Here's Why One Self-Made Real Estate Millionaire Says You Shouldn't Buy a Home

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  • You'll often hear that owning a home is a great investment.
  • One expert feels the opposite way, and for good reason.
  • Homeownership is expensive, without guaranteed returns on the investment. 

It's a decision you might regret.

Real estate mogul Grant Cardone knows a thing or two about buying homes and building wealth. In fact, he credits real estate investing as paving the way to becoming a self-made millionaire.

But despite his success, Cardone isn't sold on homeownership. In fact, he believes that for many people, buying a home is not a smart investment -- especially given today's market. Here's why.

1. There are too many costs involved

When you buy a home, you don't just put a down payment on a mortgage, pay your loan every month, and call it a day. There are other expenses you'll incur when you own property. These include:

Plus, don't forget it costs money to actually put a home loan into place. Mortgage closing costs commonly equal 2% to 5% of the sum you're borrowing. Take out a $400,000 mortgage, and you could be looking at up to $20,000 in closing costs. All of these expenses could eat into your profits, making homeownership a bad choice.

Let's imagine you buy a home for $500,000 and sell it for $700,000 in 10 years' time. At first glance, it looks like you just scored a $200,000 profit. 

But not so fast. What if you also spent $24,000 a year on taxes, insurance, maintenance, and repairs? Suddenly, you're not up $200,000 -- you're down $40,000 if you look at things from a pure investment standpoint.

2. You don't get regular cash flow out of your home

When you invest in assets like dividend stocks, you can get paid regularly, thereby increasing your cash flow. A home won't do that. Granted, you can borrow against the equity you have in your home if a need for money arises. But that's money you'll have to pay back. 

3. The tax breaks are limited

When you own a home, you're privy to certain tax breaks. But Cardone says they're not compelling enough to make homeownership worth it. 

Sure, you can write off your mortgage interest, as well as up to $10,000 in property taxes. But remember, these days, the state and local tax deduction is capped at $10,000, and that includes property and state income taxes. So if your state income tax bill is $9,000, it'll eat up the bulk of your deduction. And with the standard deduction being higher these days, you may not get so much tax-related upside as a homeowner. 

Is homeownership a waste of money?

Cardone says point blank, "Don’t buy a home -- unless you can afford to waste money." But to be fair, you're not necessarily wasting money to put a roof over your head. Rather, you're covering an essential expense.

That said, if you're going to buy a home, it's probably best to look at it as an expense, and not as an investment. If your goal is to make money, there are probably better, easier ways to do so than to buy a home and sell it at a profit down the line. But if you need a place to live and you want the stability of not having to worry about being forced to move, then a home may end up being a good choice -- even if Cardone thinks otherwise.

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