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♪ Got to sort of tell 'em ♪ Two destinations, one loyalty card. Visit yamava.com/palms to discover more. - Today on Radical Personal Finance, we're gonna talk about nine myths and nine facts surrounding the purchase and ownership of your own home. I'm in the process still of processing the experiences of the last three years, learning all the lessons that I can learn, and today I'm gonna share with you some of those lessons that I learned personally.

And what's interesting is many of these myths are pieces of advice that I used to give. If you were talking to me three or four years ago, many of these things I would have said were good ways to consider, good ways to think about the process of owning real estate, and today I would say differently.

(upbeat music) (upbeat music) - Welcome to the Radical Personal Finance podcast. My name is Joshua Sheets and I'm your host. Thank you for being with me today. Every time we go through an experience in life, whether it's a positive experience, a negative experience, we should seek to learn from that experience.

Well, I've been taking notes on the things I've learned, and today you get to learn from my experience. Some of these you'll expect. Some of them might surprise you a little bit. (upbeat music) There are a few topics of advice where emotions go so deep and advice is so prominent, a few areas in which advice is so prominent other than the ownership of your own personal house.

Many people have strongly held beliefs, opinions, convictions on this subject, and I'm one of them. But it's interesting sometimes to note the times that those convictions change. I know for me, that's a useful thing to pay attention to. When your convictions change, there should be a reason behind it, and it's always good to process that information.

And again, each of these things today, if we were talking a few years ago, I would give you about half of them, and I'll point out which ones I would have used to have told you were good pieces of advice, and today I disagree. The other ones are just things that, lessons I was aware of before that really made a big difference.

I have a total of nine of them, and I hope you find the content and the ideas instructive and helpful to you in your situation. No one right answer, I think, that everyone should be trying to find. Rather, I just suggest you consider your circumstances. My intent in today's show is not to give you advice, on your specific situation, or to give even generalized advice, but to encourage you to consider all aspects of the decisions that you face, in your specific situations.

The key of financial planning, the key of being able to make a good decision on renting a house or owning a house, is all based upon your situation. So as I share with you some of these myths, and what I would call the facts that bust those myths, consider that there's always a counter argument.

You might have some unique skill, you might have some unique situation. You might run the actual numbers in your situation, based upon a scenario, and you might find that, well, there's a compelling financial reason why this is a better move. Always run that. And today I'm just going to challenge some of the commonly held beliefs.

Before I do that, let me talk about sponsors today. Sponsor of the day number one is Jay Fleischman. Jay is an awesome guy. He's been a guest twice on the show, episodes 214 and episode 258. Jay is a student loan and bankruptcy attorney. That's his primary area of practice.

So first off, if you find yourself in a contentious situation with student loans, consider reaching out to Jay on that. He may be able to at least point you in the right direction. He may be able to help you personally. He's admitted to practice law in that area in New York and California, but he teaches student loan attorneys around the country, and so he may be able to refer you professionally.

But more importantly, if you have student loans, Jay has additionally built a consulting business where given his background and depth of expertise, he consults with borrowers who are in a situation where they're trying to figure out what's the smart thing to do. And prior to speaking with Jay, I think I had an overly simplistic idea of what you should do with student loans.

Now after two episodes with him, and again, go back and listen to those episodes and you'll see what I mean, I realize there are a lot more options, and Jay is my go-to guy that I am sending everybody that I know who has student loans to. And I mean everybody.

In my personal life, if I come across somebody, just a friend or a family member or someone like that who's asking me advice, if they have student loans, my first advice is call Jay. And I recommend that to all of you, my friends in the listening audience. Call Jay.

The best thing to do is go to studentloanshow.com/radical, studentloanshow.com/radical. That is a special landing page that Jay has set up. It'll go over some of his options and ideas. He has a $25 off package for a $50 email consultation on your federal student loan options. So go to studentloanshow.com/radical.

And while you're there, make sure to subscribe to Jay's podcast, The Student Loan Show. Next sponsor today is Patrick Snow. Patrick is a really great guy. He is my publishing coach. We have been working together on the writing and publishing of my book, which I don't have a date for it yet, but I am working hard to get it done.

We're still making good progress on the draft. Patrick is a really great guy because he knows the publishing business. He is a published, best-selling author. He also helps people publish their works themselves. So he can give you a good advice as far as negotiating the world of publishing. He's an excellent resource there.

He's got all of the resources lined up, all of the vendors, all of the products, everything lined up to make the publishing process smooth and simple. And also, he's an expert in the areas of using the book and leveraging it to advance your career. That's what I'm doing with the publishing of my book.

I'm going to be writing it, and I'm using it to leverage my speaking career, my consulting career, and the work here on radical personal finance. So it's an integrated package. And Patrick is an expert at that. If you're interested in more information, go to thepublishingdoctor.com, and you can see more information about Patrick and his experience, thepublishingdoctor.com, or listen to episode 252 of the show, which is an interview with Patrick, and you'll get an introduction to him.

If you would like a consultation on your publishing project, reach out to Patrick. Best way to get in touch with him, send him a text message at 206-310-1200. He would be happy to offer you a complimentary 30- to 60-minute consultation on your publishing project, and he can point you in the right direction.

That's it for sponsors. One final announcement. I have launched a new podcast, and just a special point of a favor to ask of you. My new podcast is entitled Encouraging Christian Fathers, some of the content that I don't put here on radical personal finance, but I've looked for a podcast specific to encouraging Christian fathers, and I couldn't find one, so I decided to create one.

It's actually a project I do with my dad, who is a 73-year-old father of seven adult children, and we do it together. It's basically me following my own advice of creating the stuff that I wish existed. If you'd like to help me, the show has just launched, and I'd love to get the show featured in the iTunes world in the Know and Noteworthy section.

