Is Your Home an Asset or Liability?
On this week’s episode, Tim Ulbrich welcomes Nate Hedrick, The Real Estate RPh back to the show to talk about the value of homeownership. Tim and Nate discuss whether or not the American dream of owning a house is for everyone, the true costs of home ownership, when to consider renting vs. buying and tips for knowing when might be the right time to purchase a house.
About Today’s Guest
Nate Hedrick is a 2013 graduate of Ohio Northern University. By day, he is a clinical pharmacist and program advisor for Medical Mutual. By night and weekend, he works with pharmacists to buy, sell, flip, or rent homes as a licensed real estate agent with Berkshire Hathaway in Cleveland, Ohio. He has helped dozens of pharmacists achieve their goal of owning a house and is the founder of www.RealEstateRPH.com, a real estate blog that covers everything from first-time home buying to real estate investing.
Summary
Is your home an asset or liability? Nate and Tim dive into this question on this week’s episode.
Nate explains that there is a lot of emotion in home ownership and that pharmacists often feel pressured to buy a home even if we’re not financially ready to do, especially after residency or school. He recalls comparing the cost of a mortgage and interest vs the amount of money he was paying in rent when he decided to purchase his first home. Unfortunately, there are many costs and factors that are associated with home ownership. Like anything in the personal finance world, you have to make a decision that’s best for you while weighing both the math and your feelings toward the decision.
So what is the true cost of home ownership? Nate explains that the biggest cost you’ll have is your mortgage, which includes the principle and interest payment. In addition to the mortgage, you’ll incur other monthly costs like property tax, HOA fees, and maintenance which can produce some large capital expenditures (think roof, boiler, etc).
Of course, there are also upfront costs when buying or selling a home, like agent fees which the seller usually pays and mortgage fees such as inspections, the cost of reviewing the title, closing costs. Perhaps you’ll also spend money on adding on a deck, putting up a fence or lawn maintenance.
Robert Kiyosaki, author of Rich Dad, Poor Dad, explains that an asset is anything that puts money into your pocket while a liability is anything that takes money out of it. Nate says that a home very rarely puts money into your pocket. While homes could appreciate over time, that doesn’t necessarily mean that you’ll make money on the house. With Kiyosaki’s definition in mind, Nate says that a home is generally not an asset.
Tim and Nate also discuss how to decide if renting or buying a home is better. Nate shares that you have to look at your personal finances to see if you’re able to take on a financial hit (like a large maintenance cost). If not, you should wait to purchase a home. If so, you then have to determine how long you might be at that property to see when you’ll break even. There are factors in determining when you’ll break even, like looking at the rental price and home values in the area and how they’ve changed over a few years.
Mentioned on the Show
- YFP Concierge Service
- YFP 040: 10 Things Every Pharmacist Should Know About Home Buying – Part 1 w/ Nate Hedrick
- YFP 041: 10 Things Every Pharmacist Should Know About Home Buying – Part 2 w/ Nate Hedrick
- YFP 064: 6 Steps to Home Buying – Part 1 w/ Nate Hedrick
- YFP 065: 6 Steps to Home Buying – Part 2 w/ Nate Hedrick
- Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not by Robert T. Kiyosaki
- NY Times Buy vs Rent Calculator
- House Hacking: How to Live for FREE During Residency by Nate Hedrick
- First Time Homebuying Quick Start Guide
Episode Transcript
Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. I have a familiar voice back on the show this week, Nate Hedrick, also known as the Real Estate RPh. And here, we’re talking about this question of is your primary residence an asset? And we’re going to talk about buying a home, owning your own home versus renting, pros and cons, considerations, running the numbers. You’ve heard from Nate before on this show. We’ve had him on in Episode 040, where we talked about 10 Things Every Pharmacist Should Know About Home Buying, as well as Episode 064 and 065, Six Steps to Home Buying, Parts 1 and 2. So Nate, welcome back to the Your Financial Pharmacist podcast.
Nate Hedrick: Thanks, Tim, always nice to be here.
