(This is an auto-generated transcript. There may be errors.)
After my wife and I were married in 2005, we received all kinds of unsolicited advice from lots of people, advice on marriage, parenting, financial advice, and more. It’s funny. I got a lot of advice from highly opinionated people whose opinions I didn’t want. And very little advice from humble people whose opinions I did want the small amount of counsel I received from people I actually wanted to hear from have helped me out a lot more than the many, many words shared by people.
I didn’t ask funny how that works. One of the best examples of this early in our marriage was advice about buying a home. I was really quite surprised at the number of times people I did or didn’t know who, when finding out that my new bride and I were renting an apartment would say, you should buy a house.
It’s a good time to buy a house. That phrase in particular, it’s a good time to buy a house. Became really annoying to me. It wasn’t just that people were telling me it’s a good time to buy a house. It was that they were telling me that I was foolish for not buying one. Some people became very a fuselage and would say, it’s a great time to buy a house, or it’s the best time to buy a house or you can’t afford not to buy a house.
One phrase I heard from several people was if you’re renting, you’re just throwing away your money every month. Or another variation of that is your rent payments are just making someone else rich comments like this got even more annoying as time passed, but anyone who knows me well knows that I’m the kind of man who cannot be coerced into doing anything against my will.
I don’t participate in peer pressure or relenting on positions simply because people criticize me. I’ll make a decision and take action when I’m ready to do so. And not before, usually this happens after much research thought planning, calculating, and prayer. Spontaneous is not a word I think anyone would use to describe me.
And I am proud of the fact that I move slowly. This has resulted in very few big regrets in my life. Now I’m going to spoil the plot of this episode right here in the very beginning. I did end up buying a house, but that was after being married for five years. Up until that point, I endured the comments of many, many people who constantly told me I should buy a house for this reason or another.
Today as I record this, I’ve been married for over 15 years. And in that time I went through a process of renting, buying a house, fixing up that house, then selling it and going back to rental life, which I’m still doing now. And I learned a lot about renting, buying and selling along the way. And because I did these things slowly for the most part and carefully planning without jumping on the bandwagon, I didn’t have to learn any painful lessons, like some people which might’ve included, getting evicted for signing up for a house that you couldn’t afford during the real estate craze that proceeded the great recession of the late two thousands.
I’m telling you right now, don’t buy into the hype of home ownership as the ultimate aim of the American dream. It’s pretty cool, but it ain’t all that. And having the wrong attitude can make you seriously discontent with your current situation. If you’re renting or worse, make a bad decision that will cost you significantly.
For this episode, I’ll be sharing my perspective on the topic of home ownership. Oh, and if you’re listening to this inside a house or apartment you’re renting, this episode is just for you. Something I discovered quite early on after I got married is that people would use phrases. Like it’s a good time to buy a home in the sense that the real estate market was in an ideal condition to purchase a house.
That’s all that phrase really meant. But as a newlywed couple with one income and a quickly growing family of small children, a conclusion I came to in response to that was, it may be a good time to buy a home, but it’s not a good time for me to buy a home. I’m glad I had the foresight to draw a distinction between the two.
Just because there’s a good market for something doesn’t mean that it’s the right time for you or me or any specific person to participate in whatever that market is. As I mentioned earlier, you might recall that there were millions of people in the United States who were purchasing homes, because it was a good time to buy a home close quote until it all came, crashing down.
Many of the people who were buying homes in the late two thousands couldn’t actually afford the homes they were buying. As you can read about on Wikipedia and probably someday in history books. In the late two thousands, the whole world was going mad. People were being approved for mortgages that they had absolutely no ability to repay people were buying homes with interest only loans with balloon payments at the end that they couldn’t possibly hope to be able to afford.
And perhaps most commonly people were getting adjustable rate mortgages, which ratcheted up their payments over time. So they’re essentially buying homes with loans that had a lit fuse that would certainly explode at some unknown future date. There’s even the joke about Ninja loans, where people with no income, no job were getting approved for mortgages.
How is that even possible? By the time I finally bought a home myself, it was the end of the year, 2010. And my wife and I had been married for a little more than five years. Five years was a good, solid amount of time for us to decide that it was right to buy a home. Even if it wasn’t as good a time to buy a home at the end of that five years as it was when we first got married.