Obviously, if you're interested in the topic, you can tell from the title what it's about, I'd love for you to listen. Even if you're not interested in the topic, could you do me a favor? If you have an iPhone or an iPad or any kind of iOS device, or if you have iTunes on your computer, would you consider searching the iTunes store for encouraging Christian fathers and subscribing to the show?

That would be so helpful to me. The way the algorithms work in iTunes is they're based on the number of subscribers, and so if any of you would just like to do a personal favor for me, and it's a little bit gaming the system, but I think it's an okay way to do it.

I'm not paying you for your subscription, just saying if you want to do me a personal favor, consider subscribing to the podcast. You'll find it in the iTunes store. Just search encouraging Christian fathers, and that would mean a lot to me. Thank you very, very much, and that'll help other people who are interested in the show topic to be able to find the content.

Let's talk about myths here, and I want to lead with one that I think is definitely one, even though I knew intellectually it probably wasn't true, now I know emotionally that it simply is not true, and the myth is this. When you own your own home, it's awesome because you can do whatever you want with the property.

This idea is pervasive in our culture, and a lot of us have dreams of being able to do what we want, being able to finally craft the property to be the way that we want it to be. I know this was very important, most especially to my wife when we were shopping for a house because she had spent years as a renter moving from one place to another every couple of years, and so the ability to have a house that she could set up how she wanted it and expect to stay there was a big deal, was a big deal to her.

But the fact, at least from my perspective, the fact is this, the concept of property rights are at least in the United States of America pretty much an absolute myth at this point. There's almost no reasonable expectation of being able to do what you want with the property, at least for the vast majority of us, especially those of us who choose to live in an urban neighborhood.

And let me tell a couple stories to illustrate this. One of the dreams that I had with purchasing a house was to be able to set up my version of an urban homestead. I wanted a property that was close, that was convenient, that was inside the city, but I wanted to be able to build that property the way that I wanted it to be to provide for the needs of my family.

I have this idea that a house is best served, a house should be a homestead. It should provide for you and for the needs of your family, and it should be an asset that provides for you instead of a liability that sucks money out of your budget. Most of us, our houses just simply suck money out of our budget, and we spend a lot of money to own it, we spend a lot of money to cool it, to heat it while we're not there, we work to service it, to service the debt on it, and it just provides shelter for us, but beyond that, it doesn't do much.

Well, I think a little bit of intelligent design can transform that. A house can serve as the base of a home-based business. So running a business out of your house or working from your house, a house can serve as shelter for your family, but it can also provide entertainment.

It can also provide a place of income. There are many, many ways that you could transform a house to provide income for you. You can build the house to be very efficient so that it provides for your heating needs, your cooling needs, with a little bit of good design instead of the crap that is mass-built today.

You can really do some cool things, and there's people all around the world who are doing this and advancing the technologies. So that was a dream of mine. When we originally purchased the property, the property that we bought is just under half an acre, and in my mind, that was a perfect amount of land.

I could intensively manage some of it, and there was enough room to stretch out and have plenty of space for some of the long-term projects that I had. One of the unique things that we were looking for in purchasing a house was the maximum amount of freedom possible. So on yesterday's show, I mentioned that one of our requirements is we refused to buy a house that was governed by a homeowners association.

That was just simply an absolute deal-breaker for us. I don't want another layer of government in my life. I've got enough to deal with, so we just simply flat-out said we're not going to even consider any property with a homeowners association on it. That was a big deal to us.

Well, secondarily, I was looking at the different city jurisdictions, and here where I live, we have the county, Palm Beach County, and then there are various cities. Now, unlike some of you who live in the central part of the United States where the city actually means something, you go from the city through the country, then you get to the next city, here in South Florida, it's just one constant strip.

Unless you are local, you would have no idea where the city limits are. But the city that my office is in is actually a city called Palm Beach Gardens, and that city is very nice. It's very kind of hoity-toity, very posh. It's mostly golf developments and a very fancy city.

Well, when we were considering buying the house, I went through and I was reading the zoning regulations and the municipal codes for the city of Palm Beach Gardens, and I came across a number of things that I didn't particularly want. Specifically, the city of Palm Beach Gardens barred the ownership of chickens.

Now, if you're into urban farming, urban homesteading, this chicken issue is a joke across the country. Many, many large municipalities ban chickens. There are historical reasons for it, but it's totally and utterly absurd. Many of the major cities now are finally changing it because the majority of chickens that are found in an urban environment are way less of a nuisance than your neighbor's border collie.

But I wanted to have some chickens on the property, and so I didn't want to buy a house in the city of Palm Beach Gardens. Well, we found this little finger of unincorporated Palm Beach County that reaches into the city, but it's not in the city jurisdiction. So I read through the Palm Beach County rules and regulations.

I actually literally looked through the PDF, as memory serves, about 1,200 pages of the Unified Land Development Code here in Palm Beach County, and I looked through it, and to the best that I could figure out, there was no prohibition on chickens in unincorporated Palm Beach County. So that was a huge benefit for us.

We moved forward with the purchase. We bought the house. I cleared some of the trees that were kind of junky so I could do some more things with the land. And then I think a year, sometime after being there, a few months later, I got five little hens. My brother had these hens, and he was getting rid of them, so I went ahead and got the five little hens and brought them in on my property.

I got these five little hens. I kept them in a little chicken tractor, which for the uninitiated is basically just a little cage that you move around the yard, about three feet by six feet long, something like that, four feet by eight, I don't remember. And just quiet little hens.

