A lot of people will say if you are asking is it worth it to buy a house, the answer is automatically no. As a homeowner and landlord, I think the answer is more complicated than that, so I’m not going to be quite that cynical.
Is it worth it to buy a house? Frankly, it depends.
Where you are in life matters
I first looked at a house when I was 22 years old. I had a steady job, and started to wonder if it was time. I found a 2-bedroom house I could afford. I looked at it, and didn’t buy it.
The house was fine. It didn’t blow me away, but it was fine. I just wasn’t ready.
I didn’t know what I wanted to do with my life. I was 22. I couldn’t see myself living in that town and doing that job forever. And I’m glad I didn’t buy it. Two years later, I moved. Moving would have been a lot harder if I’d had to sell a house.
I finally bought a house in my late 20s. I had a better idea what I wanted to do with my life. I found an apartment in a nice area and tried living there a couple of years. I decided I liked it, so I bought a house.
The economics
Where I live, $100,000 will get you a 2-bedroom house. A 3-bedroom house will run closer to $150,000. The 2-bedroom house will rent for a thousand bucks. The monthly payment on it would be closer to $550. The 3-bedroom house, if you can even find one, will rent for $1300. The monthly payment on it would be around $700.
Assuming you can get a mortgage, owning a house costs $450-$600 less than renting. You’re responsible for upkeep, but on average, you spend $1,000 or so per year on repairs. The most expensive ones, like a roof, last 20 years or more. So owning is still cheaper than renting in the long run. Once you pay off the mortgage, you’re only responsible for taxes, insurance, and upkeep. That will amount to maybe $300 a month.
Some argue that means you never really own a house, but it means housing can go from 30 percent of your budget to a single-digit percentage, eventually.
What if you don’t do the upkeep? You pay for it when you eventually do sell, and then you don’t get to enjoy any of the upgrades yourself. There usually are some other expenses beyond upkeep too, but some of those are optional. I recommend you skip the home warranty. It’s cheaper to pay for the maintenance out of pocket.
I think it is worth it to buy a house
The caveat is that the time needs to be right to make it worth it to buy a house. But when the time is right, here’s what makes it worth it.
I don’t think of my own home as an investment, but generally speaking, real estate increases in value over time. I’d rather be sinking money into something that’s increasing in value than not. When you’re renting, you get nothing in the future. Just a roof over your head now.
You also get two other things as a homeowner that you don’t get as a renter. First, you can deduct the interest on your mortgage while you have one. That makes housing easier to afford. Second, you can pay the house off early, and once you no longer have a mortgage, your standard of living increases.
It’s never just a house
One thing to keep in mind is it’s never just a house. You may need some appliances. Buy basic or even used appliances to save money. And there’s a good chance you’ll need furniture. Estate sales are a good source of furniture and other household necessities. Even things like laundry baskets. You might as well spend dozens or hundreds of dollars instead of thousands, especially early on. Repaint patio furniture, whether second hand or stuff you already own, to save around $100.
When it might not be worth it to buy a house
Once I had a good idea what I wanted to do with my life and found a place I could see myself living the rest of my life, it totally made sense. But if you see yourself moving in a year or two or even three, buying makes a lot less sense. Right now it’s easy to sell a house but you don’t know if that will be the case in two or three years. At one point my dad was paying mortgages on three houses in three different towns and we were living in one of them. We moved too much, and selling houses was too hard at the time.
For that reason, I think it’s better to buy a house a year too late than a year too early.
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.
Rent is pretty high right now. I don’t see it coming down either. It’s never the right time to buy an overpriced house. Consider short sales and auctions. Sometimes there are bargains there.
That’s an interesting idea but I’d be uncomfortable recommending either of these routes to a first-time homebuyer. With an auction you probably can’t inspect, and short sales require extra approval so it can take longer to close the deal, and the deal can fall through. Some realtors aren’t willing to work short sales.
A good inspection is crucial for a first-time homebuyer to reduce the number of unpleasant surprises. Once you’ve bought a few houses, sure, go that route, but not the first time.