On the surface, the purchase of a home sounds like a boring and mundane topic, but the decision of buying versus renting a home is one of the most common and problematic questions facing individuals today, so let’s explore it a little.
During this decision making process, you might ask yourself, “do I want to dump money down the drain and pay someone else’s mortgage?” Or, “do I want to dump money down the drain and pay my own mortgage?” These are complex questions, yet the answer is simple. Indulge me for a minute while I illustrate our family’s thought process on the matter.
During this decision making process, you might ask yourself, “do I want to dump money down the drain and pay someone else’s mortgage?” Or, “do I want to dump money down the drain and pay my own mortgage?” These are complex questions, yet the answer is simple. Indulge me for a minute while I illustrate our family’s thought process on the matter.
The wife and I have been going back and forth, struggling with this question for over a year, and not until recently did we come to a conclusion. You see, by trade, I’m a financial guy. Every day I’m building financial models that help support various investment decisions. To illustrate how exciting my life can be, out of boredom, I recently created a model that will help us arrive to at our own investment decision to this timeless question. In building this model, I had to address all of the different variables and assumptions that must be accounted for when purchasing a home: location, investment time horizon, purchase price, down payment, interest rates, taxes, tax shields, capital infusions, exit strategy, buying costs, selling costs, opportunity costs, and etc. You see, everything must be accounted for in your decision because it has a direct impact on the balance in your bank account; failure to do so will have negative consequences and could ultimately lead to your demise, just as these guys.
Aside from these quantitative figures, you might also consider the qualitative aspects as well: how comfortable are you in 1,000 square feet; do you mind living in the “arm-pit” of your community; are you embarrassed to have friends over for dinner because of your current living conditions? Now if you’ve answered yes to any of the above questions, don’t feel too bad, I know what you’re going through and I’ve learned how to deal with them. So there is hope for you too.
By now there are probably a few of you who think I am analyzing this too much, because most people view a home as security, it’s a place where you are able to invite families and friends to enjoy a holiday or special occasion, it helps one feel that they’ve finally started there life, it provides peace of mind, and etc. So, what’s the price tag that is put on this “peace of mind?” Depending on where you live, I’m guessing it ranges from $150,000 to $500,000 and up. Now, be aware that there will probably come a time in every person’s life that has purchased a home when this “piece of mind” turns into a piece of lunacy, just ask this guy...
...scary, huh?
This case is not hard to diagnosis, as he clearly suffers from a severe case of home ownership. It is called home ownership because at this point, the home owns you. Your life and your mortgage are inseparable, until you rid yourself of this disease which can take up to 30 years unless you go for the amputation altogether.
So what is our family’s decision? We have decided instead to own our own lives. See what I mean? Simple.
So what is our family’s decision? We have decided instead to own our own lives. See what I mean? Simple.