They don't make any noise. They don't crow. And I just moved them around my backyard to a fresh set of pasture every day and enjoyed their eggs, and it was awesome. Beautiful eggs, nothing better than going in your own backyard and getting your chicken's eggs out, and it's just a night and day difference versus the eggs that most of us buy in the grocery store.

Well, one day, my wife gets a knock on the front door. I'm away at work, and she gets a knock on the front door. I don't believe she answered it, or the details escaped me, but we come home to a hanger on the floor. It began as a hanger on the door, and then later it was a knock on the door, and she had a knock from the code enforcement.

And the code enforcement hung a little flyer, "Chickens are not permitted in Palm Beach County." Well, all right, that was frustrating enough, and I'll finish that story in a moment. But what was even more frustrating was a couple days later, a letter arrived in the mail, and the letter indicated four infractions that I had committed against the zoning codes.

Number one, I had chickens. Number two, one of my hedges was too high. Number three, I had a pile of brush in the backyard. And number four, I had an unpermitted shed on the property. I began the process of finding out what was going on, and I asked them, "Well, how did you know, first of all?" And evidently, the code enforcement officials had received an anonymous tip from a neighbor of some sort who informed them that I had chickens.

Now, they said they didn't have a record of who it was. It was an anonymous tip called into the tip line. I had no idea who it was. My neighbors had all liked the chicken, liked the eggs that I shared with them. Later, I went and spoke to each of my neighbors.

None of them ever admitted that they had been the one who called it in. But that in and of itself is highly frustrating because personally, I consider the ability of the government to collect anonymous tips and then act on those tips without the right to face an accuser, I consider that to be immoral is a strong word.

I'll just say not right. I think it's – I personally think it's immoral. It goes against the spirit of the law, if nothing else, and biblical Mosaic law upon which a majority of our laws in the United States are based, all people who are accused always had the right to face their accuser.

That was a common feature in biblical Mosaic law. It was a common feature in Roman law, a common feature in English common law. It's enshrined in the US Constitution under the Sixth Amendment and then also the 14th Amendment. But there, it's limited to criminal accusations, not just civil cases or other proceedings in the constitutional protections.

But I don't particularly like that. It seems to me that not only is it a bit on the unethical side, it's just on the unneighborly side. It's always better just to work out disputes and if any of my neighbors had come to me and talked to me, obviously we would have worked out and tried to figure out what's the problem.

But it doesn't really matter whether I like the law or not. It's common practice. The majority of municipalities do it and now I'm very well educated on that process. And so it doesn't really matter whether I like it or not. It's the law of the land. So I began the process of working through the scenarios with the code enforcement officials.

Now, the hedges, I contested all four of the points. The hedges and the brush – well, except for the brush pile. I cleared the brush pile and it was just a small pile I had sitting in the backyard. But the hedges I contested and was able to get them to deal with that.

Then also the chickens, I simply asked for where is the code. The letter had specified specific sections of the code. I spent a great deal of time on the Palm Beach County website searching for the code and I could never find the code. I emailed repeatedly with the code enforcement official.

Finally, what happened was I wound up in his office and he had to print out two different sections of the code from the documents that I had reviewed, the 1,200-page documents that I previously looked through to cross-reference the map that demonstrated that I was not in an urban agriculture – excuse me, an urban – no, rural tier or whatever it was that the map laid it out.

So I – obviously I was wrong even though I wasn't aware of the law. I had searched for it and that was really frustrating because I had thought about it carefully. I had done my homework. I thought I was well-served. But I went ahead and relented on the chickens.

The biggest issue, however, was the shed. So the code enforcement official went back through and from the aerial photographs, they only had aerial photographs dating back to – well, they had one in 1973 and one in 1981. The shed appeared on the property sometime between 1973 and 1981. And they had no record of a permit being issued.

Now, of course, I purchased the property and one of the benefits of the property was this very large, very nice shed. That substantially added to the value of the property and I paid extra because of that. But the shed was unpermitted. And the challenge is that in order to get the shed permitted, I had to go through the permitting process.

I had to submit architectural drawings of the shed demonstrating that it meets all current code standards. I had to request building permits. I had to pay fees because – double the cost throughout because the building permits were being issued years after the fact. And it was my responsibility to bring the shed up to and have the shed permitted.

If I chose not to have the shed permitted, inspected, approved, brought current, all of those things, then the county government would progressively fine me and they would place a lien on the property up to a maximum of $1,000 a day after a period of time and increasing fines. My other option was to tear the shed down.

Perhaps you could guess that was a pretty frustrating day because the shed was very well built. It was maybe 15 by 25 feet, well strapped with hurricane straps and things like that, but is nowhere near in compliance with current building codes here in south Florida. Following the Hurricane Andrew over a decade ago, the Miami-Dade building codes under which Palm Beach County operates is – they're tremendous.

And it was $500 to have an engineer draw up architectural drawings, going ahead and reinforcing the – everything in the shed. It was just – it would have been thousands of dollars. Well, I actually did start the process because it was a very nice shed. I didn't want to take it down.

I started the process of the approval process only to find out that as part of the permitting process, I submitted the land survey to find out that the shed was six inches within the setback on the side of the property line and the mean height of the shed was 13 inches too high, which meant that in addition to the inspection, the permitting process, etc., I would have to request a code variance based upon the fact that the shed – one corner of the shed because the shed was actually built on a diagonal.

Instead of being parallel with the property line, it was slightly askew and about half – from the midpoint of the wall to the corner of the shed, that portion of it was slightly over the 7.5-foot property line setback and the corner was a total of six inches over the setback.

