Peter Schiff warned Americans that a house can easily become a 'money pit' and he believes that renting is a ‘better option’ for many Americans — is he right on the money?
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During a recent appearance on the Iced Coffee Hour podcast, hosted by Graham Stephan and Jack Selby, Peter Schiff was asked about the common belief that for many, a house represents their primary means of saving.
Schiff, who runs Euro Pacific Capital, strongly disagrees with this perspective.
“A house depletes your savings. It's a money pit,” he stated bluntly. “It's crazy the amount of money that a house costs you.”
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Proponents of homeownership often argue that property values appreciate over time. For example, the median sales price of houses in the U.S. was $329,000 in the first quarter of 2020, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. By the first quarter of 2024, this figure had risen to $420,800, reflecting a 28% increase.
Yet, Schiff urges caution when interpreting these figures — here's why.
Buying vs. renting
The decision between buying and renting a home depends on a variety of factors, such as financial circumstances, lifestyle preferences, market conditions, and interest rates. Schiff acknowledged the individual nature of this choice but believes that for many, one option stands out.
“It depends on your circumstances and where the home is located, but for a lot of people — and this has been the case for a long time — renting is a better option,” he stated. He said money saved this way should be invested.
If you are a renter and are neither ready nor willing to commit to a large down payment, there are other ways you can invest in home equity.
For instance, if you aren’t in a position to build equity yourself, why not invest in the home equity of others?
Cityfunds allows you to invest in owner-occupied residential properties in top U.S. cities — like Denver, Austin, Nashville and Miami — without having to drain your bank account to put a downpayment on a home.
Here’s how it works: The company allows investors to invest in diversified portfolios of owner-occupied homes. In exchange for the cash, Cityfunds secures an interest in the home's future value. As the home value appreciates, so does the value of Cityfunds equity investment alongside the homeowner.
So you can invest in the housing market of a city you love for as little as $500, without having to deal with high home prices, an expensive mortgage or the hassles of being a landlord.
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Be a shareholder instead of a landlord
Schiff went on to explain that a home or investment property can require significant upgrades, which can be costly.
“A lot of the houses too that were bought back then, if you don't redo the kitchens, redo the bathroom, put on a new roof, you know, your audio, visual systems are all obsolete, the wiring — a lot of stuff has to be brought up to date ... ,” he said during the podcast.
Elevated home prices, along with high interest rates, can make purchasing a house unaffordable for many. However, if you're interested in investing in income-producing real estate, there are alternatives to buying a house.
You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.
Backed by world-class investors including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.
To get started, simply browse through their selection of vetted properties, each picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning quarterly dividends.
Buying shares in properties may not be enough for everyone. If you’re an accredited investor looking for larger scale, institutional-level real estate that can generate a little more cash flow, you might consider a platform like First National Realty Partners (FNRP).
FNRP is one of the fastest-growing vertically integrated private equity firms. Their platform is designed to offer accredited investors access to grocery-anchored commercial real estate.
Investors own a share of institutional-quality properties leased by national brands, which provide essential goods to their communities.FNRP’s team of experts manages every component of the investment life cycle from due diligence and leasing to property management and upside, so you get headache-free investment with the potential for big returns.
Using gold as an anchor in stormy markets
While inflation and high interest rates have helped the housing market surge to a point of inaccessibility for the average young American, there is another asset that Schiff believes will continue to show resilience in the face of economic volatility: gold.
“I think what’s going to happen is the world’s going to reject the dollar like we rejected gold [in 1971] — and it’s going to go back on the gold standard,” Schiff predicted.
The gold standard is a monetary system, used primarily from the 1870s to the 1920s, where the value of currencies is fixed to a specified amount of gold.
Gold is a solid alternative investment because, unlike the U.S. dollar, which has lost 87% of its purchasing power since 1971, gold has remained more stable over time. You can take advantage of the inflation-hedging properties of this asset class with a gold IRA.
By opening a Gold IRA with the help of American Hartford Gold, you can benefit from the tax and other advantages of an IRA as well as the inflation-resistant properties of investing in gold. A gold IRA gives you the opportunity to diversify your portfolio finances by investing directly in physical precious metals.
When you sign up with American Hartford Gold, you’re eligible to get up to $10,000 in complimentary silver and a free investor guide that can help you diversify your portfolio and help secure your retirement fund.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
