3 Things Too Many People Get Wrong About Homeownership

Buying a home is a major goal for a lot of people. And it's easy to see why.

When you own a home, you get an opportunity to build equity in that property. And unlike the money you pay as a renter, as you pay off your mortgage loan, you get closer to owning a potentially valuable asset outright.

But there are a lot of misconceptions about homeownership that may be driving some people to purchase a home when that's not the right move for them. Here are a few things people tend to get wrong about owning a home.

1. It's a more financially sound choice than renting

You'll often hear that renting a home is akin to throwing money away because you're not getting anything out of it in return. In reality, there's nothing wrong with spending money on rent because it satisfies a need -- putting a roof over your head.

When you buy food and consume it, you're not getting any financial value out of it. But you're doing something important -- keeping yourself nourished.

To put it another way, there are some costs in life that are pure expenses and not investments. And it's okay if housing is one of them.

Besides, by renting a home, you're off the hook as far as things like maintenance and repairs go. That could result in a world of savings and free up cash you can use for other purposes, like buying stocks and growing wealth that way.

2. It's a great investment

If you're going to buy a home, don't think of it as an investment. Think of it as an expense.

You might end up making money on the sale of your home if your property appreciates in value, you sell at the right time, and you don't end up having to sink a ton of cash into that home along the way. But you're by no means guaranteed to turn a profit when the time comes to sell your home. And it's important to understand that before buying a place of your own.

What's more, just because you're able to sell your home at a price that's higher than what you paid for it does not mean you're ending up with a profit. Let's say you bought your home for $300,000 and are able to sell it for $500,000 after 20 years. But what if, between property taxes, maintenance, and repairs, you spent $250,000 on homeownership costs over those 20 years? When you add up all of the numbers, you're not looking at a profit at all.

3. It gives you the option to make your own rules

Some people like the idea of owning a home rather than renting one because doing so means not having to follow a landlord's rules. But if you buy a home that's part of a homeowners association, or HOA, you may be disappointed to learn that you don't, in fact, get to call all of the shots.

Some HOAs can be extremely restrictive, dictating what color your shutters must be and what type of shrubs you're allowed to have in your front yard. And it's not unheard of for HOAs to ban certain dog breeds, or to prohibit property owners from running a business from home.

Now you might think, "Well fine, I'll just avoid a home in an HOA." But that may not be so easy. More than 53% of owner-occupied households in America are part of an HOA. And more than 82% of newly built homes in 2021 were part of an HOA community.

This isn't to say that it's impossible to find a home that doesn't force you to join an HOA. But it's getting increasingly difficult.

Homeownership can be a rewarding experience. But don't fall victim to the above misconceptions if it's something you're interested in. Instead, understand that you may not make money on your home and you may not get to set your own rules as expected. And if you decide that renting makes more sense for you, know that there's absolutely nothing wrong with that.