Sell Your House and Become a Millionaire and Free
Sell Your House and Become a Millionaire and Free
The Real Estate Lie
Let's talk about rights and obligations. Today, I'm going to be very politically incorrect, but I don't care.
We live in a very socialist world. This is typical of the last cycle before the collapse of the world order. I won't go into that again; if you're interested, there's plenty of information in books like "The New World Order" or "The Fourth Turning". It has always been the same: one generation lives off the wealth generated by previous generations.
Why am I saying all this? Because we're seeing many countries adopting populist measures. These measures are driven by the belief that citizens think governments owe them everything, and governments provide it in exchange for staying in power for another four years.
This leads to citizens gaining many rights, while those with money and assets acquire many obligations.
If we extrapolate this to the world of finance, it's exactly what we should never do. If we sell options, we have obligations; if we buy them, we have rights. What always happens in the long run? Those with obligations end up losing everything.
A clear example that has been on my mind a lot is the real estate sector.
In March 2021, when interest rates were around 0% worldwide, we argued that taking out a mortgage was a brilliant investment idea (also, we mentioned that gold would be a great asset for the coming years). We ourselves bought properties. Who wouldn't want free money?
I've been thinking about rights and obligations for a long time. This varies greatly by country, but today, tenants have many rights. In fact, in many countries, if you occupy a house, it's very hard to evict you.
Why am I mentioning all this? Because I've seen many people on social media and in my daily life who only think about investing in real estate. It seems like the goose that lays golden eggs. Obviously, property prices have skyrocketed (or rather, the currency has greatly devalued).
However, we're talking about a very illiquid asset that can become a headache during recession periods when you have no tenants and several mortgages to pay.
What do I plan to do?
I think you can guess, but if you can't beat the system, join it. If today all the benefits are given to the tenant, why not be one of them?
This will allow me to do several things. First and most simply, be antifragile. Rent the house you like and can afford. If property prices go up, your rent will only rise with CPI. However, if property prices go down, you can move to a much cheaper place.
Secondly, I can sell the house I bought a little less than four years ago with a 50% appreciation, not counting the fact that I haven't had to pay rent.
Third, we often get attached and feel secure with a home. But homes are like cars. When you're young, you want a sports car; when you're a parent, a large SUV; and when you get older, a luxury sedan.
With houses, it's the same; you don't need the same thing at every stage of your life.
Fourth, financially speaking, it's not a good investment. I just encourage you to run the numbers between investing in an index or buying a home. I think the results will speak for themselves.
Fifth, high concentration. Often, when we buy a house, we're highly concentrated in one asset, in a specific area. From a financial standpoint, this is a total aberration. Having the ability to have a completely asymmetrical portfolio, this makes no sense. In fact, if you have a $500k house and a $100k portfolio, does it make sense to worry about diversifying your portfolio knowing that 80% of your wealth is in a single investment?
I'm simply sharing my thoughts. I hope many of you will reflect on them. As a final thought, always in life, seek to be antifragile against any eventuality.