• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

From $500,000 to $1 million?

Given the rise in America’s home prices over the years, if you bought a house many years ago and sell it today, chances are you will receive more than the purchase price.

However, Schiff cautions that such examples often have significant caveats.

“Even if somebody tells you, ‘Oh, here's this house that I sold for $1 million and I bought it, whatever 10, 20 years ago for $500,000.’ If you think about all the money they put into that house over that period of time, they may not have made any money,” he said.

He explained that houses can require significant upgrades, which can be costly.

“A lot of the houses too that were bought back then, if you don't redo the kitchens, redo the bathroom, put on a new roof, you know, your audio, visual systems are all obsolete, the wiring — a lot of stuff has to be brought up to date in order to sell it for the million dollars,” he said.

He added that many of these houses, if not updated over the years, would be considered teardowns.

“A teardown means a house that was once brand new and had a lot of value, now has zero value. It's going to be torn down. The only thing that has value is the land itself. The house is worthless,” he said.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

Buying vs renting

The decision between buying and renting a home depends on a variety of factors, such as financial circumstances, lifestyle preferences, market conditions and interest rates.

Schiff acknowledged the individual nature of this choice but believes that for many, one option stands out.

“It depends on your circumstances and where the home is located, but for a lot of people — and this has been the case for a long time — renting is a better option,” he stated. He said money saved this way should be invested.

He also criticized government policies for distorting the housing market with tax incentives.

“Now another thing that the government has done to push people into homeownership, which has helped screw up the market, is the tax consequences. The government gives you a tax write off: If you buy a home, you can deduct your mortgage interest, but you can't deduct your rent,” he explained.

Schiff further pointed out that interest rates are another factor skewing the market. He said, “A lot of people are better off renting. A lot of people who own homes, the only reason they're better off staying where they are is because their mortgage rate is so low, their mortgage rate may be so low that if they sold their home and rent it, their rent would be higher than what their current mortgage is.”

He also emphasized that homeowners are responsible for maintenance, insurance, and property taxes, and noted how these costs have been sharply rising.

Mortgage rates have indeed risen sharply in recent years. Three years ago, the average interest rate on a 30-year fixed rate mortgage was around 3%. Today, it stands at 6.87%.

Elevated home prices, along with high interest rates, can make purchasing a house unaffordable for many. However, if you're interested in investing in income-producing real estate, there are alternatives to buying a house, such as real estate investment trusts (REITs) and crowdfunding platforms.

Sponsored

This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.