investment vs. speculation and the joy of owning your own home

Oh, boy. There is so much interesting stuff out there on the Internet, yes? There are a number of blogs that seem awfully nasty. The bloggers themselves even admit it, to an excess of Schadenfreude...excessive joy taken from observing the misery of others. These people say they knew the bubble was coming and the fear and greed of people who bought at the peak of this situation really have it coming. They rent, they say, and are proud of it. Well, good for them! It must be comforting to feel so vindicated in one's decision not to have participated in buying something they couldn't afford anyway and that may be worth less today than it was in 2005.

I'm reminded of a great friend of mine, a dear person who considered herself something of a socialist. She didn't believe in speculating in real estate. She found it immoral, somehow. My husband and I were at her apartment for dinner, and when I excused myself at some point to use her bathroom, I found in the magazine rack an annual report from Exxon. She owned stock, in Exxon.

She, and some of the bloggers from Irvine, CA and many other locations all over the country, are still renting. They have no equity, no forced savings, they are subject to the vicissitudes of the rental market, how cool is that?

Don't get me wrong, I don't advocate paying more than something is worth to my clients, in fact, the opposite is true. Let's find a great deal! But buying a single family home or condominium is not an investment in the true sense of the word. Buying a single family home or condominium to sell is speculation, if you are planning to resell it anytime soon, and hopefully for more than you paid for it and put into it. Speculation is risky, and not for everybody (I really hated those reality shows like Flip this House, they made me want to cringe when I saw rank amateurs spending their savings in an effort to rehab a home and sell it fast. So sad. Like watching a train wreck, or a really bad auto accident.

Buying a single family home or condominium to use as your primary residence is financial planning, it is responsible, it is one of the few things you can buy and pay off over 30 years, while you still have full use and enjoyment of it. You can refinance it, or take a HELOC out, tax free. You can deduct the mortgage interest. You can experience pride of ownership. You can decorate and improve it at will. And, if you got a good deal, and bought in the right place, and maintained the property, and are lucky and live there long enough and can sell it for more than you paid, the profit you make is exempt from tax (up to certain limits). Try doing that with your rent receipts!