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
Are Homeowner’s Views realistic?
The idea to contribute a homeowner’s blog is based on conflicting information I had to deal with when settling into an owner-occupied home. I was told buying an investment, but in reality it turned out a family home is a huge financial commitment, a liability and a depreciating asset. Be with me I explain the facts later.
In other words your “family home” is the only "investment" that does not generate income, but rather generates every month a number of bills for paying interests, insurances, council rates, repairs and maintenance. When I paid rent I wouldn’t have thought about.
I was also told—don’t worry you get that money back, called tax-free capital gains. You are right, I sell before I die! On the bright side it is true “No one ever got rich by renting for life”. Well, hard to prove but I go along with that. The major difference between renters and homeowners is attitude. Again, I prove it later!
Ownership or Renting is the question
All land on earth is already owned by somebody. Land scarcity is driving up housing costs and the notable answer of city planners is building more compact housing and apartments in high-rise buildings. Also looking at massive demographic changes such as single households and professional couples with no kids prefer living close to work instead of time consuming commuting every day, costs for petrol and transportation, job availability and social stability —everything enters the equation of buying a house or not.
Look at trends in developed countries showing that the majority of people prefer to live in cities and are willing to pay rent for that convenience. Reasons are good paid jobs and social security including sufficient old pension funds. On the opposite in NZ people are still keen on home ownership for retiring in a mortgage free house, which is typical in countries with low income or rural societies. But still home ownership has its benefits and that is the purpose following these blog posts.
Home ownership—what are the risks?
Being a homeowner-occupier (commonly called homeowner) by having control over a place for bringing up a family and using a mortgage as enforced saving make sense if you can afford it. And that is the crucial point “affordability” a term so widely mislead by politicians fishing for voters, but don’t define a number telling what price is affordable. The recent numbers 650-700k released for Kiwi-Built homes—are they affordable?
People tend to react emotionally, sometimes even suffer panic reactions when dealing with price and finance options before signing a purchase contract. But only then the reality kicks in when being heavily overtaxed as homeowner. Details—follow the blog.
Winners and Losers
People are getting caught in the media twist of getting quick rich with properties. Remember, home ownership is a liability. Let me help you to avoid a mortgagee (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 for example the purchase of an asset like an investment property to create income (cash-flow), wealth (capital gain) or both. The performance is measured by the return on investment (ROI). What is ROI on your family home?
Another consideration is when having signed a mortgage, the house is taken as security by the bank. You own a title, the bank your home and related interest payments are the largest expenses homeowners might face. Face it, the dream from an effortless wealth creation with borrowed money is actually a reduction of your net worth as long as the home loan is more than 50 percent of the market value. Let me show you in this blog 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 these home improvement costs. Saying, capital gain is not free money people tend to believe. It is money already spent on a depreciating asset to keep and increase the value.
Again, a house is a liability and a depreciating asset. The difference to an “Old Timer car” is the land attached to the house. Details later.
What is in for the willing home buyer?
Home ownership forms habits to meet personal and financial goals. In contrast renters with even better cash-flow tend to save little. That controversy is too often true.
Here is my point, ownership gives control, for instance to use assets to hedge against property market swings and inflation. How? Simply improve your home for reducing housing costs and more details—follow the blog!
Klauster Properties Ltd. - Homeowner's Blog
Home ownership—key factor for creating strong communities
Klauster Blogs lead to a real person, an experienced renter for more than 25 years in Europe, South Africa, Australia, New Zealand and became a landlord/investor before founding Klauster Properties Ltd in 2006.
The passion of making experiences available and helping people to avoid pitfalls has been rewarding by forming lasting relationships.
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.
Don’t blame, boost your confidence!