Some people insist renting is the way to go, but buying a home was the smartest thing I ever did for my money
- Buying a home may come with some additional risks, but if it works out well you can sell for a nice tax-free profit.
- After owning two homes and walking away with a sizable gain, I was able to buy a home in the expensive Southern California real estate market.
- Purchasing your home instead of renting helps you build equity, but it also comes with some costs and risks you should understand before buying.
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It doesn't take much searching online to find people who are adamantly opposed to the costs of homeownership.
But for me, owning my own homes has been by far my smartest financial decision. Outside of picking my college major, earning an MBA, and choosing a career path, the decision on where to live may have been the decision with the biggest impact on my money.
Renting has certainly come in handy between homes, but for my money, the best return I've had came from owning my own homes. Here's the story of the three I've purchased, and why I firmly believe home ownership is an important part of building your net worth.
Owning my own home has been my smartest money decision
I currently own a home in Southern California, which would not have been possible without the two earlier homes I owned in Denver and Portland. Thanks to making smart decisions, I've come out well ahead compared to the purchase price of the first two homes.
Part of my success came from living in hot real estate markets where home prices had been steadily on the rise for some time. But it also worked because I paid fair prices and was picky about choosing only the right home that met my criteria. Never rush into a real estate purchase, or any large transaction for that matter, without fully understanding the long-term costs and what you can expect when you are ready to sell.
My first home: the Denver condo
After establishing myself in my first career as a financial analyst, I decided it was time to buy a first home. I had saved up a decent down payment, and after doing a bit of hunting decided on a condo in Denver's Capitol Hill neighborhood.
I owned the home for about two years and did very well. I did invest a bit to upgrade the floors, among a few other small changes, but ultimately did very well due to buying at the right place at the right time.
Prices in Denver have been on fire since the Great Recession. Had I held onto the condo after moving to Portland, I would have come out even further ahead. The home price kept on climbing, evidence that it was a great purchase despite some interesting quirks like a galley kitchen and low floor in my old building.
Profiting on a house in Portland
My then-girlfriend (now wife) and I decided to move to Portland for new adventures. Upon arriving, we rented a place for a year while we got our footing and learned our way around town. We got the house hunt underway and purchased a newly built home on an old lot just a short ways from a very cool part of Southeast Portland.
Due to changes in family and career needs, we only kept that home for about 14 months. But in that time, just over a year, the value of our house went up by about 20%. For our house, that was about $100,000 profit over what we paid.
Again, the house's value continued to rise after we sold and moved on. We couldn't have bought this house without the profit on my old condo and we couldn't have purchased our current home without having done well on this one. For my family, each home has been a stepping stone to something better.
A big down payment in California
After having our first daughter, my wife and I decided to live closer to family. That was either going back to Denver and its occasional cold weather or Southern California where we could count on warm, temperate conditions nearly year-round.
Buying a home in Southern California is no easy feat. California is home to some of the most expensive real estate in the United States, and while we are not paying Bay Area prices, it is definitely more expensive than anywhere I had lived before.
Again, we rented for a year when moving to our new city. But this time, we had to come up with a much bigger down payment to make the property purchase work. As someone who was newly self-employed, the mortgage company would only lend us so much. Even more, we didn't want to borrow more than we could comfortably afford to pay back.
Thanks to our prior homes, we were able to put down more than 50% of the home's purchase price. While that means most of our net worth is tied up in our home, we can afford our monthly payments and were able to buy the best home for my family's needs.
Owning is better than renting for my household
While there have been times that renting made more sense, I have made more than six figures buying and selling my first two homes. My current home is worth a bit more than I paid, and I'm keeping my eyes on the market hoping to see it go up even more!
If you have to spend money every month to live somewhere, you might as well pay for a mortgage rather than handing your money over to a landlord. That way, when it's time to go, you have something to take with you.
Buying a home isn't right for everyone, but for me, it's definitely the smartest thing I've done with my money.
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