Is Your Home Really an Investment?

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Do you consider your home an investment? Here are some things to consider before you decide to buy a house and view it as an investment.

For most people, buying a home is the single biggest purchase they will ever make. It’s been the American Dream for as long as we’ve known, and it’s a rite of passage that we assume we must reach when we become adults. We graduate college, get married, have a couple of kids, and buy a house, because it’s long been considered one of the wisest financial investments we can make. We even count the value of our homes in our personal net worth because home ownership is supposedly a sign of wealth.

Obviously a home is a worthy investment in terms of the value it holds in providing shelter for your family, but should your personal home be considered an investment?

Is Home Ownership Still the American Dream?


Typically speaking, renting is viewed as a waste of money, yet so many financially savvy investors today are choosing to rent instead of own, and with good reason. Renting has a stigma attached to it, but it’s not always a bad decision.

Many investors today choose to rent so they aren’t tied down to one single property, neighborhood, or city, so they don’t have to deal with the financial aspects of owning their own home, and so they can keep their investments liquid in a savings account to invest elsewhere, such as in an online brokerage, which can be a great way to build up retirement savings and prepare for the future.

With their savings from not needing to pay for annual maintenance and repair costs on a home, they have the option of investing heavily elsewhere, such as through index funds, and that’s the route many early retirees are taking today because they can live off the proceeds from their investments since they’re not tied up in real estate.

Homes Require a Lot of Financial Upkeep


Houses are expensive, and I’m not just talking in terms of the amount of money we pay for them upfront. Unlike many other investments, real estate requires a lot of money to protect your investment after you purchase it. Homes need continuous maintenance, whether your home is brand new or old, and you will continue to sink money into it in the form of repairs and upkeep as long as you own a property.

In addition, mortgages are notoriously expensive, even when you have the lowest interest rates. If you take a full 20 or 30 years to pay off your mortgage, then the amount you actually pay for your house over the life of the loan is astounding. Then once you do pay off your mortgage, you will continue to pay for property taxes and insurance on an annual basis. That’s a lot of financial upkeep for an investment.

You Will Always Need a Place to Live


Whether you choose to rent or buy, you will always need a place to live, and that means that as long as you’re alive, if you own your home, the money you’ve invested is tied up in your home. If you need to access that money, you’ve got to sell your house, a process that takes months of your time and a lot of money and effort. Once you are finally able to (hopefully) sell it, you’ve got to find another place to live, so you’re forced to rent or buy another property.

You will always pay for somewhere to live, so even though you may have all your money tied up in a sweet million dollar pad, you aren’t going to be able to access that money until you sell your property. The money will be tied up in your home until your heirs are able to access it. (And we know what that means.) In most cases, once you invest your money into your personal residence, you’re never going to see it again.

Questioning How Much You Really Need


Surprisingly, I’m not completely against owning a house as I actually own one myself. However, I try not to look at it as an investment because our money is completely tied up for the long haul. I do think that we made a good decision in buying our house, but not just because we got such a great deal on it.

The house we bought is small, but it fits our needs. It is (comparatively) cheap because we didn’t buy a $300,000 home (the national average price of a house) when we could buy a third of that and invest the rest of our money elsewhere. We bought a foreclosure that came with instant equity, and it is one of the cheapest houses in the neighborhood. That fact alone is what helped us pay off our mortgage so quickly so that we could focus our money elsewhere.

The important thing is to decide how much money you really want to invest in your house instead of worrying about how to impress everyone around you with its location or size. Do you need an expensive home in an exclusive neighborhood?

Do you really want to sink a decade or two of working in a job you hate to pay for that expensive home? Do you need a 3,000 square foot house for a family of four that leaves you stressed about paying its mortgage every month, or would you rather make your home in a cozier, more affordable home that leaves you extra money for travel and saving for your retirement?

Reassess your needs, and then decide if the American dream of owning a big, fancy house is actually your dream or someone else’s.


Do you own your own home or rent? Do you think the American Dream of home ownership is evolving into something else? Would you ever consider selling your home to rent instead?

