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Why Entrepreneurs Should Not Buy Homes


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http://techcrunch.com/2012/03/24/entrepreneurs-should-not-buy-homes/

Many people have said to me in the past few months, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” Everyone thinks: Well the housing crisis is now over so I should buy a home. They think: It’s probably a good investment. They think: Time to put down “roots”. 

I’ve owned a home. A couple of times. I bought a home once after I sold a business. I then lost that home. I then went almost completely insane trying to sell it. Two things: If you are about to do a startup or if you are in the middle of startup-phase then you definitely can’t afford to waste the time or money to buy a house for reasons I explain below. Second, when you sell your startup — everyone wants to buy a house with the proceeds. Don’t. It’s just part of the American mythology. You know the myth: the white picket fence, the yard, the pool, the walls that you can paint, the keeping up with the Jones family. Just don’t. You’ll go broke. At least, if you are as stupid as me. I might be dumber than most though.

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That's a fascinating article.

I like his blog too, some "interesting" stuff but a little more OT.

What I like about this article is that here is someone who is in the "money making" business and he is completely blanking property when so many peolpe think property is the way to get rich.

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What I like about this article is that here is someone who is in the "money making" business and he is completely blanking property when so many peolpe think property is the way to get rich.

He's an entrepreneur, a breed apart from some BTLer riding a bubble they can't see. He works and creates.

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You, TMT, should read his blog too.

http://www.jamesaltucher.com/2012/03/im-ashamed/

I am now confused now.

The first link in this thread is him arguing why not to buy a house - I haven't read beyond the first paragraph.

The link you just posted is from March 7th with him writing about selling his home?

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I am now confused now.

The first link in this thread is him arguing why not to buy a house - I haven't read beyond the first paragraph.

The link you just posted is from March 7th with him writing about selling his home?

The second link is off his blog, the theme of that one is not explicitly about property.

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OK, but it shows he has a home which he is selling. So what does that say about his blog piece on not owning property?

Read the first link for stuff about property, it does say he's owned in the past.

Read link 2 for psychobabble shit, property is coincidental.

Edited by SeeYouNextTuesday
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The article is written by an entrepreneur with a choice about buying a home. I suspect most entrepreneurs in the UK, at least of the younger generations do not have that choice.

I do wonder how harmful our government's outstretched hand, supporting those with mortgages above renters, is to our nation's innovation. Those who innovate and start new businesses are not mortgage-material. I'm in this situation, and I don't have any qualms with the banks in this regard - my future income is not as predictable as it used to be when I had a more regular job.

This was not really a concern when renting was cheaper than maintaining a mortgage 5 years ago, and indeed when house prices were declining. However, now it is firmly the reverse. It makes financial sense now to be in a reliable job and to buy a house.

The optimum time for innovation is when the smartest and most enterprising people can take the risk to go out on a limb and work on their idea.

I want to work into this idea that innovation is not limited to younger people or younger companies. It could be argued that the housing boom allowed many entrepreneurial types to cash out and start new ventures.

However, the whole imbalance created by low interest rates propping up of the housing markets is dealing too good a hand to those with mortgages, and is only going to distract or limit those who should have their focus elsewhere.

Talking of focus, it's getting late and I'm not happy I've nailed my thoughts on this, but will look again tomorrow as I think it could be an interesting topic of discussion!

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I've seen many a young man with hopes and dreams of becoming rich, and starting out in a good job to learn the business.. then meeting Mrs. Right and under peer pressure buying a home. Of course using all of his savings as a down payment, and buying the most house the bank will let them.

Then hes stuck for the next 25 years. Because he has to make that big monthly income in order to pay for the costs of that house. The idea of becoming an owner of capital, after a few years fades from the mind. And they start doing things like watching home improvement shows and thinking they can add 10,000 pounds to the equity of their house with some creative design suggestions.

The system loves it.. another worker bee who is stuck. And when they sadly tell him there will not be anymore raises, and the pressure comes to work more and more overtime.. our hero is stuck. He has to do it. His life becomes about making money for somebody else.

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I've seen many a young man with hopes and dreams of becoming rich, and starting out in a good job to learn the business.. then meeting Mrs. Right and under peer pressure buying a home. Of course using all of his savings as a down payment, and buying the most house the bank will let them.