Because of that, I would have to face the variance process and apply for a variance, pay the fees for that, mail letters to all of my neighbors, give them appropriate time to comment, etc., etc., etc. Now, ultimately, this was a very frustrating scenario and ultimately to cut the story there without going into some of the additional details, I ultimately decided just to tear the shed down.

I actually sold it on Craigslist for a few hundred bucks and the person I sold it to came and dismantled it and hauled it away. So that worked out fine and I didn't have to do the work and I at least got a few hundred bucks out of the deal, which went partially towards paying for the permitting fees and the things that I had begun pursuing.

At no time, the county government, the code enforcement official was very professional. He did a fine job. I have no complaints about his professionalism. But the system in and of itself was extremely frustrating and the idea that here I had worked very hard to save this money, to build this house.

I had bought the house. I had negotiated. I had paid the contract for it. I had followed the rules. I had done the title searches. I had done the survey. I had followed all the rules, checked all the boxes, and here I am finding out that if I don't bring this structure that's existed for 30-plus years into conformity with current code, I'm going to be faced with $1,000 a day fine and a lien on my property, thus removing any equity from the property.

That's really frustrating, and the law at least here in Palm Beach County, the rules are such that the property owner at the time of violation – at the time they find the violation is responsible. If you built your house two feet over the setback, then legally they can require you to remove the whole wall of the house and rebuild the whole thing.

Now, perhaps the more experienced real estate people in the audience know all that. Builders certainly know all that and real estate professionals certainly know all that. I didn't. I had learned the hard way. Now, it's frustrating because, again, I had paid extra money. That shed made a measurable impact in the value of the property, and ultimately it just vanished into thin air because I had to tear it down.

There was no other feasible option that made any financial sense. So not only do you not have really any rights – and I had talked to the county commission. I had looked at the laws and I was wrong. I didn't have any rights. I should have known the rules going in.

I didn't, and I was – the inspector and the code enforcement people simply enforced the rules that were in existence at the time. But I had no property rights. I had no right of I bought this. This is mine. I had given over by living within the county, not even within the city.

By living in the county, I had automatically deeded over and ceded over all of those rights. Worked it out. Dealt with it. Got the violation closed after working through it all. But it was a frustrating experience, and it's frustrating to know that some neighbor, who knows, was the one who caused that, and I never found out who it was.

I'm now an expert, by the way, on codes and code violations in Palm Beach County because I did go through every single page of that unified land development code, the 1,200-page scenario. So I can drive down any street and I can cite and spot all of the violations. In fact, I seriously considered using the anonymous tip line to get revenge on every house on the street because I can identify all of the infractions, but I chose not to.

I decided ultimately that wasn't an appropriate course of action. It's not mine to take revenge on people, but it was certainly tempting. Now, government is one thing, but what about other factors of it? Well, here you get into the bind that comes with home ownership when you don't own a property free and clear, and here was the other experience.

I had purchased the property, as I described yesterday, and when purchasing the property, it had a very old water heater. This water heater system was very good. It was excellent, but it had been around for a very long time. There were no indications of failure. It was certainly doing very well.

It was a well-built water heater, and it was no problem. It had the property insured for a while, and of course, the mortgage contract requires you to maintain property insurance up to an adequate level. So in order to meet the terms of that contract, I had to keep homeowner's insurance.

No problem at all. Fast forward a couple of years, and then all of a sudden, the homeowner's insurance company decides – well, one company decides to drop me because we've got a disaster of a market here in homeowner's insurance in the state of Florida. So one company drops all insurance here, and now I'm switching back to another company, and – forgive me.

I try to not major on the details, but I misspoke. The company that I had required me in order to renew the contract, they required me to replace the water heater. Now that's also very challenging. It's certainly – I understand when you're applying for the insurance process, and again, the insurance company was within the realms of – within the limits of the contract.

There was no breach of contract. Everything they were doing was within their contract. But in practical application, it's very frustrating to have an appliance that's actually well-built, that's actually been around for a while, and the major concern is that the water heaters rust and flood. Well, the place that the water heater was was very protected from water.

There would have been no lasting damage. It was tile and concrete. It would have simply slid right out the door, and it would have been no problem at all. But that wasn't according to the rules. Now, the requirement is to replace the water heater. Many people have faced these things.

Some people, it's the roof. I had a friend of mine who their insurance company is requiring them to replace the roof. How do you come up when you're being required? How do you come up with whatever – whether it's $1,000 for a water heater or $10,000 for a roof?

That's hard to plan for, hard to budget for, and yet you are obligated to do it. It's especially tough for us here in South Florida. We have a very thin property insurance marketplace, very few companies operating here. So you can't just try to pit companies against each other and you're at the mercy because you have a mortgage to satisfy that obligation.

Obviously, that one would go away if you owned the house free and clear. The zoning rules wouldn't. Those experiences hit me pretty deep because I still had these romantic notions of somehow, "Well, I own the property. I can do what I want." Nope. Maybe there's a place if I were to buy land in the middle of New Mexico or out in rural Texas somewhere where I could escape some of those zoning regulations.

But any kind of normal place of living, any kind of urban environment is going to have this. Now, I'm not saying these things don't have their place. They certainly lead to nice, pretty communities where your neighbors don't all have tall grass, which is what the majority of our society has decided that is important to them.

Well, it may or may not be important to me, but I don't have much of a choice. The idea of owning the property mattering, it doesn't matter. It really doesn't matter to much of a degree. And the other aspect that really helped me to see through this notion was something we've talked about on the show in past episodes that really as a homeowner, you are always concerned about maintaining the value of your home.

So you will never actually do anything that crazy. You never start a garage in your side yard and pour gallons and gallons of oil in the ground because then you destroy your property value and you have no ability to resell the property. So you can't do whatever you want.

