Wealth Pillar Five: Make your home an asset

There are three ways that entrepreneurs, investors, etc. commonly view as ways to make their home an asset. They are as follows:
  1. Buy a house outright/pay off your loan ASAP.
  2. Don't buy a house, rent and invest the difference + deposit.
  3. Don't buy, travel abroad and live in luxury on lower expenses, then invest the difference.
All three have their benefits and impositions, but they are all viable.

1. Buy a house outright or pay off your loan ASAP


The theory of this principle is that if you buy a house with cash, or pay off your loan ASAP, that you will be saving money in loan repayments and rent, which can then be allocated to investment. 


These days this option is quite hard, due to the high price of housing and the high deposit required. 

It can be beneficial, but in my personal opinion, is not the best option for undertaking this wealth pillar.

2. Don't buy a house, rent and invest the difference + deposit.


Buying a house requires a high deposit (usually around 20% of the purchase price). 


This money could alternatively be invested over the life of the loan and make a significant difference to your investment portfolio, far beyond the amount the house will appreciate in that time. 

Even if renting costs more than the weekly repayments associated with buying, the difference is still usually dramatic enough to justify renting. 

In the current economic environment however, renting is usually much cheaper than principle and interest loan repayments.
3. Don't buy, travel abroad and live in luxury on lower expenses, then invest the difference.


If you are able to find employment as a telecommuter or if you are able to start a business that has a global perspective and can be operated without you being tied down to a single working location, you can begin to travel abroad, where expenses are a lot less. 


Tim Ferriss, author of the four hour work week says that while he was travelling and living in different countries for 15 months, he saved thousands that would have been spent on living in the United States. This excess (aka spread between living costs in other countries vs your home country) can then be invested to create a difference.

Whatever decision you make, the important thing is to make a decision that will benefit you and your goals in the long term. 


But don't compromise the first four pillars to do the fifth, build your Wealth one Pillar at a time!

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