Tim Ulbrich: So two things I want to talk about first, before we jump into the recording. First is before we hit record today, you shared the good news that you and your wife Kristen are getting ready to close on your first rental investment property. So congratulations. Tell us a little bit more about what you’re working on there.
Nate Hedrick: Thanks, yeah, we’re really excited. I’ve helped a number of pharmacists get their own rental and investment properties, and it was time for me to pull the trigger. So I’d been looking for awhile, we finally found a house that the numbers worked on, and we got under contract just a couple of days ago now. And now we’re going through the process of inspections and all that good stuff. So hopefully that all goes well, and we’ll have that secured here by the end of the month.
Tim Ulbrich: That’s exciting. And Jess and I are going through a similar process, and you and I were talking before we hit record, we’re going to come back on in the future and kind of break down those experiences, we’ll talk about the numbers, we’ll talk about the good decisions we made, probably the stupid decisions we made that we don’t even know about yet, right?
Nate Hedrick: Exactly.
Tim Ulbrich: All with the goal of really hopefully encouraging and teaching, as we’ve done with other topics on the show before. The other thing I want to mention here is that we’ve been talking about this on social media, we’ve been talking about it on other platforms as well, but we’re excited to continue the collaboration with you to roll out the concierge service that you offer for pharmacists as a part of the YFP community, for those that are both buying or selling a home. Tell us a little bit more about what is that concierge service? What’s involved? And where people can go to learn more about that?
Nate Hedrick: Yeah, absolutely. So the concierge service is this thing that I’ve been doing for a little while from my own website, Real Estate RPh. And now we’re rolling it out to the entire YFP community. And the basic idea is that we’re looking out for pharmacists in terms of finding a local agent that knows what they’re doing. We want to be kind of on your team because if you really get into the process of buying or selling a home, as, again, I’m going through it right now myself, there’s a lot of steps, a lot of processes, and a lot of things to know. And having more people on your team can only be helpful. So what we really do is we get together with you and whoever’s going to be buying that home or selling that home, go through your budget, go through some background about why you’re making the move or whatnot. And we come up with a plan, and then we find you a local agent. And all of these agents have been personally vetted by myself, they’re a part of a growing network I’m creating, and we find that local agent or connect with that local agent that we know really well and get you to basically purchase that home using that agent. So the service is completely free, but the agent that we are working with basically pays us a referral fee. So there’s no cost to you, but we’re able to connect with more agents and bring them clients and make everybody happy in the process.
Tim Ulbrich: Yeah, one of the things I’m really excited about, Nate, with this is that obviously besides your peer-to-peer connection, pharmacist-to-pharmacist, which I think just puts you in the position to be able to understand some of the issues and the challenges but also really being able to — you know, you’ve lived this life of you’ve had student loans, you and your wife have worked through budgeting and all these other financial goals and where does home buying fit into this? So I think there’s some of that peer mentoring and advising that can happen as well that, you know, clients may be thinking about things like, hey, what would be good in terms of percentage down and how might this fit in? And you can point them to various resources and content and obviously your own personal experience as well. So we’re really excited. This is live. If you go to YourFinancialPharmacist.com, you’ll notice at the top of the home page, there’s a button that says, Buy or Sell a Home. And from there, you’ll be able to learn more about the concierge services and get access to schedule an appointment with Nate and to move that forward and hopefully coming in the future — in the not-too-distant future — we’ll also have an option here for those that are looking to jump into real estate investing. So again, that’s YourFinancialPharmacist.com, top right of the page, Buy or Sell a Home button, and that will take you to the page to learn a little bit more. So Nate, setting the stage for this conversation today, so again, we’re talking about is your primary residence an asset? How might somebody decide this decision of what’s the ROI on a home buy? Or should I continue to rent or should I purchase a home? And really the backdrop here is that I feel like there’s a lot of emotion that comes with home ownership. And I think especially here in the great U.S. of A that there’s a common belief that owning a home, I know I had it, should be a top priority and is beneficial to everyone to build equity and that often, it should supercede anything else in your financial plan. And you know, I think what we really want to talk about is some questions like, do we take this common belief too much at face value? What does the math really say? What are the pros and cons of home ownership? And how does home buying fit in with student loans and other financial priorities? Because at the end of the day, home buying is really just one — albeit a significant one — one part of a financial plan. So am I alone, Nate, in kind of hearing that common belief? Or is that something that you hear as well?