Then hes stuck for the next 25 years. Because he has to make that big monthly income in order to pay for the costs of that house. The idea of becoming an owner of capital, after a few years fades from the mind. And they start doing things like watching home improvement shows and thinking they can add 10,000 pounds to the equity of their house with some creative design suggestions.

The system loves it.. another worker bee who is stuck. And when they sadly tell him there will not be anymore raises, and the pressure comes to work more and more overtime.. our hero is stuck. He has to do it. His life becomes about making money for somebody else.

Legendary worked with, managed and hired young men in this mould. The scary thing is look at a fifty year old man under threat of losing his job and really look into his eyes. You can often see that story coupled with a hate of his life now.

The indians say build your business and then build your house. I have tried to stick to that not always successfully but it is a good guiding principle.

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I think there are so many opportunities out there at the moment to start a new business if you have the persistence staying power, belief, done your background home work and are prepared to live it night and day (warning can be addictive)....use that property deposit and invest it and your knowledge into your business...if the worse come to the worse you can always sleep in your office. ;)

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I like the idea of an improved rented sector (thru REITS) allowing a person to act in an entrepreneurial way career wise, ie take risks and move jobs to take up the most interesting and better positions, ie using entrepreneurial in a broader sense than so far in this thread

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I think there are so many opportunities out there at the moment to start a new business if you have the persistence staying power, belief, done your background home work and are prepared to live it night and day (warning can be addictive)....use that property deposit and invest it and your knowledge into your business...if the worse come to the worse you can always sleep in your office. ;)

sleeping in your office is only viable for a week or so, people start getting nosy and annoyed at you after that.

the poster above about the indians fails to take into account the planning authorities fail to let us live in the buisness in the uk, its pathetic how many above shop areas are basically abandoned in the uk, this is where the local butcher and key cutter used t stay before they were bought up and now used as a sometime store, must be near 1/2 million places like this in uk just itching to be put to use and give independent people a chance. but unlike india they dont allow that here anymore.

So try building a buiness while paying 800 month rent

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sleeping in your office is only viable for a week or so, people start getting nosy and annoyed at you after that.

the poster above about the indians fails to take into account the planning authorities fail to let us live in the buisness in the uk, its pathetic how many above shop areas are basically abandoned in the uk, this is where the local butcher and key cutter used t stay before they were bought up and now used as a sometime store, must be near 1/2 million places like this in uk just itching to be put to use and give independent people a chance. but unlike india they dont allow that here anymore.

So try building a buiness while paying 800 month rent

Unfortunately you are right, I wish you weren't for everyones sake.

I know people who live illegally both on plots with no permission and in their business, in fact I have done it myself.

As long as you make the very most of that benefit for as long as you can you stand a chance of progressing.

The other problem is that while doing this others will consider you as strange, tight and odd in our culture, not smart which in reality is what you are and they are not

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Unfortunately you are right, I wish you weren't for everyones sake.

I know people who live illegally both on plots with no permission and in their business, in fact I have done it myself.

As long as you make the very most of that benefit for as long as you can you stand a chance of progressing.

The other problem is that while doing this others will consider you as strange, tight and odd in our culture, not smart which in reality is what you are and they are not

There are enough hoops to jump through and hurdles to jump over....TPTB make it as hard and expensive as they can for the people that want to better themselves, and improve on their lot......then they wonder why people take the easy cheap, secure option of getting a cushy job with long paid holidays and a final salary pension in the public sector....just saying. ;)

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There are enough hoops to jump through and hurdles to jump over....TPTB make it as hard and expensive as they can for the people that want to better themselves, and improve on their lot......then they wonder why people take the easy cheap, secure option of getting a cushy job with long paid holidays and a final salary pension in the public sector....just saying. ;)

agreed...for a long while no one figured out they need business people to pay their wages..

starting and running a business was a lot harder than buying houses to rent and here we are with high prices and a poor economy

Are those public sector jobs still available?

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I agree with him, and I have seen a number of other entrepreneurs advance the same ideas in several other books, owning a property tends to tie you to a location, and burdens you with debt, no matter how reasonable the terms, ok perhaps you pay a bit more in rent but at least it's not debt that will hamper you if things get tough (unless you own it outright in which case you can sell it to raise capital, but how many people are in that fortunate position?).

