I’m going to say it upfront, this post will be controversial for some. As you read, please bear in mind that this is my personal view, and explains my personal reasons for not going down the property path to FIRE. I’m not judging those that have, it’s just not my choice.
The reason I don’t want to own multiple houses, is that they are a limited resource sold in an unrestrained free market, yet they are a necessity for life. Everyone needs a home to live in. Supply is constrained and demand to purchase property has increased, which has driven up prices. But the problem is that it’s not just the purchase price for owners that has gone up, rental prices have gone up too.
We’re experiencing fast rises in interest rates, and when wages don’t keep up, the cost of living increases. For many at the low income level, or those living paycheck to paycheck, rapid changes like this can be disastrous. I’ve read so many stories about people who are working full time jobs, but can’t afford rent and are living out of their cars. And the reality is far from the trendy ‘van life’ movement.
This is happening in America, but it’s also happening here in Australia where the minimum wage and social welfare system is supposed to be better.
And I think excessive buy-to-invest property purchasing is a big part of the problem. Firstly, buying more than one home contributes to the increase in demand for housing that causes price rises. Secondly, in many countries including Australia, investment properties come with tax breaks and incentives. An increase in mortgage rates affects those that live in their homes much more than landlords. Yet demand is seeing rental prices continue to rise, more than off-setting any reduction in profits, but pricing people out of being able to live somewhere.
Yes, governments should do more to remove the tax breaks for investors, help those that are living on the edge, and rebalance the market. After all, we’re not just talking about any old kind of free market commercialism here, a roof over your head is a basic need and there are serious consequences when people can’t afford to participate.
But while we’re waiting for the solution, I don’t want to be part of the problem.
A small caveat – I do own the property I live in. This factors into my FIRE plan as I’m aiming to be mortgage free, which reduces the amount of passive income I need to generate. And I’m not against renting out my house if I temporarily change location. But I won’t be trying to build a property portfolio – one house is enough.
Please note, this is not financial advice, it’s just an anecdote of my personal approach.
Like I said at the start of this post, I’m not trying to convert anyone or judge anyone who does have rental properties. I’m just throwing my view on it.