Home is where the heart is. When did we lose sight of this and replace the heart with subzero refrigerators and walk-in closets? Where and how you live is one of the largest decisions you will make, so don’t get persuaded by what you think you are supposed to want and remember Antoine de Saint-Exupery’s belief — “It is only with the heart that one can see rightly; what is essential is invisible to the eye.” This is what to consider when contemplating moving.
Choose where over what. People are notoriously bad at predicting what they will want in the future. Where you live is always going to be more important than home features, such as size or amenities. A long commute is far more painful than some additional square feet is pleasurable. Being surrounded by the right community brings more lasting enjoyment than the surround sound system. If you made a bad decision about where you are living, then develop a plan to right it. Don’t be stuck by rigid rules of how long you have to live somewhere, even if it means renting for a bit rather than owning.
Renovate or relocate? If you love where you live but are feeling like there are certain things that you can’t do without, consider remodeling. The direct costs of moving are always more than you expect (sales, closing, furniture) and the social costs (friends, schools,) are not knowable. If you don’t love where you live, then don’t renovate. Remember, features don’t eclipse feelings.
Rent or own? Ownership gives you tax advantages, at times equity benefits (through appreciation and principal pay-down) and a capital gains exclusion on sale. A home ties you down — which can be good or bad. You have ongoing and unpredictable costs. But many apartments provide conveniences that you can’t get through ownership, and in places where you may not be able to buy. No matter what anyone tells you, it is not clear that homeownership provides significant financial advantages unless you are in a rapidly appreciating housing market and want to stay in the home for several years. The great myth for most people is that they will sell their home when they retire and buy down. We only see that occurring when a client moves to a far less expensive city. If you factor in a reasonable rate of return on the money that is embedded in your house, you may be surprised at how close the numbers between owning and renting are.
Make your home decision guided by your heart, not your head.
Spend your life wisely.
Ross Levin is the founding principal of Accredited Investors Wealth Management in Edina.