After World War II, the government and home builders amplified the American Dream of homeownership.

Put wealth creation from owning a home in the column of the food pyramid — a fable created by industry and our government that we fell for. Both sold lots of products to consumers benefiting the industry.

However, wealth does not typically come from a primary residence.

Real estate investing is a viable route to create wealth and passive income, but don’t fool yourself about your primary residence. Sure, home values tend to increase and have been going through the roof recently. But that equity you built does you little good until you sell.

Oh, and owning a home is more expensive than advertised.

Homeownership is not a bad thing.

Owning a home is not a poor decision if you can afford to invest beyond your residence. But the prices are making it more difficult to own an affordable home.

The poor decision is buying a primary residence and expecting the purchase to play a significant role in your wealth-building strategy. A typical suggested real estate mix in a portfolio is 25–40%, including a primary residence.

Unfortunately, Americans typically have 70% or more of their net worth wrapped up in their primary residence. That money is not easily accessible and can give the homeowner a false sense of wealth.

There are many debates about owning a home versus renting. In some scenarios renting is better than owning.

If you own your home and understand that you need to build wealth outside of home equity, buying a home can still work out. It depends on how long you intend to live in the house and how many major repairs or improvements you will have to fund.

Through experience on my path the making work optional, before I turned 50, I learned that owning homes had little effect on my net worth.

A mortgage is also a good hedge against inflation, assuming you have a fixed-rate loan. As wages increase, your mortgage payment remains the same, assuming you have a fixed-rate mortgage.

You need to invest in your future beyond a primary residence.

Choosing to become a real estate investor, invest in stocks, or build a business will help you create a portfolio that can fund your future. Each can produce cash flow and assets that you can access and liquify when needed.

Unlike equity in your primary residence, you can easily use these assets to create more wealth.

Many homeowners borrowed against the equity in their homes during the Great Recession and then lost their homes when the values nose-dived.

The roof over your head is not a sound chip to wager.

How can the average person afford to invest beyond a home?

The prices of homes are out of reach for many in America. People are spending far more than the 30% of gross pay recommendation. When you overspend on housing, you have little left to invest elsewhere.

These homeowners are left with no money to invest and the bulk of their net worth trapped in their primary residence.

Houses are obscenely large in America, ballooning from an average of 1,660 square feet in 1973 to over 2,300 square feet in 2019. Often when you buy a home, you buy a bunch of furniture to fill the space, further depleting your ability to invest.

It can be extremely difficult to impossible to purchase an affordable house. In some areas of the country, it’s not possible unless your income level is high.

Renting a suitable small place could be your best option in these areas.

If you can reduce your monthly commitment to housing, options for investment open up.

Homes have costs you probably didn’t consider.

My home is ten years old and will soon be due for a fresh coat of paint. The heating and A/C system could go at any time. Those are only a few items that can cost big bucks to replace or repair.

If you fail to plan for the expenses required to maintain a home, you can easily find yourself in dire straits when things go wrong. The bigger the house, the more maintenance will cost also.

I received a quote for a new HVAC system a while back, and it was $18,000. Imagine spending 50% or more of your gross pay on housing and getting hit with a bill like that.

Property taxes can also cause pain. A fixed-rate mortgage locks your principal and interest for the term, but your local government will want their share of your property’s increased value.

My home value has doubled in the last eight years, and my property taxes have grown by 50%. It’s not like I can easily tap the equity in my house to cover those taxes.

Take steps to reduce the net worth impact of your primary residence.

Your financial health will improve if you can move into assets that do not provide shelter for your family.

Minimize your housing expense by renting or buying a smaller place. Use the money you free in your budget to invest. Investments in real estate, the stock market, or a business can generate wealth.

Be aware of the additional expenses that come with homeownership. Evaluate these before committing to a purchase. The more you have to spend on the roof over your head, the less you have to invest for your future.

You can become very successful through real estate investing, but your primary residence is not real estate investing. Your home is an asset that is difficult to liquidate and risky to leverage to build wealth elsewhere.

Summing it up: Homeownership is not real estate investing

While it’s debatable, homeownership is not a bad thing. There are benefits to homeownership, including hedging against inflation with a fixed rate mortgage.

Equity in your primary residence is difficult to access. Leveraging this equity for additional investments can be dangerous. You are literally gambling with the roof over your head. Many took this gamble during the Great Recession and lost.

Pick a path to create wealth, whether it be real-estate investing, investing in stocks, building a business, etc. Do not rely on the equity sitting in your primary residence as a foundation for your future.

Consider opportunities to reduce your housing expenses. In some cases this may mean renting is better than owning. If you can reduce your monthly commitment to housing, options for investment open up.

Homeowners comes with many expenses you may not have considered. Renters do not need to worry about a HVAC system or painting, for example. As your homes value increases, so do your taxes. Your local government will be at the front of the line get their share of your homes increased value.

Reducing your dependence on wealth in the equity in your primary residence give you freedom.