Really, we were spared a lot of pain and suffering by not listening to the Cadenza of it’s a good time to buy a home. Don’t throw away your money and rent every month. Don’t make someone else rich by renting from them by not purchasing a home too early in our marriage, we were able to avoid the real estate crisis and the great recession.
By the time we actually bought a home, we could afford it. We never lost our house and we never signed up for ridiculous mortgage that we couldn’t afford. That was a valuable lesson that I didn’t have to learn the hard way. That’s in contrast to a friend of mine who had one of the nicest homes I had ever been in.
I went to a couple parties at his house and I was insanely jealous of his big, beautiful home. I wanted to provide something like that for my family. But during the recession, he was so far underwater on his mortgage where what he owed on the house was significantly higher than what he could have sold it for.
That he couldn’t sleep at night, he had fits of anxiety and told me he didn’t know how much longer he could afford the mortgage payments. And he even thought about leaving the keys under the front doormat, abandoning the house altogether, moving out quietly and calling the mortgage company and saying the house is yours.
Come get it. Boy was I glad I didn’t have to worry about things like that now, before I go further, I want to clarify. I’m not saying don’t buy a house and I’m not saying that renting is for everyone or forever, or is better than owning a home. I am saying people need to be careful. Home ownership is not for everyone, or at least not for everyone at all times.
One of the most surprising things that you’ll learn as a new homeowner is just how expensive everything is. You’re on the hook for everything you pay for all of it. Not only as a buyer, are you responsible for paying the mortgage and home inspection fees and property taxes and HOA dues and anything else that has to do with the house itself?
You also have to pay for everything that breaks as a renter, especially if you’ve only lived in town homes or apartments, you might not be able to fully comprehend exactly what that means. For example, If you’ve rented a two or three bedroom apartment for the past two years, you might say, what’s the big deal.
The property management company sent over a handyman two or three times to fix things like the broken cabinet door or the leaky faucet. How much could it cost to actually take care of a house? But let me tell you, when you own a house, you’ve got to take that and multiply it by 50 you’re responsible for everything inside and outside the home.
To illustrate my point. I’ll share with you a detailed list of many of the things that I had to pay for. When I bought a house that I lived in for seven years now, disclaimers are important before I start, let me be very clear. I had an excellent real estate agent and a great home inspector. The house was a really good deal and it was in good shape when I bought it.
There were no big surprises and I don’t feel like anything unfair happened at all. The entire transaction was fully above board. Having said that it was a used home. That was two or three decades old. By the time I bought it. And something that people who’ve never owned a home can’t really understand until they do own a home.
Is that things just break and you cannot anticipate what things will break or when, in my case, we had to start fixing things before I could even move into the house. We had to replace all the flooring in the entire home, including the tile and carpet. At some point in time, the previous tenants of the house.
Not the actual homeowners, but the renters who had lived there before had owned multiple dogs and let them live inside the house. So there was pet odor everywhere, and even holes in the carpet from where the dogs had chewed through it. We ended up getting some excellent stain resistant child-friendly carpet and a beautiful hardwood floor in the kitchen.
But this was expensive. I think the total cost was about six or $7,000. Fortunately, I didn’t have to pay for that out of pocket because the seller did as part of our negotiation because of that pet damage, though, it wasn’t enough to simply lay down new flooring. We also had to have a disaster restoration company come and spray down some special pet proof odor barrier, which never completely worked by the way.
The cost for that was about $250. Also, there was a tree leaning over the house that had to be chopped down. My insurance company told me they wouldn’t insure the home at all, unless I had it removed due to the chance of it falling onto the roof and destroying the house. So again, I didn’t have to pay for this out of pocket, but I think it was something like 500 or $600 to get that tree removed.
When it was all said and done, the sellers ended up contributing about $10,000 at closing to pay for all of these types of issues. Obviously I’m very happy they did, since it didn’t cost me, but it does go to show you that you can spend a whole heck of a lot of money on a house before you even move into it.
And then start to deal with the actual cost of daily life in a home that you own. After we moved into the house and over the next seven years, here’s a partial list of the things that we replaced or repaired. We had to replace the roof due to hail damage. Fortunately, this was covered in our insurance.
So my out of pocket cost was minimal. Something like 500 to a thousand dollars, but still an unexpected thousand dollars. That kind of sucks right after I purchased the house, literally right after I purchased it the day after. And I hadn’t even moved in yet, the furnace died. I was definitely afraid that I would have to replace the furnace in the dead of winter before we could even move into the house.
