There are several reasons why people should not choose Home as their first investment. Sometimes, when people start a job, they might want to invest the money that they are earning. Some people choose to invest it in gold, and some people immediately want to buy a house or a property. In this article, I would like to mention a few reasons why we shouldn't choose Home as our first investment.
Liquidating issues
Any investment should be giving us returns and the returns should be claimable. Some people might argue saying that the rent we are getting from a property is the claimable income. Still, by liquidating I mean there should be a facility to change the property to cash or liquid money immediately. This can be a hard thing to do with a home or property. Sometimes when we try to get rid of it, we might even end up at a loss because we would have not waited till the value appreciates.
Not a beginner-friendly investment
When we are just getting started with investments, it is important to choose a wise investment and also the investment that can give us better returns. The EMI of a new house can be higher compared to the other investments. There are other investment opportunities available that can demand only a small amount of money every month and as our salary grows, we can switch to bigger investments. So it is not the best thing to do if we are just getting started to earn.
Low return investment
Having a property is a very slow process. Even if we are purchasing a property just for the sake of investment, it can take a lot of years to appreciate. If we rent out the property, the tenants may not keep it very well and it can cost us maintenance fees. At the same time, the rental income can even be very low. Some flats when rented out give only 2% per annum which is very small compared to the returns we can get from other places. Other places can yield a better percentage of income compared to investing in a property.
Cannot diversify
When we invest all our money in a house, we will not be able to diversify our investment. It will be like we are putting all the eggs in the same basket. The reason is because usually a home loan demands a huge EMI and if we end up paying that huge EMI, we will not be able to afford other things which is the biggest problem with home loans. This can even affect the quality of our life.
Renting is better than purchasing
Only after paying a few months of EMI, we will be able to realize that a major part of our earnings go to the EMI of home loans which does not let us save any money on other things. We may not even have the money to take care of our emergency financial needs. If the monthly rent that we are paying is somewhat equivalent to the EMI value, then it can be considered to purchase a home instead of paying rent. Otherwise, this is something that needs to be thought through.
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