The single largest mistake America’s Millennials are making is failing to buy a home, according to millionaire and finance guru David Bach.
Although there is a school of thought that home ownership is the “American nightmare,” Bach holds to his premise that failure to buy a home limits young earners in their quest for financial well-being. “The average homeowner to this day is 38 times wealthier than a renter,” he asserts. “Buying a home is an escalator to wealth.”
Bach, author of “The Automatic Millionaire,” says he bought his first home in San Francisco. It skyrocketed in value. He then moved to New York, purchased another home and again saw a significant increase in value. He now owns a third home.
You have to live somewhere, he reasons, so why not make an investment in something that will pay you back over time? A renter can easily spend half a million dollars in rent over the years and end up with nothing to show for the expenditure.
“Or you can buy a house and spend the same amount paying down a mortgage and in the end wind up owning your own home free and clear.” As an example, he cites the math: $1,500 rent per month over 30 years equals $540,000 – money down the drain, in his opinion.
If you are considering the pros and cons of home ownership, he advises “Start by crunching the numbers. Do the math, starting with the smallest options. When you’re really clear on your goals, start shopping.
Rule of thumb: Make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay. Save for a down payment of at least 10 percent, more if possible. Don’t go overboard. Your first home may not be your dream home, but it is a step toward that end.
Buying a home puts you in the market, and, according to Bach, “You aren’t really in the game of building wealth until you own some real estate.”