Ways to Wealth: House vs Investments

HERE is a very VERY good article about buying a home vs investing for long term wealth. We have chosen investing with 401k and stocks. The comments are very good here, too, so read those. It’s an in-depth discussion about renting vs buying and there are several different viewpoints. My viewpoint is that I’d rather have savings and investments and a BUDGET rather than drain my savings and have large bills to pay at random times (repairs, etc.).

We had a home and I can tell you that the lure of “a smaller monthly payment” is completely undone by maintenance. Everything that breaks is $500-1000. Every time. Not to mention things that must be replaced periodically like roof, new paint, appliances. AND the fact that you’ve put all your cash into a down payment, so your savings are low. You’d also be amazed at how much shit you need to keep up a house. I’ll bet we spent $3000 at Home Depot in our first six months for lawn equipment, tools and parts for fixing crap.

We pay $1300/mo rent, which seems like a lot (compared to a $750 mortgage payment) BUT we never again have to worry when the fucking A/C stops or the deck needs work or the driveway is crumbling or the water line needs replacing or the basement leaks or the roof needs to be replaced. NEVER. And after dealing with that shit for 10 years, let me tell you IT IS NICE.

I still hear people preaching about how buying a house is the only way to wealth and I can tell you IT IS NOT TRUE. In the past, maybe, but in our current economy, not so much. Not only must you have a down payment (nope, no one can help with that), but you have to have this money in the bank for at least 6 months AND document how you got it. Because everyone is a drug dealer/terrorist now thanks to the Patriot Act and cash is frowned upon. And you’ll also be strapped into PMI (private mortgage insurance) which will add another coupla hundred to your mortgage payments – they don’t tell you THAT, either. Buying is a stressful, expensive process. Realtors are of the devil. House inspectors are untrained morons. I’ve covered this in another post. ;)

So for all of you who are being told over and over again that the ONLY way to live outside an apartment is to BUY, PLEASE for the love of all that is holy, READ THIS ARTICLE.

You can RENT a house. It’s not that much more than a good sized apt. Trust me on this: you do NOT have to be an indentured servant to the mortgage industry.

You can have your house and no worries, too. We do.

We lost our ass in the real estate crash, and YES, this colours our attitude about real estate, but now that we’ve done both: own and rent, renting is definitely the path for us. Owning is just too stressful and costs too much. We never had savings because it was always something with the house. Now we DO have savings and investments. We are in a much better place now than we were with Maplehurst, even paying almost twice as much.

I feel sorry for people who are talked into buying then realise that it is not all it’s cracked up to be. And now they are locked into a mortgage. You don’t make money selling unless you have equity. That takes a very long time to get. Equity, or lack thereof, is why we ditched Maplehurst. We lived there ten years and had $75k NEGATIVE equity, which is what “under water” means. It means that you’ll never get the benefits of having a mortgage because it’s not only worth nothing, it’s worth LESS THAN NOTHING. Negative equity. The market is far more stable now, but all the good deals are gone. You’ll pay a premium and it’ll take many years to get equity of any sort. So while the credit reporters just LOVE IT when you are strapped into a $200k loan, it is alllll a big fat LIE. No equity means you’re indentured to the mortgage company, plain and simple. Which leads me to my other post that addresses this.

The decision to buy a house is life changing. Don’t do it because your parents are pushing you to or your two-income-with-fulltime-jobs friends tell you it’s the best thing EVAR. For us, with an uncertain job outlook, the flexibility of renting is the best path. For ANYONE who has uncertain cash flow, buying a house is probably not for you. And there is absolutely nothing wrong with that. Just run the numbers and do what is best for YOU. Don’t forget to add at least 30% to your mortgage payment figure to cover PMI and repairs.