Rent Your Home, Own Your Income Stream
I know, it is counter to probably every bit of advice your family or friends would give you on investing.
They would say that your house is the biggest asset you can own and that by owning your house you are building wealth.
The second piece of advice they will give you is to get good grades, work hard and you will always have a job and you can retire with a little nest egg to survive through retirement with.
That advice may be as up to date as the advice given on Leave It to Beaver. The rules changed while everybody was looking.
Investing in your home can be a way to grow asset value as the general trend in real estate is often upwards over a long period of time. We all remember times in the past, one very recently, where real estate was a less than attractive asset to be holding. Those down times in the real estate market can be attention getters and limit your options if you need to relocate for a job or quality of life.
The other big impact on the value of real estate over decades of time if you do manage to hold that asset for 30+ years is that the house gets older and may look less attractive over time when buyers want shiny new houses with all the upgrades.
The big question is whether owning your home is better viewed as an investment or simply a forced savings program. Neither are necessarily bad but are they your best game plan since the value of your home asset may be mostly out of your control?
On the employment side, your eggs all in one basket income stream, the rules changed to where we now see very little commitment on the part of either the employee or the employer to a long term commitment. I see a thousand resumes a year and for successful executives where the average term of employment with a single company seems to be about 18-20 months. We also see a lot of pay gaps where executives are between jobs for 6-18 months.
So why is it that we are comfortable taking out a loan for a very expensive asset we don’t really have much control over the value of, a house, while at the same time having a single income stream that is required to pay for that asset which we don’t control?
I have an alternate theory to offer up.
Rent your home but own your income stream.
You see, most people depend on a job that they don’t control for income. I would argue that they rent their income stream.
Look at it this way, when you take a job you get into it at low or no cost, you use it for gaining skills and to get a paycheck and someone else may have to make the really big decisions and take responsibility at the top. When you are ready to move to the next job you just move on without having to sell the business. But there’s the rub, the asset you were part of building is actually owned by someone else.
When you rent a home you get to move in for little to no cost, the homeowner has to deal with any repairs along the way and when you are ready to move you just move. If the house increased in value the owner of the property has the increased asset value, not the renter.
Do those two descriptions sound all too familiar?
When you look at the cost of a house vs the cost of a franchise, many people are more than willing to invest in a home where they control very little about how it appreciates in value but they are more than willing to sign for that loan. Alternatively, they look at job options and are willing to go build someone else’s asset using their finely tuned skill set instead of owning their income stream by staring a franchise.
A franchise owner would use many of the same skills that a corporate employee would but are focused on building their own asset that they can sell someday. Their goal is to take that asset from a small startup and build a large single or multi-unit portfolio. During that growth many take income out of the business.
When you sign the loan to buy the house it would be very uncommon that you got to live in it and that it would offer you an ongoing revenue stream.
When it comes time to move from that business for retirement or to go grow another business they put it on the market and capture the current value of the franchise they built.
Between a no limits business ownership career path and capturing the value of the assets you build, could a business be a better asset to build than owning a house?
So here is my idea, reverse the expectation and consider that everyone should have an income stream that they own but a house they rent. In this day of job insecurity, I have to think that would be a very empowering position to be in. As a business owner you get to pursue your goals, there is no employer limiting your potential.
Just imagine talking to friends about having the ability to up and move on a whim, to chase big goals and pursue personal passions! I have a friend that is doing that right now, she and her husband are renting where they hang their hats for a period of time after being long time homeowners. They are living and working from a myriad of amazing places across the globe this year. Renting your home may be easier to be happy with than renting your income stream!
As a business owner for many years now I have my own story and know the stories of countless others that have taken over ownership of their income streams. I cannot imagine a scenario where I would go back to being an employee and building someone else’s asset. Making that change is one of the most positive work experiences I have had.
What will your success story be?
George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution. Contact the Franchising USA Expert George’s Hotline 703-424-2980.