Ponderings on Home Ownership

Real estate – is it really such a great investment?  This has been a question I’ve been pondering the last several months, perhaps because we have bought 3 different types of sump-pumps this winter after 2 separate flooding incidents in our basement, when in the end we wound up fixing the original (yes we now have 4 sump-pumps in our house – all providing different levels of support).  Or perhaps it was the fact that the property tax bill came, followed a few months later by the school tax bill that got me questioning our recent real estate “investment”.

For easy numbers (and not so personal) let’s say we bought our home for $100,000 a year ago.  Pretend we can expect a modest housing price increase of say 3% a year.  So after 1 year our home is worth $103,000.  But how much money have we “put into” our home in that same year?  Property and School taxes would most likely be around $2,500, plus all the sump pumps listed above.  In addition we painted and put in new carpet in our upstairs and built out our mudroom.  We also installed new windows.   I know – the salesperson and media want you to believe you’ll get your money back for the new windows, and we are in utility savings, but buyers expect windows – they aren’t going to pay anymore for white ones than the old wood ones.  So say we spent another $6,000 on general maintenance and improvements this first year.  So we’ve put in $8,500 between property taxes and maintenance/improvements that we can’t take with us, but wait – we earned $3,000 plus perhaps another $500 in utility savings. I still feel like I'm out $5,000 somehow.

**Note, none of the numbers presented are actual to protect the innocent.

We've been told for so long that houses are a good investment, that owning a home is part of the "American Dream".  I feel like I’ve been sold a line…again.  Now, if we had children the investment may be worth it, after all our school tax dollars would go towards their education.  We would have a place for them to grow up and have memories.  But couldn’t we do the same by renting?  Is the cost worth it?  Yes you are at the whim of a landlord if you rent, but are they really such whimsical people?  It may not make sense when raising a family or for someone that requires a great deal of stability.  But Dann called me a vagabond earlier this year, so obviously housing stability is not a requirement for me.

When I jokingly mention to others that our next place will be an apartment of some kind, they say – “Oh, you want a condo!”  no, No, NO!  Why would I want a condo – that adds on a whole other list of fees that I will not even go into right now.  I mean a rental, where when the sump pump breaks we call the land lord and he/she fixes it and Dann & I aren’t taking shifts through the night to watch in case of flooding.  We are well versed now in proper shelving heights for use in basement storage.

Let's do some math for fun, yes I'm a nerd.  What if we took that same $100,000 and invested it like Dave Ramsey recommends in a good growth stock mutual fund earning 12% (read this article to understand where the 12% comes from).  So, on 100,000 we earn 12,000 a year.  That means we could rent somewhere for around $1,000/month and “live” for free essentially, never touching the principal.  If we were frugal, which I thought I was before this all popped in to my head a few months ago, we would rent a garage apartment or some such location preferably with some land for our ladies and an area for a small garden, for far less than $1,000/month so we could cover utilities and food with the earnings as well.  Don't think this is possible?  We have friends that rent the first floor of a house in a nearby town for a good bit less than $1,000/month.  It’s a great home, great floor plan and a great location.

Am I crazy?  Why do we need things – especially such a big expensive thing like a house?  Why do we need the latest and greatest gadget?  Why do we need to keep up with the Jones?  As Jesus said in Matthew 6:21 (NIV), “Where your treasure is, there your heart will be also.” Treasures in my mind should be time spent with God and memories we build by spending time with loved ones.  Do I care what you wear, where you live or what you drive?  No.  I care about who you are and how you are.  Are Dann & I moving to an apartment, maybe not.  But it is something we will spend more time evaluating. 

Apparently I’m not alone in my thoughts, I read an article yesterday by James Altucher entitled "Why I am never going to own a home again".  It appears Mr. Altucher has felt this way for some time now.  I don’t know his back story at all, but I definitely found a common ground in what he had to say on this topic.

I'd love to hear your thoughts on this topic!