Owning a home is the American dream, right? First of all throw that crap in the trash. The American dream is that you get to decide what your destiny will be. You are America and you decide what your dream looks like.
But it seems like everyone and everything in society is telling us that we should own a home and that should be our goal.
Full disclosure: I own a home! With a two car garage and pool. But I will get to that story later.
There are so many things and costs to consider when purchasing a home. The purchase price, the cost of the loan and then repairs, maintenance, remodel costs, home insurance and taxes.
If you are trying to reach financial freedom or financial independence these costs can really add up.
The way to reach financial freedom is pretty simple: Earn money – Spend less than you earn – Invest the rest.
If you own a home you are more likely putting money into house payments rather than your investments.
Now for a lot of people a house is the right choice. It many cases it provides a sense of security that cannot be beat.
Why do I own a home? It was not really my choice. As a millennial I have lived in a million different apartments, because I changed jobs and because I never felt like I could afford a home down payments. Lets be real. The down payment I could afford would have put me in a tiny. So I started dating someone that already owned a home. Together we went above and beyond the minimum mortgage payments. By making triple monthly payments together we were able to pay off the house in four years. And today we own the house free and clear. That is the short story.
A house can be a wise investment at the right price. My boyfriend purchased the house at a great price. And then I got to work. I removed wallpaper, replanted grass, resurfaced the pool, removed popcorn ceilings and painted walls. And I am sure a million other little things. It was a LOT of work and each project took longer than I thought it would. But it did increase the value of the property and the real estate market has been kind.
But there are very few people that can do major home renovations without the help of professionals and moving out of the house.
Why does a house really make you poor? Taxes and fees. AKA lost opportunity cost. And everyone’s favorite subject.
Property taxes do not apply to everyone they very from state to state. I live in Texas. Texas does not have a state income tax, but they do have property tax and sales tax. I live in Dallas. Dallas currently has property taxes around 2.5% not including city fees.
500,000 x .2.5% = 12,500
1,000,000 x 2.5% = 25,000
That’s per year. So if you lived in that house for 10 years you would pay $250,000 in taxes. And that is just in taxes. That does include paying the mortgage principal amount, interest, home insurance, etc.
Think about how much money you could have made if you invested that money in the market.
Now everyone needs a nice place to live. My point is not to discourage anyone from buying a house. You do build equity and apartments come with their own set of problems.
Be wise in your purchases. Purchase the house you need rather than the maximum house you can afford. And invest the extra money. Interest and time create magic.