While many people view homeownership as a hallmark of financial stability and wealth building, legendary investor Warren Buffett says there are overlooked costs that could make buying a home a bad investment.
“Buying a house is usually a worthless investment,” says Buffett, who has lived in the same house in Omaha, Nebraska, that he bought in 1958 for $31,500 – about $336,164 in today’s dollars.
Buffett’s house, now worth about $1.4 million, is his only real estate investment. Buffett’s estimated net worth is approximately $136.8 billion.
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First, there is the down payment. At the annual meeting of Berkshire Hathaway Inc. in 2021, buffett talked about his experience buying a house, noting that the down payment was about 10% of his net worth. He postponed purchasing a house because he wanted to use the money for other investments, which his wife agreed to.
Interest, property taxes and homeowners insurance represent a significant portion of monthly mortgage payments. Owning a home also ties up resources that can be used to invest in stocks or bonds.
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Buffett also said that homeownership does not guarantee significant financial returns compared to other investment strategies, such as stocks.
With rising home prices and high mortgage rates, buying a home has become a challenge for many Americans, and many are choosing to rent instead — a smart move, according to financial advisor Dave Ramsey.
According to Ramsey, renting can be a strategic choice that can save people from overly tight budgets and buy them time before they can afford a home.
Ramsey and Buffett aren’t the only ones who believe that renting can be a wiser choice than buying a home. Grant Cardone, another high-profile social media personality, said rent is often half the cost of a mortgage because of high interest rates, homeowners insurance and property taxes.
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This article Warren Buffett says ‘Buying a house is usually a worthless investment’ – here’s why it originally appeared on Benzinga.com
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