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Is It Always Necessary to Build Your Own House?

This is not a personal finance site and I do not profess to be good at personal finance. But whether you acknowledge it or not, your plan to own a house is tied up to your long-term financial objectives.

Build Own House

Consider the following:

Is owning a house your ultimate objective or is it just a means towards a greater objective?

Which would you rather have first, having your own house or financial freedom?

If someone offers to buy your house at a price that will give you ample profit, will you sell it or will you keep it?

If you’re renting a decent house and your money is invested in financial instruments that earn you enough to lead a modest lifestyle and will give you financial freedom when you retire, will you pull it out to buy a house or are you willing to rent for the rest of your life?

Two kinds of home buyers:

Depending on how you answered the foregoing questions, you are either an investor or an end-user.

An investor buys a house in order to add value to his financial position; for him, it’s all business, a means to achieving financial freedom. Whether he’s buying his first house (where he and his family will live) or a second house, he always looks at the house as a form of investment. He is not emotionally attached to the house that he will readily move out, even rent if necessary, if he gets a good offer for it. He then rinses and repeats the process until he achieves his financial objective. And maybe, only then, will he settle in his permanent house.

I have a friend who does not actively sell any of his assets but says that all his properties are for sale… if the price is right.

End-users, on the other hand, are almost always motivated to build or buy a house by a mixture of rational and, sometimes, subjective reasons.

Rational reasons may include the following:

Spending, say, 10 thousand pesos monthly on rent, by cutting back on some unnecessary expenses, I can save three thousand pesos monthly and use my savings plus the cost of renting to pay monthly amortization on a house.

I have saved enough for a down payment; I and my wife have a 3-month emergency fund; we are in good health and we have saved for any medical emergencies and we have secure jobs.

We don’t need an extravagant house; we just need something that is close to our kids’ school and to our work so we can save time and money in the process.

We have saved, planned and plugged all holes to secure our retirement and we have enough money to buy or to finance our own house.
All these are valid reasons for buying a house. But they also imply that for most Filipinos, building or buying a house is as much a lifestyle decision as it is an economic one. It entails making sacrifices.

On the other hand, some people buy a house for subjective reasons:

Owning a house is the cornerstone of the Filipino dream.

All that I have worked hard for will be for nothing if I have no house of my own to show for it.

The Joneses have one, we should have one ourselves.

Depending on your reasons, a personal investment on a house may be your best financial decision ever… or it can be your worst.

Some Filipinos are motivated by peer pressure or some personal beliefs to own a house. Worse, some end up buying houses they can’t afford. It is not always necessary to have your own home. Your decision to buy or rent should be based on needs and financial capacity and most importantly, on your long-term personal financial objective.

A house can only be an asset once you have fully paid for it. By regularly paying amortization on a loan or mortgage, you are simply building equity on that house, i.e., you’re increasing your ownership on the house while the bank or lender co-owns it. Forfeit payment and you’ll lose your house regardless of how long you have been paying for it.

Here’s the story of a woman (and her husband) who kept switching between being a house owner and a renter while focusing on her most important objective – personal financial freedom. It’s a five-part blog but is quite an interesting read.

Author: Cecilio A. Sanchez, Jr. (Licensed Real Estate Broker)
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