When Do We Buy Our Dream Home?

One of the things I really enjoy is working with people who have never owned a home before.

I believe owning a home can be one of the most important parts of building the kind of life you actually want. Especially as an artist or creative, where your income may not follow a traditional career path, I think it’s critically important that you eventually start investing in your own future and retirement.

Because here’s something worth thinking about:

Every time you pay rent, you’re helping invest in your landlord’s retirement.

That’s not necessarily a bad thing. Renting makes sense for a lot of people at different stages of life. But if owning a home is something you want, the sooner you can get yourself into a position to buy one, the sooner you can start building equity in something that’s actually yours.

And when someone finally gets to that point — they’ve saved some money, gotten their credit in shape, figured out their income documentation and jumped through all the hoops required to get a mortgage — they start looking.

And of course, they want to buy their dream home.

I mean, if you’re going to drop $250,000 or $300,000 on something, you want to like the place.

But here’s the problem.

Your first home probably isn’t going to be your dream home.

And I think that’s okay.

The First House Just Has To Get You In The Door

Let’s say you can afford a $250,000 house.

At 5% down, you’re putting $12,500 into the house and borrowing $237,500. At 7% on a 30-year mortgage, your principal and interest payment would be around $1,580 a month, before taxes, insurance and everything else.

Now imagine you find a perfectly serviceable two-bedroom house.

It’s not beautiful.

Maybe the kitchen needs work. Maybe it’s on a busier road than you’d like. Maybe it has a great yard but an ugly bathroom. Maybe it’s missing several of the things you’d put on your dream-home checklist.

But it’s workable.

And it’s yours.

If you held that house for ten years and, purely for illustration, it appreciated at 4.5% a year, that $250,000 house would be worth around $389,000.

Meanwhile, you’d have paid down roughly $51,000 of the original mortgage.

That doesn’t mean you’d walk away from a sale with $190,000 in your pocket. There are selling costs, maintenance, taxes, insurance and all the other expenses of owning a house.

But you’ve spent ten years building something.

And here’s where it gets really interesting.

Suppose it’s a two-bedroom house and you rent the spare room to a friend for $1,000 a month.

That’s potentially $12,000 a year helping with the cost of owning the house.

I’m not saying everybody should live with roommates. I’m saying that sometimes you can make temporary decisions that dramatically change your long-term financial position.

You don’t have to live that way forever.

You just have to decide how badly you want the next step.

The House After That

Ten years later, maybe you sell that first house and have a substantial amount of equity to put toward the next one.

Now you’re looking at a $350,000 house instead of a $250,000 house.

Maybe you’ve got $80,000 to put down.

Maybe this one has three bedrooms.

And maybe, for a few more years, you rent out the other two bedrooms.

Two roommates at $1,000 a month is $2,000 coming into the household.

Again, this isn’t free money. Houses cost money. Things break. People move out. Markets go down as well as up.

But you’re no longer standing at the bottom of the mountain wondering how you’re ever going to afford the view.

You’re climbing.

And eventually, you might do it again.

Your Dream Home Might Be House Number Four

This is something I think a lot of people get wrong.

They think the choice is either buy your dream home now or don’t buy a home at all.

But for most of us, it doesn’t work that way.

Your first house gets you started.

Your second house is better.

Your third house is better still.

And somewhere along the way, your income has increased, your equity has grown, you’ve learned more about real estate, and you’ve accumulated enough capital that the house you once thought was completely out of reach suddenly isn’t.

That’s when you buy the dream home.

Maybe you’re 45.

Maybe you’re 50.

Maybe you’re 60.

There isn’t a magic age.

And I’m certainly not saying this is guaranteed. Real estate markets go down. Houses need expensive repairs. Interest rates change. People lose jobs. Life happens.

But I think there’s something powerful about understanding that you don’t necessarily have to buy the house you want to live in for the rest of your life the first time you buy a house.

You can buy the house that helps you get there.

That’s a very different way of looking at it.

Grow Slow

I’ve spent a lot of my life around artists and creatives who are waiting for the big thing to happen — the huge gig, the big break, the windfall, whatever it is that they believe is finally going to make everything easier. Maybe it happens. I’ve had some pretty incredible breaks in my own life, so I can’t exactly argue that they don’t exist. But I wouldn’t build my life around waiting for one. I’d much rather build something slowly and deliberately: a little more equity, a little better credit, a little more income, a little more freedom, a little more ownership. That’s really what I mean when I talk about the art’trepreneur life. You don’t have to hit the jackpot. You just have to keep making decisions that put you in a slightly better position than you were in yesterday. Given enough time, those little improvements can turn into a completely different life.

You don’t have to have everything figured out today.

You just need to make the next move that puts you in a better position to make the move after that.

So maybe the question isn’t:

“When can I afford my dream home?”

Maybe it’s:

“What’s the house I can afford today that can help me get to my dream home someday?”

Because for a lot of us, the dream home isn’t house number one.

It’s house number four, five, six or seven.

And that’s okay.

You don’t have to start at the finish line.

You just have to start… Oh, and full transparency, for me, it was home number Six… The first five houses were like rungs on the ladder, each one helping me climb to the place I ultimately wanted to be…