This is a guest post from my friend Pamela at Hands On Home Buyer. She recently re-launched her site, and I am excited for the opportunity to help it grow. 

 

I bought my first home, a three story Philadelphia duplex for $70,000 in 1990. Ten years later I sold it for $74,000 after spending more than $30,000 in renovations and maintenance.

By all accounts it was a horrible loss. But I was happy and still don’t regret my choices.

Here’s why.

A house is a home, not an investment

Until the recent mortgage crisis, it was blasphemy to say buying a home was a poor investment.

That doesn’t mean it wasn’t true.

By the time you consider mortgage interest, closing costs, repairs, maintenance, selling expenses, and property taxes, you’re probably losing money on your house, even in a rising market.

But most people only look at what they paid for the house and what they sold it for.

So my situation wasn’t unique. And it was exactly what I expected.

Welcome to my first home

My Philadelphia neighborhood was “distressed.”

We had eight vacant houses on our block alone. I kept a collection of empty crack vials on my fireplace mantel. Helicopters flew over every night to harass the owners of the local chop shop.

But my neighbors and I were committed to our block.

We closed the street for our annual block party. We painted the front porches on some of the vacant houses to spruce them up. We took slumlords to court. We fought back against the drug dealers. And we created a fine community.

My years on St. Bernard Street were some of the happiest in my life.

I felt needed. I was part of something bigger than myself. And I saw real change.

By the time we left our block, only two houses remained vacant and the appearance of the block was dramatically improved.

As for the finances? After making extra payments toward my mortgage for years and carrying no other debt, I walked away with enough money to make a 10% down payment on my next (more expensive) house in a new city.

My housing success story

My current house is in a college town with steadily appreciating house prices. We continue to have one of the lowest foreclosure rates in the nation.

After leaving Philadelphia, I bought my current house in a popular downtown neighborhood for $100,000. Today it would likely sell for twice that.

So this time, I’m going to come out way ahead, right? I’ll finally get my profitable real estate investment.

Not so fast.

Although I’m paying my 20 year mortgage off in less than 15 years, I’m still paying a bit of interest. My property taxes are among the highest in the nation and I pay more toward taxes each month than I do my mortgage payment.

I’ve had to replace a roof, insulate, put in a new furnace and hot water heater, and do a gazillion little jobs just to keep the place in good shape.

If you’re curious, you can look at the numbers I crunched two years ago when I was curious about whether I’d make a profit on this house. And, if anything, I estimated down on my repair costs.

So although I’ll walk away from my next sale with a bigger check in my hand, I’m still not making a profit the way investors talk about it.

But once again, I’ll walk away happy.

The best reason to buy a house

The best reasons to buy a house have nothing to do with money. We own houses because we want to express ourselves, provide stability for our children, have animals, or to gain a feeling of personal security. And that’s just fine.

If you want to make an investment through your housing choices, move to a city with a high income compared to rental costs and invest the extra money after paying rent in stocks or bonds.

Somehow I don’t think most people would find that satisfying. I know I wouldn’t.

But what do I know? I walk away happy even when I know I’m losing money.