Kind of tie's in with the whole "why own a property in the first place" thing, in some circumstances it's ok, but for others it means continuous expense and maintenance, it can be more of a drain on finances than an asset which will actually generate income, that is in the absence of asset bubbles or a healthy BTL market as is the case now. (No real lover of BTL just including it here for completeness as one way in the past you could possibly consider property an asset).

Having a new business fail and not being able to pay a mortgage must be the stuff nightmares are made of

Edited by madpenguin
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I've seen many a young man with hopes and dreams of becoming rich, and starting out in a good job to learn the business.. then meeting Mrs. Right and under peer pressure buying a home. Of course using all of his savings as a down payment, and buying the most house the bank will let them.

Then hes stuck for the next 25 years. Because he has to make that big monthly income in order to pay for the costs of that house. The idea of becoming an owner of capital, after a few years fades from the mind. And they start doing things like watching home improvement shows and thinking they can add 10,000 pounds to the equity of their house with some creative design suggestions.

There is also the ongoing pressure to spend pretty much everything you earn.. and the 'What's the monthly payment' culture. Which as I've repeated before, is very dangerous in a low-inflation environment.

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Great article. :)

I pretty much share the same opinions as James Altucher. His comment on 'not investing any more than 10% of net wealth on property' is quite thought provoking too. :unsure:

I felt very trapped having a mortgage fixed for 5 years when I first bought. Had to pay to get the boiler serviced, leasehold charges, repairs. Most people I know have mortgages or own their homes outright. Family members tried to put me off selling. Some consider me as odd for being content in rented. I wonder if their opinions on 'the renting class' will change once interest rates go up?

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I agree with him, and I have seen a number of other entrepreneurs advance the same ideas in several other books, owning a property tends to tie you to a location, and burdens you with debt, no matter how reasonable the terms, ok perhaps you pay a bit more in rent but at least it's not debt that will hamper you if things get tough (unless you own it outright in which case you can sell it to raise capital, but how many people are in that fortunate position?).

Kind of tie's in with the whole "why own a property in the first place" thing, in some circumstances it's ok, but for others it means continuous expense and maintenance, it can be more of a drain on finances than an asset which will actually generate income, that is in the absence of asset bubbles or a healthy BTL market as is the case now. (No real lover of BTL just including it here for completeness as one way in the past you could possibly consider property an asset).

Having a new business fail and not being able to pay a mortgage must be the stuff nightmares are made of

As I am what some people would regard as an "entrepreneur" I feel qualified to comment on this.

Firstly, you don't have to rent a house in order to rent a washing machine. You can still rent one hassle free if you own your home.

Secondly, you don't have to buy a house that needs a lot of maintenance.

Thirdly, it does not necessarily make sense to do your own maintenance, it may make sense to pay someone to do it for you. If you are not the kind of person that can figure this out, then there is a good chance of failing in business anyway, as if you're unable to recognise how to use your time to your companies greatest benefit and outsource all the menial tasks (that you can do if you are a penny pincher) and focus on the core revenue generation.

Fourthly, having your business go down when you have a mortgage is no better or worse than if you are in a job and you lose it. In both cases the prudent person makes sure they have 6 months or so mortgage payments held in reserve so that they can weather the storm if things go wrong.

The only argument I can see is that if you believe in your business (most people do) it makes sense to fund it yourself rather than borrow, or sell off a chunk of the equity, because if you think it will suceed you then benefit the most. On the other hand this rather all in bet is of course very risky and many prefer not to do it. As well it helps to have a bank/equity partners to kick your ass ocassionaly and keep you on the straight and narrow. Sometimes its all to easy to throw another 10K of your own money at the problem, and this is of course where most business owners go wrong, because they don't know when to call it a day but keep on doubling down in the hope that sooner or later things will turn good.

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The only argument I can see is that if you believe in your business (most people do) it makes sense to fund it yourself rather than borrow, or sell off a chunk of the equity, because if you think it will suceed you then benefit the most. On the other hand this rather all in bet is of course very risky and many prefer not to do it. As well it helps to have a bank/equity partners to kick your ass ocassionaly and keep you on the straight and narrow. Sometimes its all to easy to throw another 10K of your own money at the problem, and this is of course where most business owners go wrong, because they don't know when to call it a day but keep on doubling down in the hope that sooner or later things will turn good.

As a business owner I have made it a rule to myself never to use the word 'hope', the day I rely on that should be the day I bail out

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  • 439 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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