Look, there’s a lot of terrible financial advice out there. I had to seek out a bunch of it to write this article, and I think my eyeballs rolled too far and are now permanently pointing into the back of my head. It is very hard to type. Are my fingers still on the home row? Everything is pink and dark. Please send help.
Recently, I’ve seen some advice against buying a home, and I really wanted to examine that. On the one hand, it makes some sense—in the wake of such a damaging recession, many traditional investment truisms proved to be overstated. Financial gurus were overconfident, and occasionally dead wrong. We are collectively wise to question everything.
But in the opinion of these Bitches, home ownership is right for most people. It can be done unwisely, even ruinously—but there are very few situations where renting in perpetuity is a great choice.
Whenever someone gives you advice of any kind, you have to ask yourself: “What is their angle?” If you ask a professional tattoo artist if you should get a tattoo, they’re probably going to be very enthusiastically in favor of the idea. If you ask your Bubbe the same question, she’s probably going to be very enthusiastically against the idea. Everyone has personal preferences, biases, passions, experiences, and agendas that influence how they advise you. Their intent may not be malicious, but it could be short-sighted or unsuitable to your situation.
Let’s get a spoon and dig into this heaping pile of problematic advice.
“Should you own a home? Unless you have 20 million bucks in the bank, in cash, you have no business buying a house.
People think the only way to save money is to buy a house. Suzy Orman thinks you have no way to earn any real money for yourself, so she advises you to buy a house as the only way to get your money. You will get your home paid off when you are old. Who wants to wait until they are old to have money?
A home is not an investment because it doesn’t pay you every month. In fact, you have to pay it every month. That’s why a house is not an asset, it’s a liability. Nothing is a good deal if you have to feed it constantly.”
This insalubrious advice comes to us from Grant Cardone, A Rich and An Old who built his fortune selling automotive sales training. He has three numbered points to support his assertion, and the very first one is that owning a home prevents you from “investing in yourself.”
“I do a weekly talk show called Young Hustlers where I talk to millennials about all things money, career and sales. I always emphasize the need to invest in yourself, no matter what your age. When I was 25 I made a $3,000 investment to buy a sales program for the purpose of becoming better at my job. Becoming a better you will never fail you.”
… That. That is his ichiban-ichiban reason why you shouldn’t buy a home for yourself: you need that money. For “hustling.”
This is the case of someone literally trying to sell you something. Cardone sells trainings, and he thinks you should not buy a house so that you can afford…trainings! Very shocking.
The saying goes that companies want their employees poor and their customers rich, and that seems to be the case here. If you were rich, you wouldn’t feel the need to invest thousands of dollars in his books and trainings in hopes of becoming so. But he also wants as much money in your pocket as he can, so that he may convince you to relocate it into his own.
Unfortunately for me, I have nothing to sell you! I’m more invested in making sure my peers are financially sound and savvy because y’all help keep our collective economy stable. Please don’t listen guilelessly to the financial advice of people who are literally trying to sell you something.
Additionally, he makes the mistake of assuming you are some kind of minimum-payment butthead. “Those whippersnappers won’t be rich until they’re dead,” he wheezes, reaching for the dial upon his ruby-encrusted oxygen tank, because he is breathless with concern for you.
But you’re much too smart for this. You already know that minimum payments, on any type of credit, are designed to squeeze as much money as possible out of you, over the longest time possible. You’re slinging extra money at that principal whenever you can to get it paid off early and save yourself hundreds of thousands of dollars over your lifetime. (Aren’t you???)
“Over the past century, housing prices have grown at a compound annual rate of just 0.3 percent once one adjusts for inflation, according to my calculations using Shiller’s historical housing data. Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.
Yet Americans still think it’s financially savvy to dump all their savings into a single, large, highly illiquid asset.”
Catherine Rampell’s opinion here in The Washington Post isn’t factually incorrect, but it is based on a logical fallacy. Lots of financial writers love to tease out the lowest conceivable interpretation of a home’s average return-on-investment, then hold it up against a stock index and say, “See, see, this number is bigger!”
Listen carefully: a house is not, primarily, an investment.
I repeat! A house is not, primarily, an investment!
If you were walking through the forests of the Pacific Northwest and came upon the lost fortune of D. B. Cooper, and you were suddenly $200,000 richer and looking for the quickest way to grow it, indeed, buying a house and waiting for it to appreciate is a pretty dumb way to do that. (Also, the FBI would appreciate a jingle, Fingle.)
Rather, a home is an asset that meets the essential needs of human beings. You cannot sleep inside a stock. You cannot pee and poop inside of a bond. I guess you can construct some kind of cabinet out of money within which to store your food and clothing? But you would have to be really good with papier-mâché.
No matter how much money you have, you need to allocate some portion of that money to go towards a shelter within which these basic human needs can be met. And for most people, a modest and wisely-selected home is the best possible way to do that, because at a certain point you will own it outright. A huge portion of what you used to spend on shelter can now be invested however you like. You’ll also come out the other end with more fiscal discipline on a psychological level.
What’s more, the 6.5% historical rate of return offered by the stock market is not a guarantee of future performance. The economy it reflects has been so utterly transformed in our lifetimes that it would be foolish to expect identical performance. Our parents lived in an economy that was booming more often than busting; the same cannot be said for us. And markets increasingly touch one another. A diversified portfolio of liquid assets is not the golden seatbelt it was for our parents; the reckless actions of a few Wall Street tycoons, Chinese economists, or Silicon Valley technocrats can smash it all overnight.
