It is a myth that home owning is always a good investment. It has been over long periods of time, but in the short term it works like the stock market—up and down. That has certainly been my experience. (Hang in here—I’ll get to the leadership point in a bit.)
Dottie (my wife) and I have bought and sold houses on seven occasions. I would like to say that we always made money, but on three occasions we didn’t. The primary variables have been how many years we owned the house; the housing economy; and the potential buyer/price ratio (how many buyers can afford the house). The details are:
#1 5 years Profit
#2 5 years Profit
#3 13 years Profit
#4 4 years Loss
#5 4 years Loss
#6 4 years Profit
#7 4 years Loss
#8 7 years Still own
One thing we have learned is that short stays (#4, #5 and #7) have a high risk of loss. The lesson is if you are a nomad (frequent moves for whatever reason), it is hard to build equity. Renting may be a better option.
#5 is a good example of the potential buyer/price ratio factor. The house was comparable to others in its small development (only twelve homes), but was too high for the community as a whole. There weren’t many potential buyers, so it was on the market for over a year and we lost a bundle.
#6 made a profit because the housing market got hot (2003-2006). However, the house we bought and are still live in (#8), lost about 10-15% of its value in the 2007-2011 housing crash, and is just now back to break even.
“Isn’t this supposed to be a leadership blog?” “Yes”—this post is about financial self-leadership, a much-avoided topic. If your personal finances are out of order and causing stress, it will affect your leadership whether at home, work, church, or wherever. So, the next time you are in the house market…
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© Copyright 2014 by Dick Wells, The Hard Lessons Company
"The best way to lead people into the future is to connect with them deeply in the present."
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