Why Tennis Legend Venus Williams Believes Home Ownership Should Be Last Step On Road To Wealth Building, Not The First
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Tennis legend Venus Williams dominated her sport with a formidable combination of grace and power, but she also approached every match with a comprehensive plan to beat her opponent. She takes the same careful approach to building wealth, and her thoughts on homebuying might surprise you. Williams believes you might be better off building wealth and investing first, then buying a home second.
That's the opposite of the approach taken by baby boomers and even many Gen Xers who saved up to buy a home and then developed investment portfolios over time. Although that traditional approach has its merits, today's economic realities may support Williams' plan. She made her comments during an episode of Sofi's "Your Rich BFF," hosted by Vivian Tu.
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Williams said flatly, "I don't think owning your house is the American dream. You should own the house once you've done everything else. Once you've invested your money, once it's working for you, then maybe buy the house." To be certain, Williams is still a proponent of home ownership, but she's arguing for taking a different tact to reach that goal and questioning whether home ownership should still be the primary goal.
"Instead of putting that $100,000, $200,000 on that down payment, should you just rent a place and invest that money? You should compare the returns," she said. It's an interesting theory, but one worthy of consideration. The late, great Charlie Munger spoke about the importance and difficulty of surpassing $100,000 on the road to financial success.
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Williams is asking whether buying a house is the best thing to do with that money once you get it. Yes, home buying was the first step on the road to building wealth for many previous generations, but in many cases, they were buying houses that only cost between $100,000 and $250,000. That means the typical 3% down necessary for an FHA loan would have cost between $3,000 and $7,500.
Even a 20% down payment was only $20,000-$50,000. With today's median home price hovering around $400,000, according to the St. Louis Fed, a 3% down payment is around $12,000. However, elevated interest rates have changed the calculus for buyers. Many are making larger down payments to offset borrowing costs, and it's becoming more common to see down payments in the high five or even low six-figure range.
If you're buying in one of America's more expensive real estate markets, $100,000 down payments are rapidly becoming a fact of life. Investing that much money wisely and letting it work for you for 10 or 15 years could put you in a much better position to purchase a home in the future or retire. It could also generate better returns than the property appreciation on a home purchase.The approach Williams advocates may have some merit from that perspective. Traditionally, real estate has been less volatile than stocks, although you can certainly lose money on a real estate investment. So, your risk tolerance and investing acumen would be key elements in making Willams' plan work. However, that's true of any investment.
Williams is just pointing out that there's more than one way to skin a cat. The real American dream is building enough wealth to live a comfortable life. For much of the last 100 years, buying a home has been the first step towards achieving that goal. But times change, and successful investors change with them.
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In October 2024, Arrived sold The Centennial, achieving a total return of 34.7% (11.2% average annual returns) for investors. Arrived aims to continue delivering similar value across our portfolio through careful market selection, attentive property management, and thoughtful timing in sales.
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This article Why Tennis Legend Venus Williams Believes Home Ownership Should Be Last Step On Road To Wealth Building, Not The First originally appeared on Benzinga.com
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