Fortunately, it was a relatively quick fix. If something about the igniter went bad and I only had to pay about $250 to get it back up and running, but just two or three years later, we had to replace it with a brand new one, the cost around $5,000. The same thing happened with the water heater before we bought the house, the home inspector gave it a thumbs up and said, it’s not an especially good brand, but it looks like it’s in good shape.
And I have no reason to doubt that that was true. But lo and behold, about four years in one day, I came home from work and saw a rusty water bubbling out of the water heater all over the floor. I called a plumber and got a quote on replacing it. And it was a lot more than I could afford something like two or three or $4,000.
So I ended up replacing it myself, but still it costs maybe a thousand bucks and took time out of my schedule that I wasn’t planning on to do something that I didn’t want to do. And I had to pay for it. And it was unexpected. At one point we replaced every single window in the house because the old ones were really crappy and let cold air and moisture in the total cost of that was about $7,000.
I had to run new wiring through the walls and ceilings because I needed high-speed internet. And I worked from home and the house was so old that it only had telephone lines. It didn’t cost a whole lot, but it took many hours trying to retrofit an existing house with cabling that was invented long after the home was built.
One of the saddest things that happened is that one of the most attractive features of the house when I bought it was the little Grove of Aspen trees in the front yard. It was really quite beautiful. The trees were gorgeous and green in the summertime, and then they turned yellow and red in the fall.
It was one of my wife’s favorite features of the house as well. Unfortunately, what I learned is that Aspen trees have a relatively short lifespan and they’re all connected to each other. That means when one Aspen tree dies on your property, it’s only a matter of time before they all die. We had one ginormous Aspen right in the center of the front yard, which died first, but then slowly and surely over the years, every single other Aspen on the property died.
I ended up having to personally chop down 22 Aspen trees. Now the total out of pocket cost was not a whole lot, but for the bigger trees, I did have to rent a chainsaw and some other safety gear, but it just took me many, many weekends to get rid of all those completely dead Brown, formerly beautiful Aspen trees.
The backyard had trees that had to be chopped down as well. We had two Ash trees that were really tall and very heavy. And unfortunately, due to several years of drought in Colorado, where we lived, they started dying down low in their roots. One of them started leaning over the neighbor’s yard and I called an arborist and he said, this tree is dead and it’s about to fall over.
Well, I didn’t want that on my conscience, especially because the neighbors had small children just like me. So you guessed it. I had to hire an arborist to safely chop it down without it falling in the neighbor’s yard. That was several hundred or maybe a thousand dollars. The kitchen had a lot of issues too.
Since the home was built in the 1970s, it was filled with crappy builder, grade appliances and fixtures and cabinets and things like that. One of the strangest aspects of the house was that the drawers in the kitchen had wood on the front, but the part of the drawer that you pull out was actually made of plastic and all that plastic gave away at the same time, rendering the kitchen, almost completely useless.
With just about every single drawer falling into pieces, unable to be used. So for several weeks, we’d had to stack dishes and silverware on top of the counter. While I figured out a way to either replace all of our cabinets for thousands of dollars or find some way to fix them. Fortunately, I found a friend who was willing to rebuild them all out of melamine, and he did it at a significant discount, but again, it was several hundred dollars and it was very frustrating to not be able to use the kitchen.
All of our kitchen appliances eventually gave out the fridge, the oven, the microwave, our microwave died two separate times. And after having the appliance repair guy come and fix it twice and it broke again, I gave up and said, there’s no way we’re repairing this a third time. We threw it away and we bought another one.
Our dishwasher started leaking and we tried to get it repaired, but the repair guy said they don’t even make this model anymore. I can’t repair it. You can’t get parts for it. So we had to replace the dishwasher even really small, weird things. Started breaking. Our mailbox out front fell over one day because the wood had started rotting and some kid riding on their bike accidentally knocked it over.
Was that an expensive fix? Well, not really, but once again, I had to rent some equipment to try and fix it. And while I was replacing the post, I might as well replace the mailbox itself. So here we were $150 later and a mailbox. Isn’t something that you can just ignore either. You can’t really live without it.
The post office will not deliver your mail. If you don’t have a mailbox. One of the most concerning things that happened while we lived in that house is that there had apparently been a slow leak under the shower in the master bathroom. So one day the squishy floor eventually gave way and we found a big moldy mushy mess.
