Why you shouldn’t buy a house. From someone’s who’s bought four
The biggest pain point of home ownership is two-fold. First, the unexpected costs associated with homeownership are exorbitant. Second, the supposed equity. We know you don't want to hear it or believe it, but your money is usually better off in the market than it is paying for repairs or the down payment. Sometimes, buying a home can be exorbidantly more expensive than renting.
For some reason, we are all in this mindset that home buying is a necessary foray into adulthood. But why? Because you think renting is throwing money away? Or because you’ve got enough money for a down payment you think it’s just what you’re supposed to do? We get it. A little. Before you start asking questions like, "When is the best time to buy a home?" consider the following:
What's the best time to buy a home? short answer: there isn't one
This week we spoke with a man, let’s call him Steve, who works for one of the largest banks in the country and strongly discourages the rest of us from homebuying. And he’s purchased four homes, so it feels like he’s:
chosen to learn this lesson the hard way for the rest of us AND
intimately familiar with any and all things that could possibly occur during home ownership.
Before jumping to conclusions, no. It wasn’t the home buying process, the frustrations of moving within a big city, or a few sketchy realtors, or the moving van that broke his grandmother’s china, or the down payment that spearheaded his campaign against home ownership. But you don’t give away the plot of the movie in the opening credits.
The horror stories
The stories here are totally true, hard to imagine yourself in, and feel a little like a car crash happening in slow motion - you just can’t look away. Fair warning: the word “water” may become one of those that sends chills down your spine after you dive in.
Home 1
Steve purchased his first house at 23 years old for $140K. In the two and a half years of home ownership, he had to replace or repair:
the HVAC unit (about $6K).
the water heater (about $400).
the oven (about $1,500).
all windows ($750/window).
the driveway (about $250).
And, to wrap it all up, he experienced water intrusion from the neighbors’ new sprinkler system so he sold the house with an active leak. Not kosher, but a true story, nonetheless. Over 2.5 years and wiping out his entire savings account for the down payment, Steve ended up spending an additional $15K. In 30 months. Some quick math - that’s an average addition of $500/month for the entire time he lived in the home. Steve sold and broke even on House #1. As long as you don’t consider the stress induced in your break-even analysis.
Home 2
House #2 was purchased for $305K and sold for $355K 2.5 years later. In the two and a half years of home ownership this time around, Steve dealt with:
asbestos (totaling nearly $35K).
a tile shower that wasn’t caulked correctly.
mold in the crawl space.
repaired hardwood flooring.
repairing the master bedroom.
a $50K insurance claim.
fridge replacement (around $1,200).
installing a fence ($3K).
moving into the living room while the entire back half of the home was being repaired (remember asbestos).
a skyrocketing insurance rate because of the claim filed for said asbestos.
updating the electrical (around $1K).
Home 3
House #3 was purchased for $510K and sold in 20 months for $560K. In his time living here, he:
replaced another HVAC system (around $6K).
repaired the sprinkler system (around $500).
installed a fence (around $1,200).
fixed the water pump (under warranty, so $100).
ran into even more water issues from the knock-off Chip and Joanna Gaines’ who previously owned the home (around $3K).
Home 4
Steve currently lives in house #4. After an insanely high moving bill that ended up doubling the original quote, this far the repair bill has included:
replacing the refrigerator (under warranty, $100).
a new HVAC system (under warranty, $100).
re-tiling a shower (minor leak at this moment, but will have to fix it along with the kitchen leak in the next year or so).
repairing a leak in the kitchen.
a new water heater (around $2K).
Before you assume that Steve just isn’t a great picker of houses, keep in mind all of these issues occurred AFTER a fairly clean inspection on each home.
The only argument you'll ever need
According to Steve, the biggest pain point of home ownership is two-fold.
First, the unexpected costs associated with homeownership are exorbitant.
These are things that, when renting, you call a landlord or leasing office to come and solve whatever problems you run into. There’s a soft rule that home ownership is “worth it” after 5-7 years in the same home, but Steve suggests moving that number closer to 10 years and adding in more education about what it means to be a homeowner.
Second, the supposed equity.
We know you don't want to hear it or believe it, but your money is usually better off in the market than it is paying for repairs or the down payment, aka your supposed equity. Even and especially over a long period of time. And only in the minority of circumstances does it provide true appreciation. NY Times did a piece on supposed equity a few years ago.
Don’t sell grandma’s house
We’ve all heard the stories about the property being passed down through generations - it’s where the saying, “Don’t sell grandma’s house” originated from. But not every saying that’s gained traction over the years is accurate. Example: your grandma bought a home in 1970 for $150K. You could sell that same home today for around $750K and assume you made a ton of money on the property. $600K is quite a gain. 400% in fact. But, technically, you’ve made nothing because you only kept pace with inflation.*
It’s not only expensive to buy a home, it’s expensive to own a home.
So before you think “It’s what you’re supposed to do at this age,” think again. You may just be outsmarting your friends by following the rules of every D.A.R.E. program you ever took in elementary school - just say no. Curious how buying a home could impact your mid- and long-term goals? Don’t have mid or long-term goals? We can help with that too. Check out the Stash Plan®. Let’s get your [financial] sh*t together before it hits the proverbial fan.*example assumes historical inflation averages of 3%.
Stash Wealth provides financial plans designed to assist high earning young professionals build and manage their wealth.
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Written by Stash Wealth Staff Writer
Stash Wealth Staff Writers are knowledgeable about personal finance topics. Their objective is to unravel the complexities of finance trade jargon, products, and services in order to equip HENRYs with a sound understanding of financial matters.