Nate Hedrick: No, I think that’s absolutely. I mean, it’s even true in my own life. I mean, as soon as we became full-time pharmacists and got out of residency, it was like, OK, how do we get a house? Because that’s the next thing, right?
Tim Ulbrich: Yeah.
Nate Hedrick: It didn’t matter if it financially was the next thing, that was just, that’s what you did next because that’s what you do, you own a house. So I’m totally with you.
Tim Ulbrich: Yeah, and I know Jess and I really felt the itch as well post-residency and I think when you feel that itch and then somebody says, “Hey, why are you dumping money down the drain renting?” and then you start looking at homes, it’s all over from there, right? I mean, you just kind of go down.
Nate Hedrick: And even worse was that I, again, at the time, totally naive to this, but I just compared mortgage and interest payments versus my rent payment, and I was like, oh, it’s cheaper to buy a house. Like it’s actually less expensive. And didn’t factor in any other things than that mortgage and interest payment.
Tim Ulbrich: So I did the same thing, so let’s start with that component, what you just mentioned, the true cost of home ownership. And I think often, as you alluded to, people are thinking about, OK, I’ve got a mortgage, I’ve got interest, and often that’s what will come up on a calculator. Or if you’re looking at a home on Zillow or Redfin or whatever, you’ll see those fees. But of course, there’s many other fees that need to be considered when somebody’s really evaluating what is the true cost of home ownership. So what is involved? What’s everything that’s involved when we look at the true cost of home ownership?
Nate Hedrick: Yeah, absolutely. So obviously the biggest things are that principal and interest payment, right? You are paying the mortgage. Unless you’re paying cash for a house, you need to be paying for that mortgage every single month in terms of the principal balance, then interest. The way most loans are structured, you’re going to pay a lot more in interest than you are on the principal. So just looking at a loan and saying, “Oh, it’s a $200,000 loan,” just that principal amount is not going to give you an idea of what your actual payment’s going to look like. So factoring in both of those and looking at your interest rate and how that’s going to affect your interest payment is certainly important. The next thing and the thing that I think is funny because I totally ignored when I bought my first house is taxes, property taxes. It can be a huge component. I mean, we pay thousands of dollars a year in taxes, and that’s money that doesn’t just come out of nowhere. You have to plan for it. And again, I don’t know why I didn’t look at that. Like everyone knows there are property taxes. But I didn’t think of that as a big important number. But it really is.
Tim Ulbrich: And how different that can be, right? From one area to another within a city even.
Nate Hedrick: Oh, absolutely. I mean, where we’re investing, the property we’ve got, the taxes are several percentage points higher, in fact, than where we live right now. And that was a major factor to say, is this really a good area to invest in? Because of that property rate. And so the number’s still work, but you have to have all that in mind. So then the other things to keep in mind, if you live in a community, there might be homeowner’s association fees. Those are often kind of hidden. But they can be quite high. I actually helped a client quite recently buy a condo here in Cleveland, and the homeowner’s association fees were probably, I don’t know, $200 more a month than her mortgage and interest payment were.
Tim Ulbrich: Oh, for the love…
Nate Hedrick: I mean, it was huge. It was crazy. And if you ignored that, it doubled her payment every single month. It doubled it. And without taking that into account, you would assume that this was a great deal. But you had to look at those numbers before you could do the final math.
