Your home is different than a real estate investment - learn how and why!

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Welcome to the EnjoyMore30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello, and welcome to the fifth episode of The Your

Major Money Misnomers series. As always, if you like what you're

hearing, please make sure to click that subscribe or follow

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reviews, they mean a big difference for us and helping

other young families out there. Last week, we discussed Schedule

Goals, Achieve Goals to help you better understand how most

people incorrectly connect goals solely with pass or fail, and

how changing our mindset to be using goals to instead give

ourselves a better opportunity in moving forward to some degree

in a better direction can really produce great benefits, real

tangible results. So check that out if you haven't already.

Today, we are discussing your home, the American dream, right?

But specifically why in most cases, you should not be looking

at your home as an investment, despite what you likely have

heard to this point in your life. We're going to discuss

what you need to know about what really kind of needs to be true

to define something as an investment, and what you can do

in changing your mental approach to avoid some potential negative

consequences as a result of that traditional mindset. Now, when I

was younger, I hated orange juice, that acidic taste or

whatever you would call it just was not for me never enjoyed it

or anything like that. Growing up, though, it was kind of

always touted or at least that's how I interpreted it as a health

kind of a drink more or less. Yeah, there's all this vitamin C

in it, and so on and so forth. So I looked at it as like, oh,

if you drink orange juice, you're being healthy. Now I can

picture kids in the commercials drinking it and then afterwards,

they have you know, that huge smile on their face because, you

know, they they felt so healthy. And as such, I tried to force

myself to drink it. Especially when I was sick thinking I was

doing a really great job. In my adult life, it was pointed out

to me that orange juice actually has the same amount of sugar

content drop for drop as a can of soda. And you know, that was

rather astounding to me. And now I drink water with a vitamin C

supplement on the side, you know, even better. So if you

think back, you can probably recall one food or another you

thought was really good for you growing up that maybe you have,

you know, changed opinions on down the road as you've grown

up. So what you need to know is that viewing your home as an

investment may sound like it makes perfect sense however, if

you break it down in real terms, and they not exactly look that

way. Now, you know, I'm not saying to not buy your own home.

I'm a homeowner. I'm just saying to adjust the way you're looking

at it and the actual reasons for owning the home. To be an

investment in just kind of the traditional or basic sense, you

need to buy something today, have an expectation of it

rising, and then lastly, an expectation of sometimes selling

it in the future at that higher value. So you know, I buy ABC

investment for retirement, I expect it to go up, then when I

retire, I expect to sell it at that higher price to pay for my

retirement. With a home if you're planning on living in

that home long term, maybe forever, then that last part is

not true. You have no real timeframe when you plan to sell

it and actually realize a gain as a traditional investment

would operate. You know, really, if you want to consider it an

investment then it's an investment for your kids, as if

you live there forever they are going to sell it after you're

dead and gone and they will just realize the profits. Now if

you're buying a real estate property today specifically

because you think at some point in the future, it's going to go

up and when that happens, you're going to sell it. So from the

very start the sole purpose is making a profit, then that is a

different story. I would agree then that is an investment.

That's why I didn't say real estate isn't an investment. I

said your home isn't an investment. You're likely living

in your home, first and foremost, because it's what you

feel is best for your family at this moment in time. And that is

the focus and to me it should be the focus. Whether it be

proximity to work, the school district for your kids, that is

by far the biggest reason I'm sure why you're there. So number

one is being your home. Whether you make money when it's sold 30

years from now or not, I'm guessing is not your primary

driver. Same thing if you purchase a second home, by a

lake or the beach or up in the mountains. It's another place to

go that your family will enjoy and that you will make great

memories in. Again the primary driver is not appreciation and

selling down the road to make a profit. So what you can do is

adjust that initial mindset. A home is an expense and one that

you're willing to take on for the lifestyle you want for your

family. Where people get into trouble with having that home as

an investment mentality is that it can often cause you to

overextend yourself. Say you're looking at a home that is out of

your price range. The realtor might say, "Yeah, but it's in a

great area, it's up and com ng. It's a great investment for

you and your family." And you get to thinking, 'hey, yeah, tha

's true, you know, maybe I sho ld buy this home'. However, lik

we just said, if you aren't pla ning on selling this house any

ime soon, and the primary rea on isn't making a profit, the

this makes it a home, not an nvestment. You will now be in

situation maybe of having a lar e mortgage, you can't really aff

rd maybe much less you can sav towards retirement or other goa

s, or you know, maybe even a neg tive cash flow, potentially mak

ng your overall financial sit ation worse, is not a good inv

stment. Same thing goes for a s cond home. When we speak to cli

nts about another home, if tha is one of their goals we go thr

ugh if they can't afford the sec nd home, and or, you know how

that will affect the other goa s and timelines we have alr

ady laid out. Whether the hou e will appreciate or not, is not

part of the decision pro ess. Again, it's a second hom

, there's that word again, not an investment property.

So a recap of today is that it's really important to mentally

separate out a property that is your home for one that is an

investment property. They are two different things. A home is

where you choose to live with your family for that lifestyle.

That's 99% of the reason for buying it. A real estate

investment property is different in that you're buying it

specifically to make a profit. The goal is appreciation to

receive a profit. So when dealing with decisions for your

home, make the primary focus on if it would make you happy, if

you can afford to do it and if it will cause you to have to

adjust any of your other goals by doing so. So not investment

profits again. Now, I personally am happy to share that I plan on

being on my in my home long term. So when we designed our

kitchen, for example, we designed it for how we would

make us the happiest, not what would have the highest resale

value. So finally, be careful when dealing with home decisions

to not overextend yourself based on it being you know, quote,

unquote, a good investment. It just makes you financially

stretched or unstable, then it's actually a bad investment pretty

much every time.

Thanks so much for tuning in today. As always, as we always

say here at the end, if you're able to implement what we cover

that is fantastic. You have less to worry about then before and

we can focus more on just enjoying life. If you are

wanting help with these things, or have questions you need help

in clarifying, check out that Ask Joe section on the show's

website www.enjoymore30s.com. That's enjoy more three zero s

.com. Again, if you enjoyed this episode specifically, please

make sure to follow us or subscribe and review us on Apple

podcasts wherever you listen. There are literally millions of

young families out there I'm trying to reach and help just

like you.

The next episode is Long Term Disability...MORE Likely To

Happen?, where we're going to break down what statistically is

actually the more likely insurance you could need to have

in place to protect your income and family. Until next week

thanks for joining me today and I look forward to connecting

with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal tax or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

registered investment advisor member FINRA/SIPC.