Investors, do you own your personal home or rent?

[Gayla Kemp]

I have been listening to podcasts and youtubes and I keep hearing people say that investors should not own their own home, they should rent.  Can someone please explain the logic behind this.  I have 55% equity in my house so I do not know why I would want this to come off of my financials.

[Bill Exeter]

Hi Gayla,

I've been speaking at seminars for years and this is a topic that does get brought up frequently at investor events. There are numerous schools of thought regarding buying vs. not buying (owning) your own primary residence.  I think the most common reason for not buying your own primary residence is that the investor does not want to tie up their own capital in their home so that they have more working capital in their real estate business. 

There are numerous counter arguments to that, too.  For example, on the conservative side, your home is where you live, and owning your home gives you more peace of mind that you will always have a place to live.  And, if you pay off your mortgage so that you own your home free and clear, then you never have to worry about making a payment or losing the property via foreclosure.  These arguments, while not necessary good financial strategies, can be a good "risk management" strategy for your family.  Personally, I just refinanced and pulled equity out since rates will likely never be this low again.  I can easily reinvest and earn more than what I'm paying the bank. 

Also, after Congress added Section 121 of the Tax Code, homeowners can now exclude up to $250,000 in gain ($500,000 if married).  Tax free gain can be very attractive and a great financial plan.  This is the biggest reason that I personally own my home.  I can build wealth/equity and exclude $500,000 in gain.  I can do it over and over again every two (2), if I wanted to (and if my wife would let me). 

So, the end game really depends on your personal goals and objectives, financial plan, risk management tolerance, etc.  Just my two cents.