This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This time, the topic is one that figures into the retirement planning of many Canadians. Is my home an investment? Make sure you’ve made careful and complete calculations before you come to that conclusion, advises Pat.
Planning for Retirement: Your House as an Investment
Q: When I’m planning for retirement, where does my home fit in? To what extent should I treat that as an investment?
Pat McKeough: I think you should take a more neutral view of it: don’t think of it as an investment, think of it as an asset. An asset could be your stamp collection, or it could be your swimming pool, or a racehorse. A racehorse is not a good investment and a house isn’t necessarily a good investment.
You need to think of what it’s costing you to own it, to run it, to maintain it—the repairs. Of course you also need to think that if you sell the house you’ll need to invest the money and have a stream of income you use to rent someplace to live. And that gets to be expensive, too.
Compare those two streams of income: the income you save by staying home plus the cost of staying there, and the income you get from investing the value of the house minus the sales commission.
Once you do that, you have a pretty clear idea of whether your house is an investment, or just a hobby.
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COMMENTS PLEASE
Did you buy your house as an investment, or did you think first of a place that suited your family’s needs? Does the equity in your house figure prominently in your retirement planning? Do you have a plan in mind for the day when you sell the house? Let us know what you think in the comments section below. Click here.
Comments
al
My house was purchased as an investment and the fact that it provides me shelter on an ongoing basis is a benefit similar to the stream of dividends from an income stock. The house is a substantial part of my total assets, which when sold, will be invested in income producing assets such as solid equities and REITS, and possibly at some future time, bonds as well. Once that happens I intend to resume something I was doing in the 80s, which was sailing around the world – I went 1/3 of the way then, and intend to travel the other 2/3. And may in fact spend the rest of my life on the boat, sailing the seas and drinking, carousing, chasing pretty young women and in general doing all the things an old geezer like me should know better than to do.
I have used the equity in my home to get a low intrest line of credit. Then turned around and invested in dividend stocks like telus and scotia bank. I bealive that using your home in this manner makes it a good investment compared to just allowing the equity in your home to just sit there. At then end of the day you will end up with a good portfolio and have paid back the loan with dividends.
perfect analysis – so many look at a house as an investment and forget the ‘lost opportunity cost’ with this investment. Certainly, a long term investment in the stock market following the guidelines of TSI will produce at least, if not a better return than one would get on their home.
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My house was purchased as an investment and the fact that it provides me shelter on an ongoing basis is a benefit similar to the stream of dividends from an income stock. The house is a substantial part of my total assets, which when sold, will be invested in income producing assets such as solid equities and REITS, and possibly at some future time, bonds as well. Once that happens I intend to resume something I was doing in the 80s, which was sailing around the world – I went 1/3 of the way then, and intend to travel the other 2/3. And may in fact spend the rest of my life on the boat, sailing the seas and drinking, carousing, chasing pretty young women and in general doing all the things an old geezer like me should know better than to do.
I have used the equity in my home to get a low intrest line of credit. Then turned around and invested in dividend stocks like telus and scotia bank. I bealive that using your home in this manner makes it a good investment compared to just allowing the equity in your home to just sit there. At then end of the day you will end up with a good portfolio and have paid back the loan with dividends.
perfect analysis – so many look at a house as an investment and forget the ‘lost opportunity cost’ with this investment. Certainly, a long term investment in the stock market following the guidelines of TSI will produce at least, if not a better return than one would get on their home.