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Buying a forever home.
Sigh… we have a few thoughts about this.
There’s a whole mess of nonsense out there about buying a forever home. People talk about it like it’s this rite of passage – like you can’t be a functioning adult without buying a forever home, or it’s a prerequisite to having children, or if you don’t have one, you’ll never actually be successful.
Buyers also assume that you can’t have a “forever home” until you’ve had a “starter home,” whatever that means.
The whole “forever home” conversation is not serving us.
In fact, I’m going to join the unpopular opinion here and say: There’s no such thing as a forever home.
Why not? Let’s discuss.
Table of Contents
Definitions: buying a forever home vs. buying a starter home
The term “forever home” generally refers to your dream house – the one you can see yourself staying in for an extended period of time, with everything you could want.
The term “starter home” generally refers to a smaller home or condo, often a one- or two-bedroom place that allows a buyer to “get started” with homeownership.
I want to point something out here, though: the individuals and businesses that use these terms are likely trying to sell you something.
Doesn’t the term “forever home” just tug on your heart strings? Ah, picture your little children running around the yard, with Fido chasing a frisbee… but you’re not married, engaged, whatever, so you know, you can’t have that yet.
Really? You can’t buy a house just because your personal life doesn’t line up with postcard images of a “forever home”?
What about “starter home” – does it corner you into thinking that you can’t have something just because you’re a first time buyer?
I remember thinking in 2016, “…well, we should just start out with a condo, since that’s what people do.” They get something small, then trade their way up, like in the board game “Life.”
It doesn’t have to be that way.
We didn’t buy our forever home.
We didn’t buy a starter home either.
You can, too. There are plenty of good reasons to buy a home, most notably so that you have a place to live while simultaneously increasing your net worth, assuming that the home’s value increases.
There’s no such thing as a forever home.
Well, not one of us is going to live forever, and whether you believe you’re going to Heaven or just as ashes to the bottom of your favorite lake… pardon the morbidity, but you’re going to die someday. It’s just a fact.
Dave Ramsey, the personal finance papa, also emphasizes that there is no such thing as a forever home. Check out his quick video regarding forever homes, where he further echoes that your dreams and needs change over time.
We are approaching year 6 in our home, and I can see how that might happen. Our lives are drastically different than when we first bought – we had a baby, our families are moving around, life just… happens!
In fact – most people, even with plans to stay in a home “forever,” still move on well before “forever” hits. According to this Wall Street Journal article, “the typical homeowner in 2020 had remained in place for 13 years.” This was an increase from 8.7 years in 2010.
Dare I say, the hunt for a forever home may be a never-ending endeavor. Take this couple, for instance, who managed to buy six “forever homes” in the span of sixteen years.
Just for a moment, then, let’s pause on the phrase “buying a forever home” and call it something else.
Replace with: “Investment”
I encourage you to rephrase “buying a forever home.”
Instead, call it “investing in a property.”
This is merely a mindset shift, similar to “spending money on a class” vs “investing in myself.”
You can buy a gym membership, or you can invest in your health.
You can spend money on secondary education, or you can invest in your career.
You can buy a forever home, or invest in a property.
It’s all in how you think of it.
With a house, you can invest in one that will pay you back. This could come in the form of an entire rental unit, a garage to rent out, an Airbnb, a fixer upper, a location that’s up and coming, a value-add (think converting an office to a bedroom, or a half bath to a full)….
Buying a forever home is a limited operation. Investing in a property provides endless opportunity.
What’s working for us
It’s no secret that we invested in a property that pays us back.
We chose to invest in a house that we could see ourselves living in for the foreseeable future (as in, more than a couple of years). We strategically planned to purchase a duplex to keep our housing costs down via the rental apartment.
It had nothing to do with a forever home and everything to do with investing in a property.
Do you see it??
Before we had any idea of where we wanted to “settle down” or “raise a family” or “buy our dream house,” we invested.
Thanks to our two family house, we not only have a place to live – for cheaper than renting, by the way – we also have tax benefits from the rental unit, income from the rental unit, and we have increased our net worth by $350k in equity.
That’s not a typo, and that’s not an accident. That’s thanks to a very hot real estate market, a lot of sweat equity, a smart buy, and 6 years of time passing.
Not too shabby for a house that wasn’t a forever home.
What to do?
So what should you do?
First, shift your mindset. Don’t buy a house, invest in a property.
Second, if you are going to be in an area for the foreseeable future, then consider purchasing a place to live.
Time flies when you are nose to the grind, and you’ll probably be there longer than you think.
Just think about your most recent lease – did you sign it a second time, thinking to yourself, wow, that year went quickly? What if that happens for five years? You could have spent those five years skyrocketing your net worth via building equity in your home.
Wait, what if you want to move?
Ok, let’s say you invest in a property, live in it for a few years, and then realize you need to move. This could be for any number of reasons: job, family, weather, who knows.
You have two options.
1. Sell it.
Just because you buy it doesn’t mean you can’t sell it!
Is it a hassle? Yes. Might you have a need to sell in a “down market”? Not impossible.
Hopefully you bought well and can sell at a profit.
Don’t want to sell?
2. Keep it.
If (and only if) you are comfortable with your financial situation on your investment, you can keep it, even if you move.
Behold, the wisdom of David Bach in Automatic Millionaire Homeowner, who would advise you to rent out the property indefinitely. Here’s an excerpt from his book, where he spotlights a couple called the Martins:
After living in their first homes for a while and building up some equity, these perfectly ordinary people earning a perfectly ordinary income didn’t simply sell out and buy a bigger house. Instead, they rented out their first home, used the rental income to cover the mortgage payments on it, and borrow against the equity they’d built up to purchase a new home to live in.
…This is a different way of thinking about your house. Most people think of their house simply as a place to live in, [not] as vehicles for building wealth.David Bach, Automatic Millionaire Homeowner
The take-home lesson from the above excerpt is that your first home, whether or not it is your Barbie dream house, can provide a stream of income and asset growth should you so desire. Take heed. (It’s a great book, by the way – you can snag it on Amazon, of course!)
Cut the convo about buying a forever home! Invest in a property, and take it from there.
Well folks, that exhausts our many thoughts about buying a forever home. Perhaps we have convinced you to reframe your approach to investing in a property.
Maybe you still want that dream house, and that’s cool too! What are your thoughts about forever homes?