Now he tells us...

Why I Would Rather Shoot Myself In the Head Than Own a Home

James Altucher

...How do banks make money? Very simple. They borrow from you at cheap interest rates and then lend to you at higher interest rates. What? How do they do that? Well, when they pay you 0.5% on your checking account its as if they are borrowing from you at a very cheap interest rate. When they then turn around and give you a 6% mortgage loan, they are lending to you. They make money on the difference between the 6% and the 0.5%. It’s a great business and I often advise people to become the bank when they have that opportunity.

It’s such a great business, in fact, that banks have spent 200 years drilling it into us with billions in advertising that the “American Dream” is to own the white picket fence, the paved driveway, maybe borrow more to make an extension to the house. Put in a swimming pool. Tear down some walls. Nobody can ever kick you out. You’re not flushing your rent down the toilet. You’re owning! You’re keeping up with the Joneses (the most successful, yet mysterious, family in American mythology, that we all have to keep up with. What happens behind closed doors when the beatings occur, when little Bobby Jones cries himself to sleep, the Joneses will never tell us) At least, in 30 years you will own. But at least you’ve fixed in a mortgage rate so inflation won’t kill you. And having your own home means you now have “roots”...

- More cash. You never have to put down a down payment that uses up most of the cash in your bank account. You’re never going to see that cash again if you use it as a downpayment. It’s just gone into an illiquid investment and when you most need it, that’s when you are most likely not able to get at it.

- Less debt. It’s true a mortgage locks in your payment. But you’re greatly in debt so you are paying interest straight to the bank that has nothing to do with increasing your ownership. In many cases it will take 20 to 30 years before you stop paying that extra interest to the bank.

- Less inflation risk. Property taxes often goes up faster than inflation whereas usually rent does not go up faster than inflation (by definition, since government calculated inflation uses rents instead of home prices).

- No maintenance. Homeowners have to take care of all maintenance. Some years that might be nothing (unlikely) and some years that may go up much faster than inflation.

- Less overall costs. When property taxes and maintenance go up faster than inflation it means you are probably not covering the costs (plus the mortgage) via renting.

- More flexibility. In a global economy, opportunities can be anywhere. I like having my flexibility....

Read more:
http://www.jamesaltucher.com/2011/05/why-i-would-rather-shoot-myself-in-the-head-than-own-a-home/