Tim Ulbrich: So when you mention principal, interest, taxes, insurance, so that term is referred often to as PITI. And I think for the most part, when people are looking at a home, they’re thinking of those things. You mentioned obviously we talked about the variance that can happen on property taxes, I think for the most part, people are thinking of that, although I didn’t necessarily think as much about it. Even here in Columbus, for example, 10 minutes away, one part of the city to another part, you can easily have an increase of property taxes of 60-80% based on school districts and other factors. You mentioned homeowner’s association or some type of an association fee. And I think our goal here is not to suggest that you should find a location in the middle of nowhere that has terrible schools with low property taxes and no HOA fees, I think what we’re getting to is just understanding what’s involved in the total cost so you can really evaluate it with the rest of your financial plan. So besides those things, besides PITI, besides HOA, besides property taxes, what else could be involved when somebody’s really looking at this aspect of true cost of home ownership.
Nate Hedrick: Yeah, the last thing really that in terms of every single month kind of a thing that you need to keep in mind are the maintenance fees. So when you live in a rental place, often you’ve got a landlord or some sort of maintenance division that’s taking care of the property. Maybe they’re cutting the grass, maybe they’re fixing things when they break. But the maintenance of a home, it vastly, vastly outweighs the maintenance of a rental property. And so you all of a sudden have big capital expenditures that might come up. You might need to replace a roof or a boiler or whatever. And all of a sudden, that’s on you. So you have to kind of plan for those things. It’s much harder to predict, but I’ll tell you one of the things that we do whenever I’m walking around a home with a potential client or with a client, I say, “Look, if these things are all about to break, that means your capital expenditures in the next couple of years are going to be much, much higher. You need to factor that into the payment.” If everything’s brand spanking new, then you can look at it a little bit differently. But keeping that kind of thing in mind. And even though you may not be paying for it every single month, you’re going to be paying for it eventually. And so factoring that into your monthly payment can be really important.
Tim Ulbrich: Do you suggest, Nate, on that point — you know, I’m thinking about like on a rental property, it’s often recommended that you set aside x percent each and every month to be able to fund those big capital expenditures, roof, eventually you’re going to need a new hot water tank, things like that. Do you typically recommend clients think of that as well to say, hey, obviously the numbers may be different, but it may not be a bad idea to every single month, you put aside some dollars, essentially a sinking fund, to be able to cover those things?
Nate Hedrick: Yeah, I usually recommend it. And that probably comes from looking at investment properties so often. I’m always calculating a cap x rate and what that’s going to look like, but I definitely recommend that, especially first-time home buyers, somebody that may not have had those kind of experiences before. If all of a sudden you need a $4,000 boiler, you don’t want to just have that surprise pop up.
Tim Ulbrich: Absolutely. And I think your point on upkeep and maintenance is a good one. I was just reflecting as you were saying that — and anybody who owns a home could appreciate this — is just go into your garage and look at all of the things you didn’t have before you moved into your house, right? So it’s not even just the week-to-week type of things and OK, you’re going to plant flowers, you’re going to do these things, but even all the different tools and devices and lawn mowers and all the things that you need that you probably necessarily didn’t need in a rental situation and factoring those in over time as well. So you alluded to, Nate, that there’s these monthly types of things that you have to consider beyond just the principal, interest, taxes, insurance, which then lends me to believe there’s some other expenses that may not be monthly but that are significant that we have to consider. Tell us about those.
Nate Hedrick: Yeah, you’ve got a number of up-front fees and costs whenever you’re buying or selling a house. You know, everything from simple agent fees, so if you are a seller, for example, often the seller is the one that’s paying the real estate agent fees. So the buyer doesn’t often see that, but sometimes maybe the seller can’t afford to pay all of it and want to split that with the buyer, that’s something they negotiated. So there’s even just the fees of doing the actual deal itself can pop in, and then again, if you’re getting a mortgage, not paying cash for a house, you’re going to have a number of fees associated with that, so everything from the inspections that you do after you get under contract — and believe me, you should be doing inspections, please — to title, the cost of actually reviewing the title on that property, making sure that it’s valid and re-writing that title in your name. You’ve got things like closing costs, which can be anywhere from 2-4% of the overall loan cost. And again, I’ve been in a mire this past week of loan documents and negotiations with closing costs and such. But all those things can really start to add up. So ignoring all those one-time fees can be really scary too because if you need $30,000 and you’ve calculated that as your down payment and all the stuff that you need for a house, all of a sudden you’ve got an extra $6,000-7,000 potentially in one-time, upfront fees that might be coming out. So you really need to keep that in mind.