You don't paint out your house black and put a pirate flag on the roof just for fun because you can because it destroys your property value. So you're always worried about maintaining your property value. So you can't do whatever you want with your own home. You really can't. I share that lesson with you in case you harbor any of those romantic illusions that I used to harbor that somehow America, land of the free, home of the brave, owning a piece of land is a man's dream.

It's a bunch of nonsense. It might still be an intelligent thing to do but recognize the framework that you are living in and get rid of that romantic nonsense about property ownership. It doesn't exist. Now, that's myth number one and I labored on that one because that one was probably the biggest one that I learned because I still did have some of that emotion going into the deal.

I no longer have that emotion. Myth number two is the idea that buying the cheapest house you can get and saving the money is always smarter. When I was shopping for the house, I was very concerned with the deal. I was looking to get the cheapest house I could.

My goal was get the cheapest house that would satisfy my needs, pay the minimum cost for the house, get the basics, and then improve it over time and get the lowest mortgage value. Again, as I mentioned yesterday, it was very important to us that we make the 20% down payment and so that limited my price range.

For me, it was all about lowest cost, maximum fastest payoff to be mortgage-free and get debt-free. So, I didn't consider buying a fancy house that somebody else had renovated. I got – I looked at the flipping model in real estate and I understood it intellectually. But frankly, I had a blind spot where I just said, "Why would anybody buy a flipped house?

Like why wouldn't everybody buy the cheap house and fix it up?" I looked when we were looking at houses. We looked at houses that needed substantial renovations and considered doing that. You would not have been able to convince me to look at a flipped house that somebody had bought for cheap, had fixed up because I didn't see the value at that time.

Well, the myth is that buying the cheaper house is smarter. The fact is you got to recognize your actual skills and your actual resources because sometimes it's simply a lot easier to budget for a higher mortgage payment than it is to budget for large amounts of money that you're going to need for lump sum improvements.

The simple example for me on the property that we own, it had a fence around it, but it was a chain link fence and I wanted to put up a privacy fence, especially after the chicken debacle. By the way, if you want to circumvent the chicken laws, here's how you do it.

Pigeons and quail. Read your regulations carefully, but what they will often do is they go through. Ducks are prohibited. That was one of my other brilliant ideas and I said, "Oh, well, I'll get ducks." Ducks are on the list too. Bummer. But pigeons and quail and rabbits, those are the ones that will allow you to circumvent the chicken laws in your town most likely.

At least here where I live, pigeons and quail were not specifically excluded on the list, so I could easily get pigeons and quail, use that to satisfy my meat and my egg production and supplement that with rabbits. Now, of course, there are some other rules that you've got to pay attention to as far as the numbers and things like that, but at least you can have some birds without having to deal with the chicken laws.

Back to the point of the improvements. I wanted to put a fence around the house. I'd never owned a house and I'd never priced privacy fences. A couple of the really surprising things about owning a house was, number one, how expensive just the simple things like a box of nails were.

When I was growing up, my dad always had boxes of nails in the shed and whenever I wanted nails, I just went and grabbed nails out of the box. Well, you go to Home Depot and it's 20 bucks for a box of nails. Of course, you only need about 30 of them, but still it's 20 bucks for a box of nails.

Now, you got this and you accumulate four or five boxes of nails. That was an eye-opening experience. But when I priced the cost of purchasing the wood to build a privacy fence, I was stunned, absolutely stunned. It was about 7,000 or 8,000 bucks and I looked for every little way that I could do it and I said, "Well, I'm always looking for the angle.

What's the cheap way?" It was still thousands of dollars. So obviously, I've got this avoidance of debt. I don't want to put the money on a credit card. I don't want to do a home improvement loan. I don't want to do a loan with the Home Depot because I don't want to go deeper in debt.

And so that means I got to save for the money and budget for it. Well, it's challenging because there are a lot of things coming at you, things like putting insulation in the attic, things like fixing up things that need to be fixed. And I realized that it was just simply really challenging to save and budget for those things.

And it would have been a lot easier to have bought a house that was perfect, so-called, that had all that stuff done because it's a lot easier to budget for a slightly higher mortgage payment when stretched over a 30-year period than it is to budget for lumps and pieces.

It's a lot easier to budget for lumps on improvements every year or every couple of years. Now, obviously, if your mortgage payment is a tiny percentage of your income and you've got loads and thousands of extra dollars coming in every month, then, well, it's no problem. You just save a few thousand bucks.

But what happened was I was in the middle of that business transition that I described yesterday and that was really tough. I could have made an extra $50 or $100 a month payment on the mortgage but I had all these projects I wanted to do and I had to prioritize other things over that.

It would have been a lot easier just to have the extra $100 a month that I owed on the mortgage payment. $10,000 of extra mortgage debt on a 30-year mortgage at 3.5% comes out to $45 a month. Now, of course, you can go a little bit crazy and you can add $100,000 extra.

But even if you did, sometimes – for me, it's a lot easier to figure out a way to earn an extra couple hundred dollars a month than it is to earn the money post-taxes and decide to spend thousands of dollars on the expenditure. I never got that before owning the house.

I get it now. I see the value that people find in buying a house that somebody else has fixed up. I didn't understand it before. I do understand it. So in your situation, consider it. Consider that sometimes buying the cheaper house may not be smarter and hopefully you can learn from my experience.

Be careful of course of going overboard and buying way more than you want or need. But if there are some things that you're going to want to make your lifestyle the way that you want it, it might be better just to go ahead and plop that onto a mortgage payment and budget for it than not.

