Tuesday, August 23, 2011

The non-mechanistic aspect of home ownership

I certainly understand that buyers of real estate do not want to over pay for a property, my business model came about to assist buyers on this path. I was recently inspired by an article on CNN.com about a couple who cashed it all in and moved to Costa Rica to live a life more in-line with their dreams. I was inspired and touched by their realization of the impermanence of life, without getting philosophical we can all agree on this simple conclusion. So rather than blog about rent/buy calculations, housing charts or shadow inventory, I thought I would touch on the joy of loving your home.

I'll start with I truly believe that "home is where the heart is", and whether one rents or owns, happiness is not contingent on which you choose. One thing for certain is we spend a great deal of time in our homes, it's where we connect with the people we love, raise our families (make our families!) and host our friends. It becomes an extension of how we see ourselves and an oasis of peace. So when choosing where we want to live we need to be careful to find a space that can foster our needs and provide us an uplifting environment.

I think that owning the place you live can provide a great level of personal satisfaction as well as financial advantages if you purchase with a long enough hold time. For me that hold time should be about 7-8 years minimum to adequately protect you from the ebbing and flowing of market cycles. It has been my experience in life that friends that have purchased real estate and held it for 10+ years have fared better than my non-owner friends (yes there are exceptions). I am excluding any purchase that would have been made at the top of a bubble period, especially in markets that went way off the traditional chart, like Nevada, Florida, California to name a few. I will add here that I was one of those people advising a wait and see in early 2007 regarding any new real estate purchases. You have to be able to recognize a "bubble" or quite simply unrealistic returns on your investment when making such a large il-liquid purchase.

But lets get back to the joys of owning your home. The most obvious fact of ownership is your ability to decorate, renovate and design a space that will be just right for you, that will maximize your joy. The quality of what you can purchase is going to be much better than what you can rent, sure there are condos or co-ops that can be rented, but they are limited in both quantity and time you can stay. I also think buying a home, either on your own or with your significant other can provide a great deal of personal satisfaction and accomplishment. For those of us that are not great savers it becomes a functioning annuity that we can use, live in and build equity that becomes free up upon selling to assist us in our next journey in life.

Life is very short, very uncertain, we need to find an appropriate balance in all our pursuits; financial and emotional. If owning a home will provide you and your loved ones with an exceptional life experience and you have done a responsible analysis of your finances, then don't let short term issues stop you from purchasing a home that will give you joy well into the future.

As a broker in Manhattan and someone who has lived her since 1981 I have seen many of the up's and downs. I am currently of the opinion that it is a good time to make a purchase if you have ticked off all the boxes, at least 12-24 months of expenses in the bank after you close, steady employment prospects and a suitable income to sustain all of your monthly debt, not just housing expenses. You also need to take into account the condition of the property you are buying, if it will need an extensive renovation after purchase and eat into your reserves beyond a reasonable amount; that is a big red flag for me. If you have children that will need to go to private schools three years out, this has to be accounted for now, no wishful thinking that you'll deal with it when you "cross that bridge".

Life is short, Maximize your joy! Be present for every moment and make a mindful purchase (or other).

No comments: