This Homeownership Advice Makes Me Want to Scream

An estimated 64% of Americans own homes rather than rent them. And there are plenty of benefits to owning a home. For one thing, you can build equity in an asset that gains value over time. And you may be able to deduct the interest you pay on your mortgage for added tax savings.

But buying a home is a process. You need to save up a down payment, apply with different mortgage lenders, and go through the process of having your finances examined.

Owning a home is an even more complicated process. You need to not only pay your mortgage, but cover a host of other expenses and do the work needed to keep your home standing.

That's why if you're going to buy a home, it should be because you really want to. And if you follow misguided advice, you might end up regretting your decision to buy in a very big way.

"Buy a home because it's a good investment"

As a personal finance writer and homeowner myself, I read a lot about property ownership. And I can't tell you how many times I've seen advice along the lines of "buy a home because it's a good investment."

That advice, frankly, makes me want to put my fist through my computer screen (or perhaps something a bit less destructive, but you get the gist). See, I know full well that it takes a lot of work and a lot of money to own a home.

Just last week, I had to dip into my savings account to the tune of about $12,000 to replace my home's two heating system units. And while I knew they were aging, I was not expecting to have to spend that money this year.

Of course, there are some aspects of home maintenance I can't just throw money at. When it snows, I have about 24 hours to clear the sidewalk in front of my house per my town's rules. Good luck trying to get a last-minute snow removal service in during a major storm.

In fact, owning a home often means dropping what you're doing to tackle some sort of issue. It's not for the faint of heart.

That's why my advice to people considering homeownership is to buy if you have a desire to own a home and are willing to do the work. But if you don't mind renting or prefer it, then rent. There are plenty of other ways you can invest your money that don't require you to shovel snow.

Stocks could make for a much better investment

During the first quarter of 1993, the median home sale price was $125,000. During the first quarter of 2002, it was $429,000. So someone who bought a median-priced home in 1993 and then sold it 30 years later may have gained $304,000. That's a nice amount of money.

But let's back up a second. It's pretty much impossible to have spent 30 years in a home without spending money on expenses like insurance, property taxes, maintenance, and repairs. So if we factor in $10,000 a year for those things, we're left with a final gain of…$4,000. Hmm.

Now let's look at the stock market. And let's say that instead of putting a 20% down payment on a $125,000 home in 1993, you'd invested that cash ($25,000) in the S&P 500.

Without accounting for reinvested dividends during that time, based on the index's performance over those 30 years, you would've grown your money to $227,500. When we factor in reinvested dividends, that number rises to about $402,000.

Your gain during this period hinges on the scenario you choose. If you take the lower number -- $227,500 -- you're looking at a gain of a little more than $200,000 when you subtract your initial $25,000 investment. With the higher number, you're looking at $377,000. Either way, it's way more than $4,000.

Oh, and if you're convinced that my $10,000 estimate for annual upkeep, taxes, and so forth is too high, then go ahead and cut it in half. Even so, you're still looking at a gain of $154,000 instead of $200,000 and change or more. Also, these gains don't account for actual work.

It doesn't take a ton of work to hold stocks in your portfolio. It takes a lot more effort to physically maintain a home.

This isn't to say that homeownership is a bad thing. It can be a very positive experience, and it can also be lucrative. But don't buy a home because the internet tells you it's a good investment. That, frankly, is a bad idea.