And the reality is if you, like me, want to be debt-free, if you do, and especially if you want to be debt-free on a mortgage, well, go ahead and buy the house that you want and if you can save the $5,000, just pay the $5,000 down on the mortgage.

Consider my lesson. You could not have convinced me to do that three years ago. I was wrong. Next myth is number three, owning is cheaper than renting. And this one we've talked a lot about in past episodes, but I just want to demonstrate. It is very hard to get an accurate assessment of how much it actually costs to own a house.

When I finish the autopsy of this deal, I will tell you the numbers to the penny. I'm one of the few people that has the records where I can actually calculate exactly what it costs me to own a house. And I'll go through all of the little things. But owning a house is expensive, and it's expensive in ways you don't expect, that nobody talks about because what most people do is when they do a transaction the way that my transaction came out, what they'll tell you is they'll tell you, "Oh, we put $50,000 down.

We sold the house and we cleared $88,000-ish. So I made $38,000." But that's wrong because they forget about the $4,000 that I spent on roofing materials. And they forget about the $1,000 on a water heater. They forget about the $300 of code violations and paying for drawings and things for the shed they had to take down.

And they forget it, et cetera. You get the point. So all of those things happen. Well, and most people forget about them. Owning a house may indeed be cheaper than renting an apartment. But it's probably not if you take into account the value of your time. And if it is, it is certainly less predictable.

The fact is renting is much more predictable and much more stable because you only have one number to contend with. And although that number will change because your landlord will increase your rates, they'll probably do that once a year, and there's probably some time to plan for it. In owning a house, you'll have expenses that come all the time.

The other myth fact component of this one, that owning is cheaper than renting, is the fact that very little of your cost is actually going toward any value of ownership. So what I mean is this. My monthly mortgage payment, it fluctuated. It started about $1,250. Last year, it was about $1,230 a month.

Well, of that $1,230 a month, three years into the amortization schedule of the ownership of the property, only about $250 a month was actually going toward principal reduction. The balance of the payment, about just under $1,000 a month, was going to interest, taxes, and insurance, all straightforward costs, no ownership included in them.

Now, obviously, those of you who are familiar with the way that amortization schedules work, obviously, over time, that would change. But it really wouldn't change all that much because my tax bill was $2,830 a year. My insurance bill was $1,824 a year, and that one was minimal. I'd strip the policy as low as I was comfortable with to take as much of the financial risk as I was comfortable with.

Knowing my construction skills and knowing where I live, I'm super comfortable with – I took maximum hurricane deductibles that I could. I'm comfortable with the risks of hurricanes and the – I'm willing to take the loss to fix those things. I didn't need to have the insurance as high as possible.

But still, over $400 a month every single month was going to taxes and insurance. People forget about that, and especially if you don't understand how an amortization schedule works, don't buy a house. But look at these numbers straightforward when you're doing your analysis. $1,250 a month of mortgage payment and only $250 a month was going toward principal reduction.

So when I actually move over here from $1,250 a month of mortgage payment to $1,000 a month of rent, I'm far better off financially than I was previously because I've just simply traded one set of fixed costs for another set of fixed costs. Except now my fixed costs are much more predictable.

There are far fewer risks, which allows me to be much more aggressive with the growth of my business rather than always having to play it safe because of the unknown risks. Much more predictable, and I can redeploy the money into a more productive asset, which is a perfect connection to my myth number four that I want to cover now.

And the myth is this. You should put down as much as you can afford on the house. You should put down 10% or 20% or things like that. And as I have said many times now, I am now convinced that in the future, if or when I buy another house, I will either pay cash or I will finance as much as possible or as much as makes financial sense.

But I won't put down this middle ground number. This was one of my biggest lessons from the house. It hit me deeply. And if you listened to the story yesterday, you can understand why, why it's been such a major factor for me because I thought I was doing it right.

I thought, "Oh, I'm putting 20% down." And then I put 20% down, and my life was much more challenging for the next three years than it would have been if I had maintained my flexibility and maintained my cash. At the time, I felt very proud of myself because I'd see all my friends do an FHA loan of 3% down.

I just think, "Oh, my wife and I, we're so good." Pride always creeps in. "Oh, we've saved. We've planned. We have $50,000. We put this down on the property, and we've actually prepared for this home ownership purchase thing. We're actually ready." I wish I'd done a 3% FHA loan and paid the mortgage insurance.

Now, my wife still doesn't agree with me, but for me, this was a deep, deep lesson. Now, let me point out a little bit of the nuance here because you can't just say, "Well, I'm just going to put down the minimum down." That's not what I'm saying. Here's the mistake that many people make.

They put the minimum payment down on the house, and because of putting the minimum down payment, they stretch to buy as much house as the bank will let them qualify for. Well, that's a problem first and foremost because it means you're buying a lot of lifestyle before your investments are covering it.

And what most people do, the way most people spend their financial lives is they spend all of their life consuming, buying as much consumption as they can finance, buying the nicest, fanciest cars, the nicest, fanciest houses, and all of those things are lifestyle consumption expenses. And they put 5% or 6% or maybe 10% into the 401(k), which might help them get moderately wealthy over 40 years.

Well, I'm not into that plan. That doesn't work for me. I want to be really, really, really, really wealthy as quickly as possible. Now, if you want to just live the lifestyle, go for it, but I would rather be financially independent and very wealthy as quickly as possible. But I also recognize the need and the value of lifestyle now.

If you are simply facing – let's use my numbers. Let's say you're facing a decision like I was facing. If you have $50,000 saved and you go and you're looking at a $220,000 house, you say, "Well, I'm just going to put down 3%," and you go and spend the rest of the money, that will hurt you financially.

