Nice House, Bad Investment.

Before I start my blog I just want to send a greeting to the millions of people who made bets in the recent 300+ million lotto draw - sana binili mo na lang ng pagkain, nabusog ka pa!

For some reason over the past few days I have been talking to people who are so proud about the 'investments' they have made in the homes they live in - the upgrade to a bigger house, the furniture that they buy, and the renovations they have done. Then yesterday I read a Sam Milby article about his 'investment' in his new house in Pasig. With new renovation, brand new furniture, swimming pool and even a mini-cinema! It was a very beautiful house but I want to make it clear that when you 'invest' too much of your money into your home its not a good idea. Here's why:

• All your eggs in one basket. When most of your net worth is in one asset it becomes very dangerous. Rather than have one nice property, why not consider other investment property that can generate you good passive income.
• Depreciating Assets. Buying furniture and other electronics are not investments they are depreciating assets.
• More expensive to maintain. Having too beautiful a home not only costs you more to build but also costs more to maintain.
• It’s so nice you can't or don't want to sell it. You have put so much effort in your house that you fall in love with it and no matter what price people offer you, you don't ever want to sell it. Sayang kasi eh! Rule number 1 when you buy assets. Never fall in love with an asset! If you can never sell your house you can never unlock its value and turn it into cash for retirement.
• Hard to liquidate when you need money. Having a beautiful house is great as long as you have a steady income. But what happens when you suddenly lose your job or your business starts to slow down like what is happening right now. What then? Well ask someone who is trying to liquidate a fixed asset in a hurry and they will tell you that you can never ever get the price you thought you would get.
• It's just like a car. What do you do when you buy a second hand car? You ask, how old it is? How many km. has it travelled? Is it well maintained? Is it important if it has nice mags, spoilers or maybe a nice stereo? It is but how does it affect the price. Not by much! Its the same as a house. Not too many people care if your toilet is made from Germany or if the tiles come from Italy, or if the furniture is imported. What's important? Location and maintenance.

So what's the point. Live simply in a 'good' house. Maintain it well. Don't add the spoiler or the mag wheels. Invest the difference in something that can make you 'passive' income so you don't have to work so hard!

For more information on how I can help you email me on hoover@barongroup.com.ph.