Tim Ulbrich: I’m glad you said that because I think it’s easy to look at let’s say a $200,000 home and say, OK, we’re going to put 10% down, so we need $20,000 but not think of the additional cash. And that’s really important for those that have a goal that are listening of they need so much down to get into a home, putting those assumptions into that calculation so they can plan accordingly. The other one I would add here, Nate, just from personal experience, and I think this is certainly very variable from one person to another and isn’t as easy to measure as some of these other things, would just be the reality of depending on where you’re at in the neighborhood is that I think it’s natural that your expenses and costs may go up accordingly to those that are around you. So we’re getting into the concept here of potentially keeping up with the Joneses and you know, as people incur law maintenance costs, they install fences, or they put nice decks or patios on their property, like do those same pressures have an influence on how you’re spending money in your own home? And again, there may be costs there that are incurred over time. So if we think about, Nate, you know, I’m thinking back here to “Rich Dad, Poor Dad,” Robert Kiyosaki’s book, that an asset is anything that puts money in your pocket. And a liability is anything that takes money out of your pocket. As we just talked about all of these costs, even after a mortgage is paid off, how do you look at this? Is a home really an asset?
Nate Hedrick: Yeah, I think it’s so funny because I think growing up, we had this societal norm that a house, you did it because it’s cheaper and it’s better for you than renting, and it makes you money somehow. And like we never really think about how that works. Well, the house appreciates and then you sell it, and you make out. Everybody wins. But in reality, if you look at all those fees we just talked about, even though historically, houses have gone up in value considerably over the years, you don’t always make money on a house. In fact, very rarely do you put any money into your pocket. And so by that definition and by what Robert Kiyosaki often says, your house is not an asset in that regard.
Tim Ulbrich: Yeah, and I think of course, we have to mention here the market specifics, right? So I’m thinking about previously to coming down to Columbus, I was living in the booming metropolis of Rootstown, Ohio. And so just seeing the appreciation in that market, while there was some post-2008, certainly it’s nowhere compared to what happened here in Columbus or other markets. So even just thinking about appreciation, taxes, expenses, of course this is going to be varied from one market to the next. So Nate, one of the most common questions if not the most common question I get besides ‘Should I pay off my student loans or how should I pay off my student loans?’ is ‘Should I rent or should I buy? And how might I consider that and weight that decision in the context of all these other competing priorities?’ So when somebody comes to you and they’re looking at a home or maybe even how you thought about it for your own personal situation, just talk us through how you think through that scenario for the right time to buy.
Nate Hedrick: Yeah, yeah, absolutely. I think the first thing you need to look at is your own kind of personal finances and where you stand. Again, the biggest thing — if we haven’t said it enough already — is that there are a lot of extra costs that come with owning a home. It’s not simply just a rent payment every single month anymore. You’ve got things that are going to show up from taxes to maintenance to stuff that breaks, and you need to be able to weather that. So if your finances are to the point where you are spending so much on student loans or so much on other debt that a big financial hit would really ruin you, it may not be the right time to buy. That’s kind of the first thing is making sure that you’re stable enough and comfortable enough that if something does crop up, you’re able to handle that. Once you’ve kind of made that decision and made that move and said, OK, I’m comfortable here, the next question I think is how often or how long do I plan to stay in this particular area. And this is where it really varies by location. Different locations benefit from longer stays or shorter stays. I was recently reading about the advantages of buying a home in like New York City, and it’s so expensive there compared to renting — I mean, renting is expensive — but it’s so expensive to buy a home in New York City, you’d have to live there something like 20 years to make it worthwhile compared to renting.
Tim Ulbrich: Wow, wow.
Nate Hedrick: It’s absolutely insane. But in other areas, it can be a year and a half and the values are increasing so quickly and the purchase prices are so low that it doesn’t matter, you can turn that around in a year and a half and be fine. So if you’re financially sound, you then need to ask yourself, how long am I going to stay here? And then what does that mean for this market? Does it make sense based on that information to buy or sell?