But if you put down 3% and you keep the balance of the money in reserve, I think that will give you greater safety than stretching to put down the 20%. Now, again, run the numbers. You have to actually run the cost and see what is the cost of the private mortgage insurance.

How do the numbers calculate? PMI – mortgage insurance has come down to the best of my understanding has come down substantially. Rates were cut in the last year or two. But even if PMI is more expensive, and it will be, I still at this point – I guess I just have such an emotional response to the desire for that safety.

Let me explain the concept of safety. What I learned is that having the house 20% or 30% paid off was useless to me because I wasn't willing to take out a home equity line of credit. I wasn't willing to set up a home equity line of credit on the property.

If you're willing to do it, go for it. Nothing wrong with it. Just my wife and I are pretty debt-averse, and it just wasn't something that we were willing to do. One of those self-imposed hedges, I guess, to keep ourselves from winding up deeply in debt. When you're young and your income is uncertain because you could have business setbacks, your job is uncertain.

When you're young, having a paid-for house is of tremendous value. Tremendous value because it removes a huge amount of uncertainty and risk from your monthly budget. And most people, if you simply had a paid-for house, you would have more money – well, I mean hedonic adaptation. We'd always quickly find a way to pay the money.

But most people would feel pretty rich if they just simply had a paid-off house. But that only comes when the house is paid off. If the house is 80% paid off, you still don't get the benefit of that safety of not having the mortgage payment. You only get rid of the mortgage payment when the mortgage is 100% gone.

Now, on the flip side, if you do what I did and you wipe out so much of your savings in order to put down a big down payment, what happens is you leave yourself with a thin margin. Now, was I stupid about it? No, I had, as I recall, $10,000 or $20,000 still set aside, but I had to stretch to put that 20% down, and that removed safety.

Now, who's in a safer position if they lose their job? Somebody who has a $1,400-a-month mortgage payment because they borrowed a higher amount and has $50,000 in their savings account or somebody that has a $1,250-a-month mortgage payment and $5,000 in their savings account because they put it all down on the mortgage.

The person with the money is safer as long as they haven't spent it on consumption because they have many more months of runway. Let me do some math here. $50,000 divided by, what did I say, $1,500 a month, so that gives you 33 months of runway on that mortgage payment versus $5,000 divided by $1,250 a month.

That gives you four months of runway on the $1,250 mortgage payment. I didn't get that until I was actually in it and I realized how wrong I was. Maybe it's me. Maybe it's my personality. Maybe it's the fact that I'm an entrepreneur, but I didn't get how important that runway was to me.

I didn't get how when I put myself in that position of everything's fine and I've got all the options in the world to all of a sudden, "Wait a second. I've got a house." It was a deep lesson for me. So learn from my lesson. Fact-dependent, what are rates, mortgage rates, things like that, etc., if or when I buy another house, I intend to either pay cash, and I'm okay with paying cash and working the way up and buying a cheap house.

I'll probably do something weird and radical and live in a trailer or build my own house out of sand and pebbles, find some new technology or have a modular house built out of shipping containers. I might do that and pay cash. Or if I buy a fancy house, I'll put down the minimum payment possible.

I'll keep the money in reserve in a separate account. I will view the extra costs of the mortgage insurance and the extra interest that I'm paying as costs to allow me to maintain my flexibility. And I'll save the money in a side fund. And then let's say I have $100,000 balance a few years in, I'll write a check for $100,000 and pay the whole thing off.

Because then I'll go from maximum flexibility, maximum security because I've got lots of money to really nice flexibility, really nice security because I have a paid-off house. And I'll avoid that in-between world. The reason this connects to the previous one, one final point to point out, the amount of your mortgage, the amount of the mortgage that you owe on the property, the percentage of the value of the property that has a mortgage on it has zero impact on the value of the property.

If you buy a house worth $100,000 and you have a $100,000 mortgage and the house goes up in market value to $120,000, you're going to get the same amount of additional money on it, the $20,000, as if you had a mortgage balance of $50,000. So you can't – you're actually decreasing your percentage rates of return because you're taking on less leverage if you do it the other way.

I'm not getting into discussion of leverage here on a personal house. I'm just talking about safety. So recognize that just because you put minimum money down on a house doesn't necessarily mean that you are financially foolish or incompetent. So hopefully you can learn from my lesson and figure out how it applies to your situation.

And that doesn't even go into the other aspects. Like for example, if you have money to pay cash for a house or that much money, is it better to have – personally, I'd probably rather have a rental property that was debt-free and have my house mortgaged. I'm getting into some credit or protection issues there that you would have to consider.

But there are other solutions. Next one, number five, myth. Owning a house is a sign of financial success and of having arrived in life. Fact. Owning a house might be a good fit for you and your family. But recognize that the entire industry exists to market them to you and to service your debt on them.

And I confess this was one that I intellectually rejected. But as I described yesterday, I still emotionally accept it because this goes so deep in our culture that we're successful people. We just bought a house. Look at your Facebook feed. Look at all of the young couples. Look, we finally did it.

We finally bought a house. I guess I'm an adult now. Now, in this one, I try to tread carefully because frankly I feel a little bit bad being so negative about home ownership in the sense that for past generations, owning a house was a remarkable achievement sometimes. It was for many people the achievement of an American dream.

Think about the societies that in the history of the United States of America people came from. And if you don't – if you're not aware of history, go travel. And you'll see that owning a house for many people throughout the world is absolutely an absolutely impossible goal. So I try to be careful because here I am denigrating the value of it.

And for many people, this is their life dream. Same thing with college educations. I'm not so keen on the massive value of a college education. Yet there are still families for whom even today their son or daughter will go to college, and it's a remarkable moment in the history of that family.

