This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Face It: Your Home Isn't Making You Money (or Meant To)

NEW YORK (TheStreet) -- "Housing is an investment." Every buyer, seller and lender who helped inflate the housing bubble said that at one time or other, and if you talk to any of the millions of Americans stuck today with an underwater mortgage, chances are they only ever took on that outrageously high debt burden in the first place because they'd convinced themselves of it.

The statement isn't untrue so much as it's misunderstood. Problem is, the English language has only one word -- "investment" -- to describe two completely different things. Some investments are intended to generate income, while others serve only to reduce expenses. Or, to put it another way, there's make-money investments and save-money investments. The housing bubble happened because too many people got confused: Your primary residence is a major investment, yes, but it's a save-money one.

Stocks and bonds are the best-known make-money investments; with luck, they generate actual income for you.

But real estate is a make-money investment only if you intend to rent property out as a landlord. You can't do that with your primary residence, or anything else to make money either (remember that home equity lines of credit are not "income" but "debt obligations").

If anything, your primary residence is likely to cost you money -- taxes and insurance, maintenance and repairs -- and the presumptive savings apply only when compared with rental costs.

Shelter is a basic necessity of life: No matter what happens, you must pay money each month in exchange for a place to live. The whole point of buying rather than renting is that in time, when the mortgage is paid off (or inflation makes your payment shrink in real dollars), you can live there for less than the cost of renting a similar place.

That's why, when I moved out of my parents' house into my first very-own apartment in a nearby town, the monthly rent I paid for a tiny two-room efficiency was only slightly less than their mortgage payment on a four-bedroom suburban palace. My apartment also lacked a washer and dryer, and hauling clothes to the coin-op laundromat was my least-favorite chore of adulthood. So a few years later, when I upgraded to a better apartment with washer/dryer hookups, I bought a pair of laundry machines immediately, primarily for convenience: Hang the costs (I thought), doing laundry at home is much easier than collecting quarters and hauling everything to the coin-op.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs