Think Your Home Is Your Greatest Investment? Here's Why You're Wrong

You shouldn't be in it just to make money.

You’ll often hear that it pays to own a home rather than rent one. The reason? There are financial benefits available to homeowners that renters aren’t privy to.

As a homeowner, you can claim a tax deduction for the interest you pay on your mortgage. You can also deduct your property taxes (though there are limits on state and local tax deductions, which property taxes fall under).

Plus, when you own a home, your property might gain a lot of value over time. And if it does, and you decide to sell it, you could walk away with a nice profit. In fact, you’ll often hear that your home is your greatest investment. But here’s why you shouldn’t buy into that line of thinking.

It's a roof over your head more so than anything else

You might make money on the sale of your home eventually, but your home’s main purpose isn’t to make you money. Rather, it’s to provide you with a place to live. And if you take too much of an investment-minded approach to buying a home, you might end up buying a home you regret.

Let’s say you really want a home in a certain neighborhood, but you choose a different neighborhood because you think it will lend to better resale value down the line. You might make more money when you sell your home, but will you have given up years in your preferred neighborhood? Yes. And that’s a sacrifice that may not be worth making.

Similarly, you may be motivated to improve your home so it ends up with a higher resale value. But you could end up spending money on things that don’t really enhance your quality of life, like high-end countertops you don't care about having. Is that really worth it?

Keep your investments separate

The stocks in your brokerage account are an investment. But you shouldn’t look at your home the same way.

The point of buying stocks is to make money. But the point of buying a home is to have a place to live. It’s important to make that distinction.

Here’s another way to think about it: In the course of owning your home, you might have to spend many thousands of dollars on repairs. But when’s the last time you had to spend $5,000 to keep owning a stock that was already in your portfolio?

Investing your money for financial gain is not a bad thing to do. Quite the contrary -- you should absolutely do what you can to put your money to work.

But when it comes to buying a home, it's really best not to focus on the investment angle. Instead, focus on the things you want in a home and neighborhood, and put your own comfort and happiness ahead of the idea of financial gain.

You can buy assets for the express purpose of making money. Your home should be your haven, and you shouldn't worry about what it will be worth in 10, 20, or 30 years from now.