That was something we couldn’t ignore. We had to hire a contractor to come in and rip out every single thing from the bathroom, the tub, the toilet, the shower, the cabinet, the flooring. All of it. We had to completely remodel the upstairs master bathroom. By the time it was done, it looked wonderful and we loved the new bathroom.
But even at the highly discounted rate that this friend of a friend gave us, it still cost about $4,000. And it was very intrusive having people for two or three weeks coming in our house and kicking up. Dust. And we had to endure loud construction noises with a house full of kids. And I was working from home.
It was a tremendous hassle and it felt like our privacy was being invaded. I could go on and on and list all the things that went wrong with the house, but that will get tedious as if it hasn’t already. My point is it never ended. Even when I got ready to sell the house, the buyers wanted me to do things like mud Jack, the broken concrete walkway in the front, and have the main sewer line scoped to make sure that there weren’t any routes that were going to cause plumbing issues.
Even after we sold the house, I found out a couple years later that there was a termite problem. The point I’m trying to make with all of this is that home ownership is complicated. It’s expensive when you buy something like an existing home, there’s just no possible way to know everything that could go wrong with it.
It takes time living inside the home in order to uncover the various problems or challenges. When it was all said and done, I sold my house. I walked away with about $30,000 in my hand that made me smile. However, I had spent almost $20,000 fixing up the place, improving it and repairing all the things that had broken over that seven year period.
So if you look at it that way, in my particular case with the particular real estate market that I had bought and sold into, was it worth spending $20,000 to get $30,000 after seven years? Maybe, but there are probably other investments I could have put my money in that would have performed much better.
There were some other financial issues that turned out to be a challenge in ways that perhaps nobody could have expected due to the recession and the real estate market. We were able to take advantage of a first time home buyer tax credit that had recently been passed by the federal government in order to qualify for up to $8,500 in free money.
All we had to do was buy a house and live in it for two years. Now that sounded fantastic on paper. And I looked at that as a way to justify all the time and effort and cost of buying a house. And I was right, except that it took the government more than nine months to finally mail that check. So for the better part of a year, I was waiting on that check paying a lot of costs out of pocket, hoping that I would be reimbursed someday.
But wondering when that would be. Which begs the question. If I had known that I could get $8,500, but it would take me over nine months living in the house before I got it. Would I still go through with it? I don’t know the answer to that, but I would think long and hard about it now, knowing that was a possibility.
This brings up another good point. There’s a really important term in real estate. You might be familiar with, which is house rich cash. Poor. This is real, and this is very serious. Sometimes people like to talk about home ownership as though you’re buying a treasure chest with gold inside. If you buy a treasure chest with gold, you can open up the lid and take a few coins out and start spending it immediately.
But when you’re buying a house, there is an inherent value in what you’re buying, but it’s not liquid. It’s very hard to spend it. For example, let’s ignore things like inflation and interest and tax rates and things like that. Let’s just say you buy a house for a hundred thousand dollars and you pay it off in 30 years and you sell it for $1 million.
You have just literally made $900,000 profit in 30 years. That sounds pretty incredible. Right. But bear with me. Here’s the problem. You don’t get to realize that gain of $900,000 until you actually sell the darn thing. Home equity quote, unquote means almost nothing in terms of purchasing power or in the case of an emergency.
I saw this firsthand. When I went to sell my house, I had to spend several thousand dollars just to get the house up to a sellable state. This is exactly the same thing that the people that I bought the house from had done for me, but unlike the retired couple that owned multiple homes and lived in Florida and the house that I bought from them just happened to be one of many.
They owned. I didn’t have several thousand dollars just sitting in a bank account, set aside to pay for things like fence repair, mud, jacking, landscaping, and drywall repairs. So the point is, even though I had quote unquote equity in my house, I couldn’t spend any of it. And it wasn’t an option for me to get a second mortgage or a home equity loan, or a home equity line of credit.
I had two options either I could refinance the house and take some cash out right before I sold it, or get an unsecured short-term loan from a third party lender at a very high interest rate to give me enough money to fix up the house so that I could sell it to pay back what I had borrowed to fix it up, to sell it.
