My Dad used to tell me stories of how his father was a building contractor but the house in which they lived had walls that were half finished. Meanwhile my Mom, whose mother was a dressmaker, rarely got any new clothes as a teenager because her mother was too busy sewing other girls’ dresses for a living.
I guess I’m kind of like that.
You see, I invest in real property. I own the titles to a couple of houses and bought a few others which are currently self-liquidating. But the irony here is I have always moved from one place to another, staying in other people’s houses – renting – for the past eight years.
Let me explain why I choose to do this. My goal is to generate an income from the real property I own. As long as I can keep my rent expense lower than the rent income I earn, then I will continue to rent.
Almost everybody wants to own a sprawling house with lush gardens and maybe even a pool. I do. But living in such a house is a big expense and can be a drain on the budget. The more sprawling the property, the higher the real property tax – which is computed based on lot and floor area. The posher the neighborhood, the higher the association dues. When you live in a big house, you also need to spend big in order to maintain it in its original state. You also spend more on heat, water and lighting utilities. You pay higher fire and earthquake insurance. The list goes on. And if you bought that on a loan, you also have to factor in the interest expense.
But take note – this only applies if you LIVE in that house. However, if you can rent it out at a price higher than the costs related to it, then that house can actually be considered a business. If it gives you a net cash inflow each month or each year after you pay off the amortization and all other incidental expenses, then you are making money. And if you can realistically expect real property prices to increase in your area, then that house can also be considered an investment. In summary, that house you would consider as an expense if you live in it, can actually turn into an investment that will generate both rental income and a gain on sale if you choose to rent it out.
Of course I want to eventually settle down in my own home in the future. Not too sprawling, not too cramped. Just right for sensible tastes. I could actually do it now, at a quite reasonable cost. But apart from cost, I have this one tiny problem. I still don’t know where I would actually like to settle down. The homes I own are scattered over four localities and then I live in another town. At the same time, for the past ten years, I have been trying to live as close as I can to my place of work in order to avoid traffic. I’ve gotten used to taking my time in the morning, having a nice, leisurely breakfast before I walk to the office. I’m not sure if I can give that up so soon. If only offices stayed put, I would buy a nearby condo unit to live in. But my work has changed three times for the past eight years so I can’t be so sure of a location. I’m thinking once I have my own business or eventually retired to become a farmer, maybe then I can finally be sure of where I want to live. For now, I have all these houses, but home is where the heart is. And it keeps moving around all the time for me.
Last year, I met a newly married couple. They had a tragedy a few years back when the house of the young woman’s mother was burned in a fire. The young woman almost died in that fire. Her health soon recovered but she continued to suffer severe emotional trauma. The newly wed decided to sell their real property and travel instead. They would rent a house for a month or two, moving like Bedouins from one place to another, anywhere close to nature. One time they would live in the highlands, another time on a secluded island, then in a farm living off their organic produce, so on and so forth. For this young couple, it was a way to heal their psyches. Not being attached to a particular house or location was a liberating and soothing experience.
In contrast, I see how some of my grade school classmates, now with children of their own, still living in the same town we spent our childhood in. I guess there’s a different kind of peace and stability in staying put as well, in establishing your roots.
Well, each to his own. As for me, this is my gig for now. I dream of settling down on my own home in the future. To be able to afford that, I just need to invest and stay mobile for now.