Is Buying a Home Important? My Homebuying Experience and Financial View

【Is Buying a Home Important? My Homebuying Experience and Financial View】Easy Investing Chat, CLEC Investment Channel. Post date: November 15, 2020

The following is only a sharing of my experience with buying homes.

If I could do it again, how would I think and what would I do?

【The following article is based on understanding investing and doing investing correctly. For people who do not understand investing and cash flow, their finances will be very difficult throughout life. Our financial investment channel and the videos below can first help you invest correctly.

(68) CLEC Investment Channel - YouTube

https://www.youtube.com/channel/UCdWAon5jrsET9PcJ-nS-b6Q

CLEC investment lecture worth NT$100 million. You must not miss it. 【Please subscribe, like, share, and forward. Forwarding to friends is very important.】October 2, 2020 CLEC Investment Channel

https://youtu.be/UMoz6W23W2c】

In 1990, housing prices in Taiwan soared. The company I worked for was forced to move to Longtan. The company offered a settlement plan: it acted as the developer, bought land in Longtan, and built homes for employees to subscribe to. I subscribed to one presale house for NT$9 million, nearly NT$200,000 per ping. Thinking back, it really was expensive. Later, because I was transferred to the U.S. branch, ten years later I sold it at a loss for NT$6 million.

This experience taught me: when buying a home, do not buy in the middle of nowhere.

While in the United States, I bought a house around 1992. Later, in 2000, I was transferred back to Taiwan headquarters. Because of various factors, I sold the U.S. house in 2003. In ten years, the home price doubled, which calculates to an annual return of 7%. I had a mortgage, and the interest rate at the time was 6.75%. The loan interest and return were about the same, so there was almost no financial leverage effect.

In today's low-interest-rate era, home prices are also extremely expensive, which will make future homebuying returns very ordinary.

This experience taught me that buying a home will not make you big money. Even if you buy in a good location, over the long term of 10 or 20 years, your annualized return is at most only 7%. If you buy at the high point of home prices, the return will be even lower.

After I sold the two houses above, I began renting and put all my funds into the stock market. This was also the period when my assets accumulated the fastest.

I retired in 2004, returned to the United States, and began teaching people about stock market investing and personal finance on a volunteer basis.

Now my main work, besides living, teaching investing, and publishing investment information and YouTube CLEC Easy Investing Chat videos, includes one important job: taking care of my parents.

My mother's health is relatively poor. For medical expenses and elder care, caring only for my mother normally costs more than NT$60,000 per month. Over the past three years, it has cost nearly NT$4 million, and my parents have their own home. By Taiwan standards, this is not a low expense.

Fortunately, more than twenty years ago, my mother gave me another NT$1 million and asked me to invest it for her. After decades of investing and spending, that fund still has more than NT$9 million so far. I believe this money is absolutely enough and will not be used up for my mother's retirement and care.

This taught me not to think that a mere NT$1 million is too little. When you have one or two million Taiwan dollars and let time accumulate, it can be enough for a stable retirement. Whether young or middle-aged, as long as you invest early, you can gain freedom earlier to pursue your dreams. Even for middle-aged friends, if you invest well, retirement and old-age funds should not be a concern.

Recently, I discovered that my father could gradually no longer live alone in his mountain villa. We prepared to sell the detached villa in the mountains, transfer the proceeds into the stock market for investment, and provide cash flow to care for my father and cover his living expenses. We planned to move him away from the mountains and rent a good house in Taipei County or Taipei City, where being in the city would also be more convenient.

While renting, I discovered that all landlords were unwilling to rent to elderly people. I almost could not rent a house for my father in Taipei County or Taipei City.

This made me realize that in Taiwan or the United States, when you are old, you may still need to have your own house, and this house may need to be near hospitals and convenient transportation. Young people never consider this when buying homes, so the homes young people buy often end up unsuitable for retirement in old age.

From my father's experience, although he spent a lot of money buying and decorating this detached villa, after thirty or forty years it became an old, run-down villa with no cash for retirement. This made me understand even more that if you use your money to buy a house, when you are old you may end up poor with only an old broken house left.

In fact, when my father was young, he worked very hard and bought many houses. In total, he probably bought four. But as he approached retirement, his cash flow began to have problems, so he sold two of the houses to supply living cash flow. Very quickly, the money from those two houses was also used up within a little more than ten years.

This taught me that using homeownership for retirement is not easy to achieve, because in the end your cash flow is insufficient. Old houses in poor locations have very low rent. When cash flow is insufficient, you are ultimately forced to sell the house, and you cannot keep it.

In 2013, I rented a house in the United States. Later, because the landlord wanted to sell the house, I originally planned to move out. Then a friend said he wanted to buy the house and rent it to me, so I did not plan to move. As a result, while I was in Taiwan, that friend canceled the plan to buy the house. At that time, I could only be forced to buy the house. Because I was retired, I could not use the house as collateral for a mortgage, so I had to buy the house with US$1 million in cash. Thinking about it now, it was truly a mistake. I should have used a Pledged Asset Line to buy the house. At the time, I did not know this borrowing channel existed. This mistake cost me at least US$100 million. If I had used a stock-backed loan to buy the house, that US$1 million could likely have earned much more money, and it would have kept earning for my whole life. This loss was truly very large.

When I had time to return to Taiwan to care for my parents and live in Taiwan for a while, I found that homes in Taiwan are quite expensive. If you want to live in a convenient and luxurious home in Taipei City, you may have to spend over NT$100 million. This is very uneconomical.

Later I found that whether you stay in a serviced apartment or a five-star luxury hotel, monthly rent from NT$120,000 to NT$300,000 lets you live at the quality of a home worth over NT$100 million. So I believe that in retirement, buying a home in Taiwan may not necessarily be needed. If you live in a luxury hotel or a serviced residence, you only need to prepare NT$14.4 million or NT$36 million for investment. With a 10% annualized return, you have NT$1.44 million to NT$3.6 million of annual cash flow, and you can live in property quality worth over NT$100 million. You also do not need to manage the home or repair it. Your own home gets old as you live in it, but when you stay in hotels or serviced residences, you can always be living in a new place. And if your investments are appropriate and returns are high, the principal will continue growing.

To summarize my experience above:

1. When buying a house, choose the location. If it is not in a good location, buying a home will not appreciate in value.

2. Even if you buy in the best location, the investment return is quite low.

3. Even if you want to buy a home, you must use a loan, whether a mortgage loan or a stock-backed loan. You simply should not use cash to buy a house.

4. If young people buy homes too early, besides being unable to profit, they may ultimately be poor with only a broken house left. The condition and convenience of that house may not be suitable for retirement, and it cannot provide cash flow. In the end, you may not be able to keep the house.

5. When you retire and grow old, you may not be able to rent a house, so when you eventually have hundreds of millions of U.S. dollars, you may slowly choose a good living environment and a suitable retirement location to buy a home.

6. If the city where you live has serviced residences or five-star hotels, you might consider living long term in serviced residences or five-star hotels. It may be more economical and efficient than buying a home directly.

The above is my experience. If you have any homebuying experience, views, or questions, you can leave a comment or email me.