Tim Ulbrich: Yeah, and I think you highlighted well that it certainly can be region-specific with your example from New York and market-specific, but I think it’s also economy-specific and what’s going on. I mean, if somebody bought a home today versus they bought it right after things crashed in 2008, very different outcome in terms of how long you need to be in a home before you may be able to break even on those costs. I would reference here too, one of the tools I love and I often give out to others is New York Times — and we’ll link to it in the show notes — New York Times has a really good buy v. rent calculator because I think to our conversation earlier, it typically is not an apples-to-apples conversation because just like you did, just like I did, just like many others do, you’re typically looking at, OK, here’s what I’m paying for rent, here’s what I’m going to pay for my monthly mortgage payment, which would include the principal and the interest. And obviously, it’s much more than that as we highlighted just a few minutes ago on this episode. And what I like about that calculator is that it helps you consider all those other variables and bring it to as close to an apples-to-apples comparison as possible. So we’ll link to it in the show notes. For those that are listening that can’t get to the show notes, if you just Google “New York Times buy v. rent calculator,” you’ll see that come up. So Nate, I want to continue that conversation for a moment on how long you might need to be in a home before you really start to really that value because I think we often see this with new graduates that are doing residency or maybe they’re in a transition period with the first job, and they’re really not sure, maybe three years, maybe five years, maybe 15 years, who knows? But while we have established it can vary, what are the factors that one is really trying to consider here in terms of will this be break-even or not? What’s going to help determine that?
Nate Hedrick: Yeah, so I think what you need to look at is if you’re looking at a particular area — and most people, honestly, start with that, right? You’re not just saying, “I want to live somewhere.” You have a plan, you’re going somewhere for a job or what have you. So once you know where you’re looking, you can look at the rent prices there. And then look at the home values and look how they’ve changed over the last couple of years. You know, nobody can predict the future in terms of what home values are going to do, but it should give you some insight as to wow, this — maybe it’s like a Columbus market where you live, Tim, and it’s just been going gangbusters for the last couple of years, or maybe it’s been on a decline. And so you can get an idea of well, where do I expect this home to go? If I only live there two years, where is it going to be when I end up selling? The other thing is if you are — even as a resident, I advocate for this quite a bit — even if you’re thinking you’re only going to be there for a short amount of time, what if when you leave, you end up renting that property out as a rental property? So maybe if you really have that itch to buy a home, maybe the trick is to go buy something that you know once you’re done, you could leave it, and it could still become a cash-flowing rental property. I’ve actually advocated, again, a lot for residents to look at doing this. You’re living most of the time in a big city, a lot of people want to rent there, you’re near to a hospital, which means near to a lot of jobs, you’re kind of setting yourself up for a perfect rental property location. And so if you want to go there with the idea that hey, I might be here one year or I might be here for 10, buying a home’s not a bad idea if you set yourself up for success to begin with and get a place that kind of meets whatever need you’re going to have down the road and has that flexibility built in.
Tim Ulbrich: And are you suggesting a potential single-family home? Or like a duplex, triplex, something you could house hack? What are you thinking there?
Nate Hedrick: Yeah, yeah, so I actually had an article about house hacking as a resident and how you can do that. But I think either would be fine. I think if it were me and I could do it all again, I wish I would have gotten a duplex when I was a resident.
Tim Ulbrich: Yes. Yes.
Nate Hedrick: So if I could change one thing about residency, that would be it. I would have bought a multi-family home, I would have had people paying my rent while I went off and did my residency. But again, I think you can still go right with a single-family home as long as you build it with the idea that, OK, when I leave this, it needs to be rent-happy, it needs to be capable of producing cash flow and worth its while.
Tim Ulbrich: Yeah, and while I would say if we’re honest with ourselves, there’s many things we probably would have changed about residency, but on the personal side, I agree with you. This is one that I would have done is I think a duplex, a triplex. For those that haven’t heard that term before, can you just define that quickly?
