HOW TO BUY A HOUSE
The first line of any concept that you want to explain, is the most difficult, and in this case is not the exception, especially because I do not intend to make a manual or course where you fall asleep on page 10 and end up on a shelf, but I wanted to make a simple guide to the core issues that you should observe when buying a home, be it pre-sale or second-use, vacation or just as an investment.
The idea is to make this exercise, something that helps us both, to me, in some way, to organize a lot of concepts and ideas that coexist in my brain, and that this catharsis is useful for you to learn some concepts and ideas that They will be useful if you plan to buy your first home or plan to invest in any real estate.
It is also a new reading of a book that I wrote in the past, back in 2010, which had some things left over and lacked others (surely this book has the same shortcomings at a distance), but I assume that over the years I have It has become more practical and more concise, so I hope that what turns on these pages will be more useful and easier to read, and above all, to digest, although that book that I wrote in the past at this moment is in the phase of update and soon I will give birth to a new reissue that deals with another issue little known in the Mexican real estate market, flipping, but that is another story that I will tell you in our next appointment. Now let’s put in black and white what you need to know to buy your house.
¿IS YOUR HOME A REAL ESTATE INVESTMENT?
I know that after reading the title of this topic you will want to throw the book out the window (I remind you that it is a digital book, so if you throw it away you will lose more than the simple book), but that is the truth, your house, in principle, is not a real estate investment. It is part of your heritage, it is your refuge, your palace, your most precious possession, your home or whatever it means to you, but, it is not an investment.
Actually as an investment is not something that will generate income during the time you use it to house your family, on the contrary, you will have an enormity of expenses that you must pay with your own money, maintenance, painting, change of the floors, the plumbing, the remodeling of the kitchen and the bathrooms, and the list goes on, and on.
Have you ever seen those comparative exercises where the purpose is to determine if it is better to buy something or rent it? There are several free formats that you can download from the web, and I assure you that it is really interesting to take the time to do it because the result can surprise you.
So, why is it important to buy our home if in fact it is feasible that it ends up spending more and not generating a single penny for rent?
There are two explanations that, in my opinion, are the answer to this matter. The first is a cultural issue. In New York, for example, only 19% of homes are inhabited by their owners, while in Mexico, approximately 65% of existing residential properties are inhabited by their owners, which is a very high percentage compared to that and many other capitals, such as Berlin. And what is even more amazing is that 91% of all properties in the country are fully paid and free of mortgage. In Mexico, and in general throughout Latin America, it is very important to have our house, the place where we are going to raise our children, and where we are going to spend the last of our days. How you can see is something that we want to do in part because of parenting, because we have always heard that we should have our refuge, and that as long as we do not have paid the last cent of the partitions with which it was built, it will not be quiet.
The second aspect has much to do with the same vision we all have of our house, where consciously or unconsciously, we do not consider our house as a real estate investment. I am not a psychologist, nor a sociologist, but something that we can see in numbers, cold and insensitive numbers, is that most people who buy their house no longer make any changes, they just keep it and live to the last of their days there, however, in other countries with a cultural root totally different from the Latin American one, the families change of house several times during their life,
For example, an average American changes his house every 4 years, and we, the Latinos, what we change every 4 years is the car, and that is if things went well, but our house once we bought it and paid will stay with us until the end, as a kind of reflection of the attachment we have to the material things that we see as an end in itself, instead of seeing them as a means to obtain some profitability or growth of our patrimony.
I mentioned the case of the average American because, as far as I know, it is the most radical in that aspect and it allows me to demonstrate this theory where Latinos do not see our house as an investment but as something that we should have because it must be, because we have to “have a ceiling for life “, and I imagine that more than once he heard that phrase in his life, right ?.
A great friend, Fernando Soto-Hay, who is the specialist in mortgage loans who advises me and has always advised me on that subject, did a very interesting exercise that he does to all his clients to show him that if they know how to use the credit to your favor and consider as an investment the purchase of your house or department, with the simple fact of selling your property every 8 years, capitalize the capital gain obtained in your home and the capitalization of your mortgage, you could have a much higher value property that those who buy a home, pay the mortgage until the last monthly payment and stay there until the end of their days.
Stay with that idea in your head because it is the seed that will allow you to change the perspective you have on your house and start to see it as a real investment, but that will only happen as long as you change your perception on this matter, learn some things useful and put them into practice.
In short, it depends on whether or not a real estate investment is your home, your home, the way you see it. If you consider that it is something you must have and have bought and paid for it, you have fulfilled that task, or if you see it as an opportunity to increase your assets without trying too hard, through the advice of experts and of course, knowing some things that you they will give more to win than to lose.