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Buy A House Or Invest __HOT__

That thought probably crossed Ralph's mind when his pubescent son began to lecture him on how the home he's been working his entire adult life to pay off was not a good investment. That it was, in fact, a liability.

buy a house or invest

Imagine you were looking to buy a $215,000 house with 20% down and a 3.01% rate on a 30-year mortgage. Now imagine that a version of you from an alternate universe decided to rent a place for $1,098 a month instead.

REITs: If you feel torn about investing in stocks vs real estate, REITs might be a good options for you as they let you invest in real estate projects similarly to how you invest in companies through the stock market. Fundrise is a REIT (Real Estate Investment Trust) that lets you buy shares of real estate properties and earn money from price appreciation and rental income. While Fundrise's REITs are private, and therefore not publicly traded like stocks, they still allow you to easily invest in real estate without having to purchase or manage a single property.

I love investing in real estate, and it's a major reason why I was able to become a self-made millionaire. But I've learned that buying a single-family home to live in isn't always a great investment.

I realized this in 2003, when I was a newlywed with a newborn, and bought my dream home in Los Angeles. But as time went by, I wasn't seeing a return on the money or time I put into my house. So I sold it and used the equity to purchase a few rental properties. Then my family became renters again.

That leaves you with a net return of $14,000 (or 14%) of that $100,000. Over 10 years, your investment returned 1.4% per year, and we didn't even include the cost of roof, plumbing, paint and other maintenance fees.

Tip: Don't buy a house expecting to make a true profit. Instead, only buy when you have enough income, whether it is passive or active, to fund the cost of mortgage, property taxes and upkeep.

At best, a home is a place to call your own, and it can provide stability. But if your goal is to create wealth, there are so many other options, such as stock market or commercial real estate investing.

Unpopular opinion: Investing in the stock market is better than investing in real estate over the long term. Put simply, an investment in real estate earns just three to four percent per year historically; on the contrary, investments in the stock market post about 10 percent annual returns. That can amount to an impressive return on investment (ROI).

There are a wealth of ways to earn a passive income, including both investing in real estate property and investing in the stock market, whether you choose to put your money in stocks, exchange-traded funds (ETFs), bonds, or other assets.

When you invest in the stock market with index funds, dividend stocks, ETFs, bonds, and other assets, however, you can be more hands off with a lot less upfront costs. (This is especially true when you invest with technology like, which automatically allocates your funds for you. All you have to do is select your investment strategy and sit back while artificial intelligence crunches the numbers.)

Plus, you can also choose to invest in real estate by investing in real estate trusts and securities. For example, a real estate investment trust (REIT) is a corporation or trust that uses investor funds to buy, rent and sell properties, and 90 percent of the profits are paid out to shareholders as dividends. Real estate mutual funds and real estate ETFs typically invest in REITs to provide broad market diversification.

In fact, only 14 percent of American families are directly invested in stocks, according to the Pew Research Center. That said, just over half (52 percent) do have some sort of investments in the stock market, most of which are retirement accounts like 401(k)s.

Real estate properties are often identified as either good investments or bad ones based on a gamut of factors like rent prices, property taxes, neighborhood vibes, the local job market, school accessibility, future development plans or lack thereof, natural disasters like flood zones, and more. But putting your money in ETFs and mutual funds can help you to diversify your portfolio to mitigate the risks involved.

Zack O'Malley Greenburg is senior editor of media & entertainment at Forbes and author of four books, including A-List Angels: How a Band of Actors, Artists and Athletes Hacked Silicon Valley and the Jay-Z biography Empire State of Mind. Zack's work has also appeared in the New York Times, Washington Post, Billboard, Sports Illustrated, Vibe, McSweeney's and the Library of Congress. In over a decade at Forbes, he has investigated topics from Wu-Tang Clan's secret album in Morocco to the return of tourism in post-conflict Sierra Leone to the earning power of Hip-Hop's Cash Kings, writing cover stories on subjects ranging from Richard Branson to Ashton Kutcher to Katy Perry. A former child actor, Zack played the title role in the film Lorenzo's Oil (1992) and arrived at Forbes in 2007 after graduating from Yale with an American Studies degree. For more, follow him on Twitter, Facebook, newsletter and via Got a tip on a music, media & entertainment story? Send it over via SecureDrop. Instructions here:

Jussi is also the President of Leonberg Capital - a value-oriented investment boutique specializing in mispriced real estate securities often trading at high discounts to NAV and excessive yields. In addition to having passed all CFA exams, Jussi holds a BSc in Real Estate Finance from University Nürtingen-Geislingen (Germany) and a BSc in Property Management from University of South Wales (UK). He has authored award-winning academic papers on REIT investing, been featured on numerous financial media outlets, has over 50,000 followers on SeekingAlpha, and built relationships with many top REIT executives.

DISCLAIMER: Jussi Askola is not a Registered Investment Advisor or Financial Planner. The information in his articles and his comments on or elsewhere is provided for information purposes only. Do your own research or seek the advice of a qualified professional. You are responsible for your own investment decisions. High Yield Landlord is managed by Leonberg Capital.

At the time, many people bought houses at ridiculously high prices because that was the time when they needed a home for their families. Then, some were forced to sell their homes when the market collapsed, so they actually experienced a negative return on investment as they bought high and sold low.

You can borrow the money out of your house, based on the amount of equity you have. This can be done either through a home equity line of credit (HELOC) or through a straight-up cash-out refinance of your first mortgage.

But when you do either, you are borrowing money against the house. That may put more cash in your pocket for purposes unrelated to the house, but it also creates a corresponding liability. That liability not only creates a reduction of future cash flow via the monthly payments but also puts your house at risk.

A lot of people found that out the hard way during the financial crisis. As house values either went flat or declined, homeowners realized they had no equity in their homes. That left them unable to refinance to lower the monthly payments, and unable to sell to move to a less expensive housing arrangement.

The widespread use of HELOCs and cash-out refinances made a lot of people feel richer in the short term, but it jeopardized their long-term financial security in the process. Thinking of their homes as perpetual investments, many engaged in serial refinances, and ended up with an underwater mortgage (owing more on the house than what the house was worth).

Besides that, houses need some TLC over time. This can include replacing the roof, siding, windows and doors, carpets and flooring, and driveway. You may also engage in major remodeling like the replacement of kitchens and bathrooms.

If the house cost you $1,000 per month for principal, interest, taxes, and insurance (PITI), plus $300 per month for utilities, you will have spent $15,600 per year, or $156,000 for the decade that you lived in the house.

Although buying and managing real estate investments can be lucrative, it takes a lot of work and money, and it involves a significant amount of risk. If you like the idea of earning investment income from real estate (as opposed to stocks and bonds), consider real estate crowdfunding.

Crowdfunding platforms give you the chance to invest a small amount in large real estate deals and share in their profits. (Take note that, like all investments, real estate crowdfunding involves the risk of losing some or all of your investment).

But during the financial crisis of 2008, and particularly in certain markets, not only did property values not increase, but most fell. Some fell spectacularly. For people in that situation, not only was their house not an investment, but it became a major liability.

Unlike a primary residence (the home you live in), investment properties are intended to generate cash flow through rental income. Thanks to the low interest rates on real estate, this can be a relatively low-cost and stable way to create passive income.

Read on and find out everything you need to know about making a home purchase and whether homeownership is the right choice for you. (This story is focused on buying a primary residence, aka a home to live in. If you are interested in buying an investment property read about these simple ways to invest in real estate.)

As with every personal finance decision you make, you need to consider the upside and the downside of buying a house and what your goals for homeownership are. Only then will you know if a home purchase is the right choice for this phase of your life.

Most of those who invest in a house borrow the bulk of the purchase price from a mortgage lender. You will be responsible for making monthly payments until you either sell the home or pay off the remaining loan balance. 041b061a72

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