It was really frustrating. If I have to pay $10,000 in liabilities, even if I have a hundred thousand dollars in equity in my house, I have to sell my house in order to get the equity out of it. It’s a total chicken egg situation. That can be very frustrating. After I sold my house, I went right back to renting.
One thing that the people who rent have that the homeowners can’t do by the very nature of their living arrangement is that renters get to decide every year, whether they want to keep living there or not. Homeowners are stuck. And that can be really important depending on your stage in life. When my wife and I first got married, if we had bought a house in our first year of marriage, it would not have been a very nice home and we probably would not want to live in it for very long, for a couple of reasons.
Number one, I was at my lowest earning potential of my entire adult life. At that stage I had just started. My income was as low as it was ever going to be. So whatever home that I would be able to afford for that first year, I would probably look back two or three years later and say, wow, I bought this way too soon.
I should have waited until I could afford a slightly nicer home. Number two, my wife and I, when we got married, moved in together for the very first time we had to decide which side of town we wanted to live on. And that was actually a really hard decision. She was moving away from her parents for the very first time in her life.
And I had only ever lived with other teenage guys who didn’t care. What side of town they lived on. On top of that, we were still getting to know each other and discovering our own sense of style and taste and desires. So how could we have possibly made a long-term choice, such as where to buy a house?
When we were just barely getting started in our lives together? Number three, as it turned out, our family grew very quickly. We had five kids in six years, so our need for more square footage kept increasing almost exponentially. If we had only purchased a small two bedroom home with no yard in the beginning because our family was small and we didn’t really need more square footage and that’s all we could have afforded at the time.
We would have outgrown that in just two or three years. So it turned out that it worked very well. That in the beginning we rented on a one-year lease a one bedroom apartment on the South side of town. That’s really all we could afford for that first year. And it worked just fine, but when it came time to renew our lease, I found a better apartment complex with an extra bedroom on a much nicer part of town for just slightly more money.
This happened the next time we moved, we moved up from a two bedroom apartment on the West side of town. To a three bedroom townhome on the Northeast side of town. Then finally we purchased a four bedroom home that we owned and a nice neighborhood in the central part of town. So this one year at a time stepping stone kind of way of slowly increasing our living quarters and our square footage was a great choice for us.
It was a much better choice for us to rent a couple of times and slowly start to understand what it was that we would need and value in a home. When we purchased one, the gradual step up in square footage and rooms and nicer parts of town was made possible by the fact that we were renting on an annual lease.
And as my income continued to rise every year, we were able to take the next step. On that same note of flexibility. One thing, many people don’t tell you about is when you own a home, when it’s time for you to leave that home, you got to sell it and selling can be an incredible hassle. If you’re the type of person who, who doesn’t like strangers coming into your house, walking around each room, judging you and your lifestyle and invading your private space, you’re going to hate selling your home.
From my wife and I, by the time we were ready to sell our home, we were so burnt out. And so emotionally spent on being homeowners, the thought of people coming into our house and us having to be prepared to leave with short notice for our open houses. And walk-throughs was almost unbearable. Fortunately in our case, our real estate agent happened to have a buyer that wanted our house.
So he acted as a simple transaction broker between the two parties. And we only ever had one showing on the house with that family. They liked it. They decided to buy it. And we paid the real estate agent, a smaller than normal commission. The house never even hit the MLS. And we didn’t even put a sign in the yard.
I’m glad that worked out in our case. But as far as I know, that’s a very rare occurrence in the end. I’m glad I was able to purchase a house that my family could live in and call home. Heck two of my five kids were born in that house. That is a super cool memory owning my own home. Definitely had its perks.
I’m not saying that home ownership is bad or that you shouldn’t pursue it. In fact, as I record this episode, I’m looking into becoming a homeowner again, perhaps next year or the following year, but I will be just as sober this time as I was the first time when I initially thought about buying a home and I will go just to slowly as I did before, throughout the process.
And this time around, I have a heck of a lot more knowledge about what to expect and what could possibly go wrong. If a home is an in your immediate future, and you’re feeling bad about that. Don’t renting is a perfectly acceptable option that I recommend, and there’s nothing wrong with it. If you can become a homeowner someday, go for it, but be prepared.
There’s a reason why there are likely many, many rental homes on the market, in your town owning your own home can be rewarding, but it’s also a tremendous amount of work. It’s up to you to decide whether it’s worth it or not for you. Thanks for listening.
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