There’s been a strong backlash against homeownership in the last few years. Many articles warn potential buyers that purchasing a home is a trap that will ruin their lives. A wealth of reasons and anectodes are recited in support of this view.
I’m sure some of this backlash is due to fallout from the housing crisis and some is simply a product of journalists and pundits wanting to write provocative articles. I think both motivations are valid and I don’t fault them whatsoever, but I have been extremely happy with the purchase of my home and I’d like to offer a contrasting viewpoint.
I bought my first house at the age of 32, after renting for many years and at times thinking that I would be a lifelong renter. What basically happened was I wanted to upsize in my market and it was cheaper to buy the kind of house I wanted to live in than to rent one, and the rental market for houses like mine is extremely limited.
So I took the homeownership plunge and I’m so glad that I did.
A quick proviso before we begin. I bought my house for cash, so I don’t have a mortgage payment. As long as I pay the real estate taxes and HOA, no one’s kicking me out of the place. I pay insurance and maintenance costs as well, but that’s just prudent and failure to pay wouldn’t lead me to lose my house, whereas the government or HOA could lien my house and potentially take it away if I don’t pay them.
Okay, with that out of the way, here’s what I love about owning my home.
There’s a reason it’s called real estate. My land and improvements exist. I can see and feel my house. I can live in my house. By contrast, I can’t live in the stock market or in paper assets generally.
My house is not a bank account, or a retirement or investment account, or a series of numbers on a computer screen, or a bitcoin wallet. It’s real and it provides me with utility immediately, by, obviously, sheltering me from the elements and providing a large amount of storage space for my minimal-but-expanding set of belongings.
I am pleased that my home is helping me diversify away from paper assets. If the markets all crash, I’ve still got a fort to hold down. If someone hacks my bank account and all the money suddenly vanishes, or, even worse, if I have a significant amount of funds on some crypto exchange that gets hacked or is cleaned out by its own people (definitely not far-fetched, see Mt. Gox), I’ll be in some trouble, for sure, but those hackers or fraudsters are not getting at my house. Networking issues aside, I’d say it’s pretty close to hack-proof.
People who say you should never buy a home love to point to the fact that it’s illiquid. It’s hard to buy and sell because it’s unique, expensive, and the transaction costs are high. Opponents of homeownership claim it’s a terrible investment. Instead of putting money into a home, they say, you should rent forever and put the money you have left over into the stock market. Stocks will always beat out real estate, they claim. Now they’re saying cryptos are the answer.
Well, I for one, love that my house is illiquid. I don’t want to sell it, ever, and I don’t even want to be tempted to sell it. I wish it could be more illiquid. Let me explain.
First, let’s address illiquidity. I have a tendency to invest in risky and volatile assets. Price swings and stress often ensue. Parking a good chunk of change in something illiquid, that gives me a large amount of value every month, for a person like me, is a very good idea. Think of investing in an illiquid house as similar to a retirement account with withdrawal penalties. I’m protecting myself from myself. If you’re like me and love high-risk plays, you know what I mean…
Second, let’s discuss the opportunity cost of not investing my house purchase money in the stock market or cryptos. In hindsight, I would be ahead now if I’d put all my house purchase money in the stock market or cryptos or both.
The operative words in that sentence were: in hindsight.
Stocks and cryptos and other investment assets are not sure things. Far from it. A house that you intend to keep forever, or at least for the foreseeable future, is as close to a sure thing investment that you can get. It’s a sure thing for me, because I want to keep this house until I die, and then pass it along to my heirs. Acquiring my home was a total no-brainer in this regard.
Had I put all my money in paper assets instead, I’d be up significantly now. But, had things gone the other way and the paper assets deteriorated, I’d be in a lot of trouble. Now, because I bought the house, no matter what happens to the stock market or to cryptos, I’ll be able to pay for my house, because all in the yearly costs, assuming no major repairs, are under $5,000 (this number includes taxes, insurance, HOA, and about $500 of cushion for odds and ends).
It Puts Money in My Pocket
My house pays me every month. It would cost at least $2,000 in my market to rent a house like this, and that’s assuming I’m able to pull off a great deal. So every month, I get a minimum of $2,000 of value out of my place. I’m not paying interest, or mortgage insurance, or padded maintenance fees to my landlord.
Furthermore, for those of you who are thinking about paying off your house or buying it cash, the impact of the removal of the rent or mortgage line item from your expenses is insane. I have so much more flexibility and purchasing power now that the monthly housing costs have largely disappeared. Yes, I may have paid all of them up front, but in doing so I have made myself the most reliable tenant of my very own investment property. (I’m not against paying interest on mortgage loans, but the fact that mortgage interest often amounts to more than the cost of the home over the loan’s life turns me off to this kind of borrowing.)
It Forces Me to Learn Some Basic Skills that I’ve been Avoiding
Buying a home quickly forced me to learn and become proficient in hanging curtains and blinds (including properly measuring for same, which is no small feat), and doing basic electrical work (step 1 is cut the power, and steps 2-4 are confirming that step 1 has taken effect). It’s satisfying on a personal level to complete these tasks and to know that I can do them when necessary or desired.
No Landlord/Tenant Issues other than the Ones I Create
Now that I own my own place, it’s mine and there’s no landlord to kick me out when the lease term is up. There’s no end of lease term scramble to figure out whether I’m going to renew or if I need to find a new place to live. I don’t miss those things one bit!
If and when I feel like dealing with landlord/tenant issues again, I’ll move out and rent my current house, and enjoy the income for the rest of my life. If landlord/tenant issues are decidedly not for me, I’ll hire a management company.
For the foreseeable future, however, I plan to live in and enjoy my new home.
Let me know what you think in the comments below, and what your experience has been either with renting, buying, or paying off your home.