A Saturday morning briefing on innovation and society.
100,000% yes homeownership is worth it. Best investment you can make in almost any economic environment. If you are worried about maintenance buy a maintenance plan. I am ready to pull the ripcord on my career and move into retirement. I can do so comfortably in large part to the various homes we have owned over the past 45 years.
Yes homeownership is worth it. Create a space you can live, sleep, laugh, love and breathe in. Realize YOU, as much as may owner, make it what it is. The design, the flow, the add on items you may not recoup in a resale. Do it and live a life of memories.
Renting is proving to be the best option for me. With mortgage rates and all the other costs that come with ownership, the headaches outweigh the benefits. I feel freer to travel and anytime I need something repaired it is taken care of immediately with no out of pocket cost. I have looked at homes in my area and cannot find anything comparable with the monthly rent I pay. The voice in my head telling me that it is not financially wise to rent is getting dimmer by the day.
We took a slightly different path. We financed our home although we *might* have been able to buy it outright.
BUT... we soon had enough “extra” cash to we start buying “ bargain” houses, fixing them up and renting them out.
Each year or so, we did pretty much the same thing. After awhile, we hit “critical mass” where the income from rentals exceeded our income from other sources.
It took a while. But all our properties are now free and clear, all are rented... and that gives us enough FU money to kinda do what we want. Like circumnavigating the world.😇
A “rule of thumb” is that to get a decent ROI, you need to get monthly rent = 1% of the value of the property.
In today’s market... maybe not! Nowadays a 3/2 sells for, maybe, $250K. Hard to rent it out for $2500 per month!
My crystal ball is *very* cloudy about the future, but... at 82 going on 83... not worrying too much about the next 20+ years of economics.
Home ownership is just an allocation of assets. If you think of it that way, then you must ask the question what is the return on the asset compared to other potential allocations. Return on a house can be such a complex calculation. There is the easy price appreciation.net of mortgage interest payments and fixing it up. There is the semi tangible of sweat equity. And then there is the ethereal feeling of a place to call your own. That last one can trump the first one without the need for rationality.
Home ownership should be driven by the desire to have a home that is yours. Financially, it is more likely to be a wash unless you are lucky to buy in the right place at the right time.
I'm a boomXer (too close to call which one I am) and was raised with the expectation that you spend a considerable amount of time maintaining and improving your house. I now value time, experiences, and community much more than saving $200 by replacing my own water heater.
I bought two houses during my first marriage, the first one a duplex while I went to grad school (free rent!). Broke even on both of them (both owned 2 years) through sweat equity.
I then went 13 years without a house while I was single. Didn't need a "home," was dedicated to startups and my own companies and didn't have time to maintain a house. BUT, missed out on the amazing boom in the Bay Area real estate prices. Absolutely no regrets, as I was able to take a sabbatical and live overseas for a year simply by moving out of my rental.
Married again with a family, I've owned two houses, one the Bay Area and one in Nashville. Both have received, in my opinion, way too much of my time and energy to maintain/improve. But I have "made" money on both of them with above average IRR, mostly based on lucky timing.
What it comes down for me is the sense of permanence - if you want the stability of your own place and are willing to sacrifice your time/energy/money on it over the years, buy a place. Otherwise, rent and invest in community and others rather than a physical structure.
Ignoring the value of sweat equity, home ownership prior to the advent of IRA/401/403 savings was a valuable and generally inflation protected investment option; but not necessarily the retirement solution that the equity and appreciation can mislead retirees who later do not want to move and are saddled with substantial property costs and taxes that escalate while they find they are must live on fixed incomes. Today, our mythic focus on home ownership is perhaps getting in the way of more people considering the financial alternatives and life choices. For those that find value in ownership and control, it remains valuable. For those I see these days focused on having their retirement fully funded by age 35, I think they have opened up a new pathway of later in life choices others who are post early kids/house investments will not have as they race to catch up on retirement savings. (35 year retirement established, absent investment gains over the next 30-40 years)
If you want to own a house, choose a neighborhood you want to grow roots in and a building you love at a cost in your budget. If you want an investment, do the due diligence on the security, the term, the exit, the risk profile, the fees. Folks rarely properly value the all-in cost of home purchase when evaluating their “investment” return
We just moved out of the city. And we are renting to start. Having owned homes before; its a good breather to avoid the maintenance threadmill.