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Robin McDaniel

Robin is a freelance writer who chronicles her financial missteps and victories on her blog


  • Holly@ClubThrifty says:

    Owning my home suits my lifestyle, but I don’t consider our primary home an investment. When it’s paid off maybe, but not now.

    • Robin McDaniel says:

      I completely agree, Holly. Owning suits our lifestyle as well, but it’s not where we wanted to put the bulk of our money. I’d rather have a cheaper home so that I can retire a little earlier.

  • Abigail @ipickuppennies says:

    I’m convinced that bubble burst because so many people bought the “it’s an investment” line. No, it’s not. You can’t buy anything and be guaranteed a return, so definitely don’t buy anything at obviously inflated prices!

    Your home is an investment in that eventually you will be living essentially rent free (not including insurance, taxes and maintenance). But as you pointed out, a home is expensive to maintain. We spent $8,000 on essential upgrades this year. We spent nearly that much last year on various things that broke. And in 10-15 years, we’ll have to start spending that much again when the things we replaced break again. Such is the cycle of home ownership.

    But we can do what we want with the property, and eventually we won’t have to pay the “rent” that is our mortgage.

    • Robin McDaniel says:

      I’m lucky that we don’t have that mortgage payment anymore, but our house is still costly with regular maintenance, repairs, insurance, and taxes. I’m lucky that my husband can do most of the repairs himself, though, which saves us a ton.

  • Chuck says:

    I don’t consider ours an investment and I hesitate to add its value to our net worth due to the liquidity issues you mentioned.

    We’ve been in the home since 09 and the estimated value just came back over what we paid in the past 6 months. If I look at that estimate and compare it with the amount of interest we’ve paid on the mortgage alone, we’re still at a loss of ~$40000. The doesn’t include maintenance and repairs.

    Our mortgage isn’t that much higher than our rent was. So, if I had taken the down payment and put it in an index fund, I would have made money.

  • EconElliott says:

    You make it sound like renters aren’t paying all of the same costs as buyers are. Taxes, maintenance insurance upgrades , etc all get factored into rent prices. The only things you get with renting is mobility and fewer bills to pay (but not less money).
    I think buying a house is an investment , but most people move way too often or refinance too often to make it an actual asset. Yes, there are liquidity issues that need to be addressed in retirement like a final buy-down, a reverse mortgage or something . Living in your greatest asset in retirement without access to its monetary value is pretty silly but that’s the other thing most people do. Like ALL investments, your house needs to be MANAGED. If done with a plan, buying a home can be a great investment and a place to live. I love my job, btw!

    • Robin McDaniel says:

      I worked in mortgages for 7 years before leaving that industry, and I wouldn’t advise most people to get a reverse mortgage. I don’t think it’s a great option, and it’s definitely not one I want to face when I’m older.
      My point with the article was to basically say that you shouldn’t throw the bulk of your savings towards a house that’s too fancy and too big for your needs. It’s silly to “invest” so much money into a house when you can’t even access the money in retirement unless you sell.

  • Anita says:

    Landlords wouldn’t lend you your property if they didn’t make a profit.
    If it was cheaper to lend a home than to buy one nobody would buy a home to lend it to anybody.
    Of course, if your roof is damaged, you’ll have to pay a huge amout of money in a short time, but over the long term it’s still cheaper.
    If your lights don’t work in the basement, you can defer calling the electrician, you can’t defer paying your rent.

  • Natalie @ Financegirl says:

    LOVE this post! I just really enjoy this discussion. I think it makes sense if you’re already financially in a good place (emergency fund, debt free, etc). But for me, I am getting out of massive student loan debt from law school, so it doesn’t make sense (yet!).

    • Robin McDaniel says:

      Thanks, Natalie. And I’d agree, if you are going to jump into home ownership, it’s best to do it once all your ducks are in a row and you are financially ready. It makes it much easier to swallow when something expensive inevitably breaks on your house.

