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Young Millionaire Claims Buying House Was His 'Worst Financial Decision'

Young Millionaire Claims Buying House Was His 'Worst Financial Decision'

Maybe it isn’t the great idea you thought it was

Anonymous

Anonymous

If you've ever wondered who'd be the best sort of person to get financial advice from, a self-made millionaire who got himself so filthy rich that he was able to retire at the age of 37 and still live the life of movie star is probably as good a shout as any.

But Chris Reining's pointers may come as a bit of a shock to the rest of us, who've basically had it drilled into our heads for our entire lives than buying a house is the absolute best financial decision you can possibly make and anyone who can't manage to do it will be doomed to an eternity of living in a dog kennel for a grand a week and eating dry Weetabix rusks for every meal with no mates.

Credit: Chris Reining

You see Chris reckons that there are better places to invest your money that in a 'forever home'. In fact, the young millionaire says that buying a house was the worst financial decision he's ever made.

Instead, Chris suggests putting your money into the stock market, which is all well and good for someone with shitloads of money, who already has a place to live and knows about that sort of thing, but for the rest of us? I'm not so sure.

via GIPHY

Having said that, I'm far from a Rothschild in the financial knowledge department, so let's hear the guy's reasoning.

Reining spent three years saving up for a $40,000 (£39,458) down payment to buy a $200,000 (£152, 289) house near Madison, Wisconsin - the worst financial decision he says he ever made.

"As it turns out, what I believed about buying was flat-out wrong, and because I didn't do the math for the biggest financial decision of my life, I'll eventually realize two losses - the property selling for less than what I paid, and the potential profit from putting the $40,000 to work for me," he wrote in a blog post. "That's called the opportunity cost - when you choose to use your money one way, rather than another."

via GIPHY

The young millionaire explained the maths in more detail for Business Insider.

"Okay, so from 1890 to 2012 the inflation-adjusted return on a house was 0.17 percent," he said.

"That means if you bought a house for $5,000 (£3,800) in 1890 it'd be worth $6,150 (£4,680) in 2012. And over the same time period the inflation-adjusted return of the stock market was 6.27 percent. That means if you invested the $5,000 you'd have $8 million (£6m)."

So, it looks like buying a house maybe isn't the great idea you thought it was, but that doesn't mean to say that you shouldn't do it.

"Buy a house," says Reining, "but don't buy a house, live in it, and think it's the best investment."

Words: Paddy Maddison

Featured Image Credit: American Advisors Group

Topics: House