing is a huge financial commitment. Your “home” is the only "investment" that does not generate income, but rather generates every month bills for payments like interests on a mortgage, insurance, council rates, repairs and maintenance. Those expenses are similar to rent payments.
From taxation point of view when selling, you might be liable to pay tax. Note; NZ is still free from capital gains tax for owner-occupied properties held longer than two years that I explain more in greater details under “Bright-line Test for Residential Land”.
Also true “No one ever got rich by renting for life”. Well, hard to prove but I go along with that and try to explain “WHY” in my “Renter’s Blog”.
Home ownership—why would you take the risks?
Owning a home or being a homeowner-occupier (commonly called homeowner) is not a risk, see it as financial commitment. Having control over a place you live in, bringing up a family and being financially backed up with equity in your home have many positive social effects on your life, too.
This blog will help you to read the headlines of the property market in a different way by understanding homeowner’s position in contrast to investment properties (also called rental properties). People tend to react emotionally, sometimes even suffer panic reactions when dealing with housing issues. Let me challenge your views with experiences I made as renter, homeowner and investor for boosting your confidence.
Don’t get caught in the media twist of getting quick rich with properties. As said before home ownership is a liability. Let me help you to avoid a mortgage (foreclosure) sale and enjoy your home with the right attitude towards money.
· Never buy things you can’t afford,
· Keep always spare money for rainy days, and
· Don’t spend money you don’t own (hire purchase)
With these three rules you will be a winner when paying off your mortgage as quickly as possible and reduce your housing costs to a minimum.
The myth of your Castle as Investment
Amazingly lots of homeowners try to sell the myth that their home is good investment. The definition for investing is spending money for profit or generating income. In an economic sense, an investment is e.g. the purchase of an asset like an investment property to create income (rent), wealth (capital gain) and/or profit. Think about the return on investment (ROI). What is the ROI on your family home?
Another consideration is when having signed a mortgage, the house is taken as security by the bank and interest payments are the largest expense a homeowner might face. Face it, the dream from an effortless wealth creation with borrowed money is actually a reduction of net worth as long as the home loan is more than 50 percent of the market value of an owner-occupied home.
The reality why you and I have purchased a home is enjoying to live in it, having a lifestyle that suits us most and being part of a community. Let me show you how you can treat your depreciating house like an "investment".
Two conflicting messages fuel the housing controversy
Homeowner’s dream is to retire in luxury on the 'equity' built up in a home. That is why “Capital gain” is a huge motivator. When looking at the costs for upgrading living standards (modernizing a house, new kitchen, second bathroom etc) most homeowners don’t realize that moderate capital gains do just off-set those housing costs. Saying here, capital gain is not free money as ignorant people tend to believe. It is money already spent on a depreciating asset to keep and increase the value. Just think about the expenses for insulation, new roof, fencing, paving the driveway and so on. Again, a house is a liability and a depreciating asset like your car or computer. Of course some people convert an old car into an “Old Timer” with considerable costs. With the land attached to the house is it different as you find out following the blog.
What is in for you as willing home buyer and homeowner?
Well, the most important first—home ownership forms habits to meet personal and financial goals. In contrast (trust my experience as landlord) renters with a better cash-flow tend to save little. That controversy is too often true.
Home buyers are more likely to take up a mortgage because of the positive social status associated with home ownership. By owning a home you can do what you want to improve the comfort in your home within your control. Renters don't have that type of luxury. The Homeowner’s Blog will illustrate
· Appreciation/depreciation of your property
· How to use assets to hedge against property market swings and inflation
· How to renovate and improve your home to reduce housing costs
And two points more to consider;
(1) If you are in business — owning a property gives you “Borrowing power”. Before investing in properties I went through the painful process not getting the finance for expanding my IT business.
(2) Keeping up with home maintenance and repairs, it can be very time consuming and daunting dealing with tradesmen and getting quality services. Here is more.
Klauster Properties Ltd. - Homeowner's Blog
Home ownership—a key factor for creating strong communities