  • Kalie @ Pretend to Be Poor says:

    I don’t view our home as an investment. Some people’s might appreciate much more than ours has, but by the time you maintain it and pay the hidden costs of ownership and selling/buying, even the best appreciation doesn’t lead to great returns.

    • Robin McDaniel says:

      I don’t view our personal residence as an investment either, even though we have tons of equity in it since we bought a foreclosure. We may stay here forever… who knows!

    • John says:

      I am a bit older than you people I own my home and will be retiring in a couple of years I live in Philadelphia Pa My house is small 1050 Sq. ft. between my taxes and home owners insurance i only pay $225.00 a month try renting a three bedroom apartment for that amount of money . iI do live in a safe neighborhood only 3 miles south of center city.

      • Robin McDaniel says:

        That sounds awesome, John. Being in a big city (unlike where I am in the country), I bet it’s tough to find cheap rent there.

  • Hannah says:

    I’m very anti “Your home is an investment” line, but I think that in some cases home ownership is a wise use of funds if you’ve got them. Real estate is best viewed on a case by case basis. I personally never want leveraged real estate again, but even there I see plenty of wiggle room depending on your financial goals.

  • Emily @ JohnJaneDoe says:

    I think your home can be an investment, though it’s not for most people.

    If you are one of those who buys a house that needs some TLC, lives in it while fixing it up, sells at a profit and buys a new fixer upper to do the same thing, then you have an investment. (Whether you have a home may be up for debate). If you bought a house with the intention of living there for a few years and then turning it into a rental, you may have an investment.

    The key to thinking your house is an investment is that you bought with the goal of selling or renting at a profit.

    If you bought your house with the goal of having a comfortable place to live, you have a home, but probably not an investment, even if you later sell it or rent it at a profit.

    • Robin McDaniel says:

      I think I’m in that last camp– buying a house with the goal of having a comfortable place to live, which means, to me, it’s not an investment.

  • Mrs. Groovy says:

    We include our home in our net worth, but don’t consider it an investment. However the NY condo we sold jumpstarted our FI. But my husband didn’t buy it as an investment. We got extremely lucky.

    I rented an apartment for many years and I can’t envision being a renter again. My reasons are more about independence, privacy and control (which is also why I want out of living in a subdivision. No more homeowner’s association) than believing home ownership is the American dream. For bloggers or anyone who wants to travel extensively, owning a home can be a burden. In addition to the related expenses, having a possession of value that you leave behind can be worrisome.

    • Robin McDaniel says:

      I wouldn’t want to be in an HOA either. We live in a subdivision without one and it’s great. I can’t imagine someone else telling me what I can and can’t do with my property, and I also wouldn’t want to worry about HOA fees even after I’ve paid off my mortgage.

  • Jen says:

    It’s very funny how the “American dream” has shifted. I always wanted to be a home owner also but I live in Los Angeles where a tiny foreclosed home is already above the $300k average you mentioned. And everytime we think we have enough of a safety net, house prices here get even more competitive. I’m starting to question whether it is worth it also because it would be a dream to travel. I don’t fully view it as an investment if your main goal of owning a house is to have a home. Great points made in this article!

  • Yasir Khan @ WealthKept says:

    I think you should buy a home if you want to, but I don’t think it’s some universal ideal that is unquestionably better than renting like so many people, radio advertisements and Facebook memes would have you believe.

    I mean, when you rent, you don’t have to shovel snow. That’s enough reason for me to stick with renting 😉

    • Robin McDaniel says:

      I agree– everyone always says renting is throwing away money, but that’s simply not true in every situation. It’s not universal, like you said.

  • Bryan says:

    Shiller stated that the historical real return on owning a home is about 1%. The financial advantage is primarily for income taxes; thus the real reasons for home ownership seem to be in an emotional level. The winners of real estate purchased at the lows of 2008-2009, followed by 1990 and then 1980. As a former condo owner (2008-2013), I can say that I don’t miss owning a condo. The tax refund isn’t worth my stress of maintenance.

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