American Homeowner Preservation has developed a way to help struggling homeowners by leveraging the power of crowd sourced funding. Since 2008, AHP has helped hundreds of families across the country (and in Puerto Rico) resolve unaffordable mortgage debts and remain in the homes and communities they love.
Like many who have been touched by AHP, Joe Willie Hart had fallen behind on his mortgage due to severe illness. Although he recovered and eventually returned to work, the hefty interest and penalty charges were insurmountable. He started planning for the worst: foreclosure and eviction.
Recently I talked with a client who is considering buying a house in Sonoma County. As you might know, the housing market here in the Bay Area is variously described as “crazy,” “red hot,” “ridiculous,” and “divorced from reality.” A similar situation prevails in many cities and towns across the country. Should a smart home buyer take the leap now or wait and hope for prices to drop? How do you evaluate whether renting or buying is the best strategy?
The comment sections of innumerable personal finance blogs are strewn with the wreckage of the battle—no, the war—around this question. It’s nearly as hot as the debate over whether to pre-pay a mortgage or not (don’t get me started). As a math major, I like to look at the numbers myself, play with calculators, build my own spreadsheets. After hours of work on this my definitive answer is “it depends.” Seriously. It depends on a bunch of factors, but actually pivots on one big factor.
Sometimes when folks read or hear my recommendation for buying a house they think, “If one is good, two should be better, right?” Well, sorry, no. Please buy a primary residence for you and your family (be smart about it) but also please don’t buy a second one. The challenges that Jim Collins outlines for personal residences as an investment are surmountable for your primary home, but are very difficult to overcome for a second. Collins suggests renting is better than buying, but I think with smart choices, as detailed in the previous article, buying is the better choice. But for a vacation home, renting is definitely better than buying. Why?
A couple popular bloggers have been making the case recently against the idea of buying a house. Sure, there’s overwhelming pressure in the US of A to settle down, buy as big as you can afford, live the American Dream—so some pushback seems reasonable. James Altucher and Jim Collins (the personal finance blogger, not the Good to Great author) have both written persuasive posts about “don’t get sucked in” to the real estate scam. Collins is blunt: “Why your house is a terrible investment.” It’s thorough and humorous, but I still think he’s wrong. But why?