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