You Don’t Have to Own Real Estate to Build Wealth, According to CFP – Business Insider

Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.

  • Buying a home may be the “American Dream,” but it’s certainly not a prerequisite for building wealth.
  • Owning a home is expensive, even if you rent it out, and you’re never guaranteed a profit.
  • Consider REITs instead, and maximize your investments in the market to build long-term wealth.
  • Find a financial planner near you with SmartAsset.

We’re often told that buying a home is one of the greatest investments we can make. But just because it’s the “American Dream” and a tangible sign of success for many, it doesn’t mean it’s your best option if your goal is building wealth.

While real property can boost your balance sheet and play a part in growing your wealth, it’s critical to understand that you don’t have to buy property to get rich.

Let’s break down some of the myths around real estate as an investment that can mislead you — and in the process, show why real estate isn’t a prerequisite for building assets.

Real estate isn’t always a good investment (or an investment at all)

“Always” and “never” don’t have a place in a savvy investor’s vocabulary. There are no sure bets or guarantees, especially when it comes to real estate, because there are so many variables that fall both within and outside of your control. 

Factors outside of your control include:

If you’re interested in becoming a landlord or flipping properties, you may have a bit more influence even amid these variables. You may be able to hold onto a property until the market is more favorable, for example – but then questions of liquidity and expenses come into play.

Homes are expensive, illiquid assets that come with expenses every step of the way, from upkeep and maintenance to the transaction to buy and sell. Every dollar that goes towards cost is a dollar that eats away at your potential profit.

When you’re talking about a single-family home that you live in as your primary residence and don’t pull rental income from, the idea of an “investment” falls away entirely. At that point, a home is more of a utility than anything else.

For many people, making money, breaking even, or losing out on a real estate deal comes down to timing and luck — which is a big reason why banking on property as a …….

Source: https://www.businessinsider.com/personal-finance/real-estate-investing-building-wealth-stock-market-2022-9