I will say this: many of the people who offer this particular argument are from the investment world. This kind of advice is not necessarily calibrated to the everyman. We come at things from the much mushier perspective of “What feels right?” For many people, owning the roof over your head just feels really damn safe.
“The other day my sink broke. How come? Because hair falls out in the shower, stuff gets put in the toilet that shouldn’t go there, food gets caught in the pipes, and a million other things.
My house is 150 years old. It used to be a hotel. Things break. Pipes crumble in the hands of the plumber.
I email the landlord, who calls a plumber, who gets new pipes that are paid for by the landlord. The landlord wasn’t expecting it but that’s what they signed up for.
Meanwhile, I read a book on the couch in the other room.”
There are so many problems with self-help-darling James Altucher’s screed against home maintenance that I had to stop writing and ram-jam some mint ice cream. (Brain freeze is the only cure for certain kinds of brain rage.) Count his sins with me, and ring the bell of shame!
The responsibility dodge here is overwhelming. All three of the examples given are 100% preventable. Get one of those $3 mesh screens to keep your goddamn hair out of the shower drain and your goddamn food out of a sink that, I am assuming, has no garbage disposal. And stop putting mystery things in your toilet! We’ve been over this!
It’s true that “things break,” but no homeowner should be blindsided by something as huge as crumbling pipes. I hired a great home inspector before buying my house, and he told me exactly what to expect would need repair in year one, year five, and year ten. So far, he’s been exactly right. I budgeted out the cost of repairs and replacement into my home purchasing decision. Only a monster who shovels spaghetti down a sink with no garbage disposal could fail to do so.
The landlord isn’t losing money in this transaction. Whatever he has to pay out in repairs is more than covered by the cost of the rent you have paid him.
You’re allowed to sit and read books in whatever room you like. The plumber won’t slap the book out of your hand if you’re a homeowner. Owning isn’t an imperative to hover. Don’t hover.
Lots of the articles with this perspective on home ownership paint home maintenance as a burdensome, time-consuming chore when you own, and a blissful mini-vacation when you rent. This is an incredibly flattering Instagram filter for the whole process of renting. I know many, many people who have experienced genuine heartache, physical discomfort, and even financial ruin at the hands of negligent landlords.
Almost anyone who’s ever rented has a “bad landlord” story. I had a landlord who neglected to tell us that an existing plumbing problem would send raw sewage into our basement shower once a month—I got super good at shoveling soggy human shit that year. Piggy had a landlord who literally sold her house out from under her, forcing her to move at her own expense when she wasn’t ready to. A couple we know had to abandon ship when their landlord refused to hire an exterminator for a building-wide bed bug infestation. I know four people off the top of my head—all Millennial renters—who had to take a landlord to court for serious property neglect and financial shenanigans. A good landlord is hard to find; bad landlords are a dime-a-dozen.
On the other hand… my perspective is that home maintenance is an opportunity to appreciate the things that you have by giving them the care they deserve. When our free-from-Craigslist lawnmower suddenly stopped working, my husband (a performing arts graduate from Jersey, i.e. a dangerously unhandy individual) flipped it over and started looking around. He had a hunch that a missing bolt was the problem. Sure enough, all the mower needed was $0.22 worth of hexagonal metal. He didn’t plan to spend his Saturday that way, but he took a tremendous amount of pride in it.
“I don’t know how to fix this, so I’m going to throw it away/pay someone to come and figure it out for me” is a quick way to part with a lot of money.
“We live in a ground floor unit with a small backyard area. I’m talking really small, like 1/10 of our total square footage. Yet we are too freakin’ lazy to tend to the garden or shovel snow in the winter. We had a dead plant sitting outside in a pot for a year until I finally got around to throwing it out. The fact that we can’t even maintain 50 square feet of outdoors tells me we would totally suck at real yard duty. I also really dislike the thought of spending my Saturday mornings pulling out weeds.”
I totally appreciate the realness of this admission from The Wallet Diet’s lovely Christine Nguyen. I guarantee I am lazier than she, and I am often too stubborn to admit it to myself and set realistic-for-a-lazy-person expectations. Just this past year, I went from an apartment with a similarly itsy-bitsy backyard to a comparatively huge lot on 1/3 of an acre. Sometimes, it does suck. We’ve had a long, hot summer, and I’ve spent many weekends exhausted, sweating like a pig, harassing some bold fucking weeds.
But you really shouldn’t buy a home that has more space than you need or more features than you want. If you’re not a gardener, get a condo with a balcony instead of a colonial with a large backyard. If you hate cleaning, don’t get a house with two extra guest rooms; they’ll just fill with clutter and dust bunnies. No one is forcing you to buy a seven-bedroom farmhouse on fifteen acres! Go into the home buying process with a thoughtful and honest inventory of your needs.
And there is no rule that you can’t still outsource the labor associated with home ownership! You always have the option to pay someone to come out and shovel your snow for you. Be realistic about your inevitable laziness and factor in the cost before you purchase.
Buying a home is not for everyone, but we think it is for a whole lot of people. Whether it’s a dusty bromide from your grandparents or a trendy new devil’s-advocate piece, always check for a personal bias or conflict of interest when seeking out advice.
(For the sake of transparency, know that Piggy and I do this shit for fun. [We are sad, sad people with a stunted definition of fun.] We don’t monetize this site—in fact, we’ve lost money just hosting it! And although we’re not trying to sell you stuff, we’re not without biases. Both of us are newish homeowners. And both of us grew up in rural areas and look down on people who wouldn’t be useful to us in the Plague Times. Our personal philosophies are shaped by our identities. They might not always work for you. Stay skeptical of everyone, you beauties.)