Raising the level of your leadership

Buy, Rent, Or A Tent

Tent LivingIt 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…

  • Ask yourself if you really need to be in the market at all, or is it just an itch you are trying to scratch. (I have the itch now; Dottie doesn’t.)
  • Buy a bit less than you can afford—a few extra $ in your pocket every month is a big stress reliever.
  • Don’t be seduced by low interest rates to buy more than you need. When rates rise, it will be harder to sell if you need to.
  • If you are a two income family, make sure you have savings to make mortgage payments if one of you is out of work for a while.
  • Unless you are sure you will be there five years or more, be careful. Consider renting.
  • If you can’t afford to buy or rent, live in a tent. Okay, I am kidding a bit, but not too much (maybe a trailer).
  • Never ever forget that the value of your house is not what you paid for it, but what a buyer will pay for it.

Any house buy/sell adventures you want to share? “Leave A Reply” below.

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© Copyright 2014 by Dick Wells, The Hard Lessons Company

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