Homeownership is often seen as part of a regular financial progression. You finish school, get a job, save up, and, eventually, buy a home.
Now that my divorce is more than a year behind me, many of the people I know expect me to get excited about buying a home. I have a relatively stable financial position, I expect to stay put for at least another five years, and I have a son.
In spite of the expectation that, naturally, I should want to buy a home, I’m not interested. I’ve done the homeownership thing, and it’s not for me. Here’s why.
How much money will you make, really?
When I was shopping around for my first home, the real estate agent kept referring to my impending house purchase as an investment.
Many people like the idea of buying a home because, in theory, your home will appreciate in value and serve as a long-term investment. But does your primary residence really count as an investment? Can you expect to see a high return?
When you have a mortgage and you’re living in the house (rather than renting it out), the interest is a cost you must consider. After paying interest for all those years, it takes away from the actual value of the home’s appreciation.
Even a tax deduction for the interest doesn’t completely offset the interest you pay.
Don’t forget the other costs that come with buying a home. Property taxes, homeowners insurance, maintenance, and repairs all reduce the total return you can expect to see.
That doesn’t even take into account the way inflation erodes your real returns. By the time you’ve had your home for a decade or two and put a bunch of money into it, it’s going to take pretty amazing appreciation to help you come out ahead.
I became disenchanted with the idea of buying a home as an investment when I realized how much better my returns, in real terms, were with my index investments.
Rather than putting that money into a mortgage payment and sinking it into other costs related to home upkeep, I decided to rent and invest the difference. My portfolio has grown as a result, and my finances are in pretty good shape.
The convenience factor
Owning a home is a big responsibility. When something breaks, you’re responsible for fixing it — or paying someone else to do it. Yard work and regular maintenance are also on the list of things you’re responsible for.
When the wind blew down a section of the fence recently, I just called my landlord and he had someone come take care of the fence. I didn’t have to do anything at all.
If I owned this house, I’d be responsible for the costs and time associated with fixing the fence. I don’t want to mess with it (or make arrangements for someone else to mess with it).
I like that someone else handles furnace maintenance, appliance upgrades, and replacing roof shingles. I prefer living in places where someone else mows the lawn and shovels the snow.
Homeownership can be time-consuming and labor-intensive. If you don’t enjoy taking care of your home, renting can be the better choice.
Freedom and flexibility
With renting, I can just leave when I want. I may pay a fee to break my lease, but other than that, it’s not too difficult to just pick up and go.
The same is not true when you buy. If you get a new job elsewhere, you can’t just move out without making arrangements to rent out your house or sell it.
I don’t want to buy another home because I don’t want to be tied down. I value freedom and flexibility, and renting better fits with my lifestyle.
Could buying a home be right for you?
Just because buying a home isn’t right for me doesn’t mean that it isn’t right for you. For some people, homeownership is the right move.
If you want to make money over time, you can buy property and rent it out. I know people who own so they can rent to others, providing themselves with regular income. The idea of being a landlord doesn’t thrill me so that’s not my path, but for others, it works well.
It’s also possible to enjoy living in a home that you buy. Perhaps you want the stability associated with owning your home, and the freedom to remodel, paint, and truly make it your own.
If you know you will spend a long time in your community and you want to put down roots, buying a home can contribute to your desired lifestyle.
The important thing is to figure out whether or not buying a home fits with your personality and long-term financial goals. Decide what that looks like for you, and make your homeownership decision based on your own goals and priorities.