[As part of our new weekly column by Mr. 1500 of 1500Days.com]
Recently, J. Money wrote an article on why he doesn’t like owning a home.
A naughty dishwasher hose leaked and caused thousands of dollars of damage to the home he was renting. J. Money describes the chaos:
- Walked into the kitchen and saw air (water?) bubbles on the floor
- Walked into far corner of the basement and saw water dripping from the ceiling
- Looked closer and there was mold on the wooden beams – meaning it’s been dripping for a while
- Mold people come out to inspect and quote a price to our landlord
- Mold people start work on it and find even more mold under the kitchen floor (those bubbles? they were water)
- Cost to fix is now doubled – but that’s only for the mold cleanup/restoration
- To get to the mold they had to rip up the kitchen floor
- To get to the kitchen floor they had to rip up the cabinets
- To get the cabinets back in/re-built a cabinet person needed to be hired
- To get the floor fixed a floor person needed to be hired
- Then on top of it all the AC overheated, tacking on another $268.50 to the bill
Sounds like a nightmare, right? Since J. was renting, the nightmare mostly belonged to the landlord. J. had to move his family out of the home for a couple days, but was responsible for nothing else.
Despite J.’s tale of woe, I love owning a home. I’ve owned my primary residence ever since I graduated college and I’ll continue to do so until I’m old and grey.
Why I Love Owning a Home
I’ve always enjoyed home ownership. Here’s why:
#1. I make money from my homes: Before I tell you how I profit from home ownership, I’ll tell you what not to do. The recipe for not making money is this:
Buy a new home. Choose a cookie cutter model in a new subdivision where the home is priced at top dollar by a builder who knows how to maximize profit.
Bonus points: throw more money out the window and build a custom home
Don’t buy or build a new home. Ever.
I have two strategies that I use to make money from my primary home:
- Love the Ugly Duck: I buy homes in need of love and fix them up, earning instant sweat equity. Of course it’s work, but an added bonus is that I get to make the house my own with finishes that I enjoy. Bye-bye vinyl floor, hello slate!
- Flirtation with Gentrification: I buy homes in up-and-coming places so the gentrification wind is at my back. I look for areas that are experiencing an influx of people and have a solid economy. If the town is still a little rough, that’s OK because it won’t be that way forever.
My current home is the most extreme example of these strategies. In 2013, I bought an ugly foreclosure for about $175,000.
I put a load of work and $100,000 into it. It now looks like this:
At the same time, my town has improved. The shuttered turkey processing plant that was recently torn down will soon be fancy condos. The pawn shops on Main Street are almost all gone. I could easily sell my home for $500,000 today for a profit of about $225,000.
#2. Owning is cheaper than renting: My mortgage (15 years at 3.25%), property insurance and taxes set me back $1264/month on my 4 bedroom, 3 bathroom home. Meanwhile, half of a duplex on my street (2 bedrooms/1 bathroom) rents out at $1400/month. Full disclosure: In addition to the $100,000 and time I spent on improvements, I also put 20% down ($35,200) at the time of purchase. After taking these numbers into account, I strongly believe that I’ll come out ahead over the long term. This brings me to my next point.
#3. 11 Years to Freedom: I have 11 years of payments to go on my mortgage. After that, the home will cost me only property taxes and insurance (currently $250/month). (Editor’s Note: AND MAINTENANCE!!! WHY DOES EVERYONE “FORGET” MAINTENANCE????? ;))
#4. Stability: Moving sucks. Enough said. Well, that’s not quite it. I have children and I want to give them stability. I was fortunate to spend my childhood on the same street with the same friends. I want my children to have the same experience.
#5. Learning Opportunities (more tools): This one is a stretch, but I’m throwing it out there anyway. I like to build and fix stuff. Coming out of college, I didn’t know how to do anything with my hands. Now, I can set tile, plumb a home, wire a home, replace windows, build a custom shower, fix a dishwasher, hang/finish drywall and build a deck (thanks, YouTube!). I can take something ugly and make it beautiful. Bonus: I get to buy more tools!
This type of work isn’t for everyone, but it feels [email protected] good once you complete a project. Also, you save loads of money since most of the cost in projects is tied up in labor.
Not for Everyone, But…
I readily admit that owning a home isn’t for everyone:
- If you live in certain areas like Vancouver, New York City, or San Francisco, forget owning a home. You’ll come out far better financially by renting. Sign a lease and call it a day.
- If you move frequently, forget home ownership. Be in it for the long game.
- If you absolutely hate taking care of a home, even mowing a lawn, go find yourself a nice rental. Fixing a broken dishwasher isn’t everyone’s idea of a fun afternoon:
However, if you’re at the right place in life or willing to endure a live-in renovation, maybe, just maybe, home ownership is for you. It’s certainly been worthwhile for me.
Let me know if you need help with your next project. If you live in Hawaii or San Diego, I can be over next week.