Should you rent or should you buy a home? That is obviously a question only you can answer but with all the hype about home ownership and equity appreciation I thought I would offer up a few thoughts contrary to mainstream thinking so carefully crafted and cultivated by our government and real estate industry.

First, a quick overview of some key words: Real estate is a derivative from the words Royal Estate which was a term used way back in time when the European feudal system was used. You know, when people use to farm the land of the rich landowners and get a small slice of the crops for their efforts? I am not a history buff but you get the idea. And Mortgage is a derivative of the word Morgue or, in so many fancy words Debt to death. My understanding is that way back in the old days, the government (composed of wealthy landowners) decided they could make more money by selling the land (Royal Estate) to people. How? By providing an interest earning loan to them in the form of a (Morgue-deed). The rich government also decided they could further benefit themselves by taxing the property they sold to these poor people. Then, these same rich people decided to make it a law that people had to insure these properties to protect the wealthy. So what you have is:

The wealthy people own the land (Royal estate)
The wealthy people convince the poor to buy the property on credit to death (Mortgage)
The wealthy people who held all the money forced the poor to (insure) the real estate (Did I mention the wealthy just so happen to own the insurance companies too?)
The wealthy people who comprise the government then (taxed) the poor slobs that bought into this program!

Real estate = debt to death (30 years) + interest + tax + insurance. Or to look at it another way:
Asset = liability + liability +liability +liability. Now ask yourself is this in the best interest of the poor slobs buying the property or the wealthy landowners? Aha! A new perspective!

But there is more to consider when you purchase a home you basically lose your ability to relocate quickly because of the obstacles associated with listing the home, finding a qualified buyer, selling, etc. Thats good for the government, they get the tax and they know where you are located. Speaking of tax, you can pay off your mortgage and still never really own the home because you will always pay taxes.

How do real estate taxes benefit your bottom line? What do you really get out of insurance? Insurance protects the lenderand its nice to have IF something were to happen. But statistically it probably wont or the insurance companies wouldnt insure you.

Dont forget the governments ability to take your property away under eminent domain. They just changed that law so the rich who have a better use for your property than you do can steal it from you legally. Which means to me, that a person pays and pays and pays and pays and never really owns their home.

And lets not forget about those catastrophic home repairs like roof, HVAC systems, sewage, etc.

And there is no guarantee that a home will appreciateall it takes is a massive layoff in a geographical area to wipe out property values.

So the next time you hear the president brag about increasing in home ownership in America or the next time you hear about owning a home is the American dream youll have a slightly different perspective. Its the American dream all right! Its the American dream for the government, the rich, the real estate industry, the mortgage lenders and the insurance companies. Butthe little person?

Like I said in the opening paragraph of this articlehome ownership is something only you can decide. But does it make sense to rent and invest your money into stock, something that has equally impressive growth potential without all the liabilities, risks and limitations?

Just some food for thought.

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Copyright 2006
James W. Hart, IV
All Rights reserved