Sometimes, owning a home feels like constantly setting handfuls of cash on fire.
We grew up dreaming of buying and owning a home. For some reason, those dreams left out the bank, interest, mortgages, mortgage insurance, and random stuff breaking. 7 Years ago, my wife and I decided to forgo the “outrageous” rent increase we were asked to pay ($25/month) and started searching for a new home for ourselves. We would be renters no more! We would move into the life stage of home ownership!
Mortgage rates were still falling to never-before-seen levels. We felt that we should skip the “starter home” and take our best shot at buying our “forever home” at the low rates. Eventually, we found the home we wanted to move into and negotiated a price we were comfortable with. We spent about 78% of what we were qualified for (~$272,000 of $350,000). We bought a home that was a little older, built in the late 1960s, but had the same owners since 1972. In the years leading up to selling it, they replaced the roof, water heater, windows and air conditioner/forced air unit. We were thrilled that we would not be spending much money on this house because the big-ticket items had been recently replaced. We thought that after a few coats of paint, we wouldn’t be spending much on the house after we bought it.
Boy, were we wrong!
Our monthly “rent” exploded from $950/month to $2,250/month (interest, mortgage insurance & taxes). If we had decided to continue renting and put the extra $1,300 into an S&P fund (which has earned 13% since February 2012 [calculated using this nifty calculator]) we would have $178,070 more today (calculated with our favorite interest calculator). Compare that to the ~$100,000 we have in equity based on the value of our home, and you can see how much we have are “down”. Not only have we missed out on $79,000, we’ve also spent a ton on maintaining our house.
The little things we have had to repair and replace over the last 6 years is crazy. We had to buy lawn equipment when we moved in. Our backyard fence has rotted and needs replacing (we’ll do that this spring). Dangerous electrical wiring in our basement that needed fixing. Our air conditioner was repaired (covered in our post about emergency funds). The master shower cracked and leaked ruining part of our kitchen ceiling below. Our guest bathtub leaked and ruined our kitchen ceiling AGAIN. Woodpeckers destroyed several parts of our cedar siding, which we needed to repair. All these things, plus the “meaningless” things we have had to fix up have easily amounted to tens of thousands of dollars. And we know about a few future projects that will eat up capital.
The List Keeps Growing
We have several necessary projects that will need to be completed over the next several years. Necessary projects that we wouldn’t need to bother ourselves with if we were renting:
- Repairing guest bathroom floors – $1,500 (we’ll probably just redo the outdated bathroom)
- Replacing our fence – $1,600
- Repairing the master shower – $1,000 (we used Flex Seal (affiliate link) clear spray to fill the cracks we found in the shower pan – and it has held up for 5+ years)
- Replacing our siding – $25,000
The list of expenses is scary to see. We know that the heat pump, water heater, and other bigger items are “middle aged.” The costs are going to continue to mount, this house is going to keep sucking our money up.
But, that is what we signed up for when we bought our home.
Plenty of posts and articles go over the rent vs. buy debate. They’re great at laying out the money pros and cons, but none of those articles seem to get at the heart of how I feel about our home: it is part of our family. As much as we have grown in this house, it has grown with us. Because my wife and I moved our whole lives growing up, we wanted to plant ourselves in one place and have our kids grow up under the same roof. None of the calculators I found were able to quantify that for me. But, I think I know how much this bit of sentimentality is worth to us: priceless*.
*I would sell our house for $1,000,000 today, easy.
Money wasn’t a priority when we bought this place. We bought this house to make a forever home for our family. We want to shape this house to fit our needs as they continue to change. My expectations for this houses’ return on investment are the same as I should expect to earn on my kids’ braces. We spend a lot of time thinking how we can optimize our lives for saving money. However, for our home, we decided to exclude our house from the equation when we signed the closing papers.
We are also staying aware of the impact houses can have on lifestyle creep. Despite the fact that our income has nearly tripled in the ~7 years we have lived in our home, we haven’t let that be a reason to move out and buy something bigger or “better.” We are keeping ourselves content with our home by choosing to make some of the upgrades our home needs. It is easier to ignore the desire to lifestyle creep our house because when we bought, we followed the 85% Rule.
- 85% of our house we love
- 10% of our house we can change over time
- 5% of our house we can live with
Do you want a house or a home?
6 years ago, when we bought our place, it wasn’t a question of “Rent vs. Buy”. It was “Are we ready to start our home, or do we need a house for now?” I think it’s an important distinction that should be factored in. Assuming you have the finances in order, if you have are trying to decide to buy instead of rent, ask yourself a few questions:
- Do you plan on moving in the next 10 years for any reason?
- Do you know what your goal is (income, future rental, flip)?
- If the value of your house dropped below your mortgage (underwater mortgage), if you still had the ability to stay and pay, would you?
Of course, a house that you are renting can feel like home and there are thousands of people living that truth every day. You should always look deeper than just the money on the surface. Your home can be an incredible gift that you provide for your family, rented or owned. That’s an important fact to remember.
We have 4,150 days until we hit our $1M retirement goal. Hopefully, every one of those days is spent in our current house. We will keep planning on that, the same that we keep planning on hitting our $1M goal. After all, we can only control so much.
Thanks for reading – MB2030