Big picture thinking about buying a house

By Christopher Peck

There’s an old cliché that a house is your largest investment, because for most people it’s the only investment they’ve ever made. I doubt that’s true for most of our readers, but it’s an important point. There are several other clichés surrounding the buying of real estate, like “buy as much house as you can afford” (we can see where that got us recently), and that old nugget about three key factors to keep in mind: location…and a couple other related things I can’t quite recall!

HouseYour house may well represent the biggest single chunk of your net worth. It’s called real estate for a reason – it’s usually the “real-est,” the most tangible, thing you invest in, and it’s certainly the asset you interact with the most often. So, let me start breaking down the investment advisor approach to investing in your home. 

Location is indeed the most important aspect of a home purchase, since you can’t pick it up and move it! The land stays where it is. In the usual formulation, people worry about the quality of the schools, the “niceness” of the neighborhood, the estimated resale value, etc. But climate is a huge factor in home enjoyment, energy expenses, and efficiency. People are fleeing the cold and snowy Northeast and moving to the Sun Belt for a reason. 

Think ahead about what the climate might be. If it’s hot where you live or where you’re thinking about, it’s likely to be hotter in the years ahead – not just decades ahead; I’m talking about next summer! That will influence the cost of everything, especially electricity and water; and, as the area declines in livability, economic viability, and population, then services begin to decline as well. Think ahead and don’t make that mistake. You don’t want to be one of the last people living on Easter Island! 

Look for an area that would be a nice place to retire to, and where the community and landscape can support a move toward more local self-sufficiency (whether because we like that, or to hedge against future trends that make it more necessary).  Why wait to live in a lovely, vibrant area? Why not move there now? If you do this, don’t buy a house right away: rent for at least a year, get acquainted with the region before you buy. 

When you’re looking for a house, think carefully about walk-ability. If you’ve read my articles over the past several years you know I’m a fan of designing your life to minimize the need for a car; it adds immensely to quality of life. As I write this I’m sitting in a café after a 6-minute bike ride from my house.

A couple things not to do: don’t buy the biggest house you can afford. That just locks you in to expensive debt and forces expensive compromises and life choices. People always seem to forget how expensive furnishing a house is; all those window coverings are really pricey! Also, don’t move into an expensive neighborhood, with its unnecessary price premium (and its keeping-up-with-the-Jones pressures for better cars, furnishings and vacations!). You don’t need it, and neither does the Earth.

Here’s an area you may not have thought about: solar compatibility. Make sure your house has an east-west orientation. That means the house should be longer along the east to west axis than it is on the north to south axis. North-south houses have a long wall facing the west, which makes them hot and hard to cool in the summer, and they have a small south wall, so there’s little potential to pull the sunlight into the house in the winter. Plus, the roof will be tilted the wrong way to add solar hot water or photovoltaic panels. 

What this usually means is you’ll be looking for a house on a street that runs east-west. When I first mentioned this to our realtors when we were buying, they gave me the proverbial “what?” A relative mentioned that this would drastically limit the number of houses available, and the answer to that would be “yep, that’s the point.” Don’t spend hundreds of thousands of dollars on an asset that will only cost you more money over time, and makes it all but impossible to upgrade its energy efficiency. 

As suggested in A Pattern Language, look for a property where the land is to the south of the house, as this dramatically increases the usability of the outside. The north side of a building has a dark band of shade, especially in the winter. You don’t want to have to cross that to get to the usable land, so look for property where the majority of the land is to the south; you’ll want to be looking out your big sun-gathering windows at your bountiful yard, anyway! 

Look for a place where you can add an extra living unit. Here in Northern California, we call a small detached, stand alone building a “granny unit,” and it can serve multiple functions. Of course you can house your granny there, but it’s also great for a rental unit to defray mortgage costs until Granny needs it! It can be a nice place for childcare helpers, or as “solo space” for family members, away from the hustle and bustle of the house. Michael Litchfield has written a great book on this, In-laws, Outlaws, and Granny Flats. You might check to see if you cold park a Tiny House  or a lovely Airstream, and use it for similar purposes, or maybe the house has a wing that could be turned into its own unit. I highly recommend this as a strategy to reduce costs over time, and also because of all of the tax benefits that go along with rental real estate. 

This article originally appeared in the Autumn 2012 edition of the Natural Investments newsletter.

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Christopher Peck

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.

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