Nate Hedrick: Yeah, so multi-family homes, the short version is — so you get single-family homes, right? Which is a one-family dwelling, most people are aware of them. There’s one door and one unit. Multi-family homes are anywhere from two to four units within the same structure. So it’s kind of like a tiny apartment building. And the advantage of these multi-family homes over an apartment over a single-family home is that the bank when you’re getting a loan on a multi-family property, they don’t look at it as a commercial loan. It’s still considered a residential loan, so there’s a number of advantages in terms of lending and in terms of tax implications and so on to having a multi-family property, that two to four units.
Tim Ulbrich: I love it. And we’ll link to your article in the show notes as well if listeners want to learn more about that concept. There’s also lots of resources out there that talk about house hacking. The other variable I would add here, Nate, when you think about kind of this question of what’s a break-even in terms of how much time I have to be here, obviously would have to include how much equity you have in the home and how much down payment you had or didn’t put down in the home, right?
Nate Hedrick: Yeah, exactly.
Tim Ulbrich: So this could either be equity you build into your down payment, it could be equity that happens because of appreciation, but you know, if you put 20% down, and you move in three years and the market has only appreciated a little bit, you’re probably not going to have forced much equity through payments just because of how those payments are structured, as you mentioned earlier on the show. However, if you have to pick up and move, even unexpected, and you’re then going to incur realtor fees with selling, closing costs, all those things, you at least have some equity that can help cover the expenses of that. And while it may not necessarily be break-even at that point, you’re at least able to weather that storm and kind of work through that. So I think how much down payment you have, how much it has appreciated, what actually are the closing costs that are involved, all those types of things will determine this number of how long you have to be in a home before you get to a break-even place. And of course, with a greater down payment, you’re kind of working yourself down that amortization table where you’re making payments that more is going toward principal and less is going toward interest, which is always a good thing. So Nate, let’s just shift gears real quick to wrap up and talk about we’ve kind of established that is a primary residence an asset? It depends when you consider the costs, probably maybe not so much for many people. But I don’t think we’re saying there’s no value in home ownership, right? I mean, from your perspective, just thinking about for you and Kristen, like beyond the number, what is the value for you guys in terms of owning your own home and having your own place?
Nate Hedrick: Yeah, I think it’s easy to get into the financial weeds and just say, yeah, well, home’s not an asset, so maybe it’s not worth it anymore. But no, the reality is that there are so many emotional aspects to owning a home that are very difficult to replace and are hard to put a value on. Just having a safe, secure place that I can go back to with my family and I can put time and money into this place, I get the benefits out of that. There’s a lot to be said for that. And again, it’s something that I don’t think you can put a true value on. So it’s not something you can calculate, not something that you can Google and pull up in a table or an Excel spreadsheet, which all my data nerds are cursing, but it is an important factor to keep in mind.
Tim Ulbrich: Yeah, I think you have to weave into this the value of your own place and making it your own and being part of a community and all that comes with those aspects and factor that in. You know, we talk about with student loans that you’ve got to run the numbers, and you have to add the emotions on top of it, right? How do you feel about the debt? And this is the same thing. I think when we’re talking about home buying, you’ve got to run the numbers, but you have to also consider some of these other variables as well. So as we wrap up here — and again, you’re going to be hearing from Nate a lot more in the future — we already talked about the concierge service. If you’re looking to buy or sell a home, make sure you check that out, YourFinancialPharmacist.com, top of the page, ‘Buy or Sell a Home’ will get you more information on that. Also would recommend you check out — if you haven’t already — we have a first-time home buying Quick Start Guide, which Nate helped develop that for somebody’s who’s looking at home buying for the first time is really a great place to get started, to get more information as you’re continuing to evaluate what the next step will be for you in that process. You can download that guide for free at YourFinancialPharmacist.com/homeguide. That’s all one word. Again, YourFinancialPharmacist.com/homeguide. So Nate, as always, thank you for taking time to come on this week’s episode of the Your Financial Pharmacist podcast.
Nate Hedrick: Yeah, thanks for having me.
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