INSIGHTS
Home Owning vs Property Investing
The importance of both property investing and home owning
BY DREW HOOK
W
hat is the difference between being a
homeowner and real estate investor?
Does purchasing a home make you both
the owner and investor, and how are other types of
real investments different? Is it better to purchase
first and invest later, or vice-versa?
While home prices fluctuate overtime, they have
consistently moved up over the long run. In fact, the
bulk of wealth created by most individuals will be in
their homes. That’s where most of their legacy money
will be built up, as homeowners are overwhelmingly
wealthier than renters.
Homebuyers
In most cases there are three defining factors for
buyers looking to purchase their first or second home
• Wanting to live in a new or better house
• Their family is expanding
• Relocating for new job/better living conditions
etc
Personal residences are not
normally traded like stocks
or other investments
Investors
Investors are more likely to be motivated by financial
considerations when it comes to purchasing property:
• Property is seen as a good investment
• Taking advantage of low interest rates
• Planning for retirement
How Investing is Different
It can be said though, that a home is never really a
true investment. The assumption being that you will
always need a home, or property that can provide a
roof over your head. One that will never be totally
liquidated during your lifetime. Personal residences
are not normally traded in the same way that other
investments may be.
There is a more freedom in acquiring, managing,
and disposing of pure investment properties, as you
can be far more objective (whereas a family home can
often have sentimental value the prohibits honest
appraisal). This helps in lowering risk and increasing
returns. It frees you from location, price range, and
looks, to hone in on the facts and figures.
Investing first before purchasing allows you to use
the proceeds from the investment to pay for a new
home. While buying a home first to will give you
the experience in the process and create a financial
foundation from which to successfully invest at a
later stage.
Home-Owning
Buying a house, even if you don’t plan on living in
the same residence for the long haul, or won’t live
there full-time for several years can be powerful for
building up equity and cash. That can be used to
upgrade housing later, or at least help make it more
affordable later in life.
Your housing cost will more than likely make
up the bulk of your life’s expenses, and the sooner
you are able to stop paying for housing, the sooner
you will be financially free. Purchasing a modest
home now could result in significantly lowering any
housing debt later on in life, which is critical when
approaching retirement.
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Residential Handbook 2015
www.reimag.co.za