I'm the first one in my family to graduate from college. That's a remarkable achievement in many families. I was saying that as an example. I'm not the first one to graduate in my family from college. But for some families, that is. So I try to be a little careful because here I say, "Well, what's the point of going to college?

Go do something else." And then for other people, this is their dream. But practically, let's look at it realistically. Yes, it was easier in 2005. But today in 2015, all it requires for you to own a house is to have a steady job and have a good credit score.

That's it. And the entire industry exists to try to get you to own a house. I'm sorry, but buying a house, lots of broke people buy houses. I've seen them. I've worked with them. Ask any real estate agent. Lots of broke people buy houses. It is not a sign of having arrived in life.

We see somebody who has – well, sometimes we don't even know. Somebody has invisible assets. All their money is in stocks of publicly traded companies. And they may be a millionaire and they live like – on the outside, we're not impressed. But somebody goes out, borrows a million dollars of debt, and they're upside down and have no money, and we're all impressed by the house that they bought.

I don't buy it. I've seen too many people financially naked to do that. So I had to go through the experience to be completely disabused of the notion from an actual emotional level because it was still there. But for me, it's done, gone, dead. Owning a house is not a sign of having arrived in life in many ways.

It's a sign of having signed yourself up for some challenges. Let's go to – and I'm trying to be careful. I don't want to be insulting because, again, I know many families are working hard. They're saving money. But listen to the story that I told yesterday and just try to put yourself in it if you haven't ever owned a house.

And if you need to go do your own story, that's fine. Some people love it. Cool. Just do what I talked about. Put those safeguards and those floors in for yourself. Which goes to number six, the myth, home ownership enhances happiness because it delivers a sense of security and stability.

Fact, houses suck money out of your budget and time from your schedule. Your happiness is not going to be determined based upon owning a house or not. Now, it may be a euphoric experience. You may have an emotional connection with it. You may do like I did and take the picture and feel really proud to see your family in the house that you bought.

It might feel like a rite of passage. But after a little while, just like all of the feelings in every other part of life fade and you're left with the reality, it's not something that's going to deliver stability and security and happiness. Now, we can dig into the happiness discussion, but I'll tell you, face the facts that stability and margin are probably going to have a bigger impact on your peace of mind and your level of happiness than owning the house.

Just my simple little example that I like to ask people is, "What was the happiest point in your life?" Now, depending on your personal experience, that will vary. But for many people, I just point out that the time that we spend in college, many of us, is a really fun time.

Usually, many people were after the college experience and they have few obligations. They had lots of time. They had just a little bit of structure in their life. They often lived in very humble circumstances. They maybe didn't have a car and rode their bike everywhere. But from the perspective of just the simple enjoyment, for a lot of people, it's a really fun time.

Now, compare that to a big giant house and ask yourself if the house is really going to contribute to happiness. The house might be what your family needs. It might be a great financial move but it's not going to just automatically make you happy. Number seven, myth, houses are a safe investment.

Fact, housing values can swing wildly and it's absolutely out of your control. I described in detail the deal of the sale of our house yesterday so that you would just be aware of it and be able to learn from my experience. But I don't call facing the prospect of selling an asset for $275,000 or selling it for $233,000.

I don't think that having a $42,000 difference in sale price that depends solely on the word of one person and the opinion of one person, I don't think of that as a very safe investment. I really don't. Now, did I have to consummate the contract at $233,000? No. Would I have?

Probably not. Maybe. I don't know. I was seriously considering all options. But basically, the entire profit of the deal was wiped out by one bad appraisal. Now, the problem is you can't argue with the appraisers. I legitimately think it was a bad appraisal. It had specific reasons, but the appraiser's word is basically the entire definition of it.

And without rehashing the whole terms of the contract, when thinking about the different scenarios, if the appraiser had been accurate, I had to reconsider the entire thing. Did I want to just sell it? I couldn't sell it what I thought the market price was. Did I want to sell at the appraiser's price?

Did I want to wait? If I waited, and that was why the second appraisal was so important because if the second appraisal had come back low, then what factor was there in the potential changes in the next six months that was going to make a big difference? And again, I own the property every month.

It's about $1,500 a month of carrying costs all in, and so it makes a massive difference. Now, are there markets in which you can be more confident of the price? Sure, there are. You are not subject to the financing of the buyer so heavily. Maybe you're working in the wholesale market.

Maybe you're working at the high end of the market or something like that. Yeah, that can matter. But I mean, I'm pretty familiar with the local real estate market, and our local market here in South Florida is so crazy. And it's all a reaction to the damage that was done back in the early part of the 21st century and then all the laws and the rules that are coming, and it's just – it's a disaster.

And everything is controlled by the appraiser, and the appraiser has all got scared because the hammer came down and they've changed the whole cycle. It's nothing like it used to be where you could kind of talk up the appraiser. The appraiser is randomly assigned. There's a – anyway, it's a mess.

And so I just simply point out that I very seriously had to consider if I was willing to sell the house that I thought had a market value of $270,000, the market proved that it had a market value of about that much based upon a willing open buyer being willing to pay me, a willing open seller and a clear transaction, that money, and then the word of one person, one person and their professional opinion.

And who knows if they drove up from Miami to do it? They didn't have any clue about here, which was part of the thing that we indicated when – or the buyer's agent indicated. Word of one person affected $42,000 of value, the entire profit in the deal. I don't call it a safe investment.

Now, it worked out, and that's just the nature of the deal, nature of real estate. But real estate can swing wildly in value based upon the actual deal. Myth number eight, housing amenities matter more than anything else. This is often I think what people conceive of, and we certainly considered it as far as the nature of the house.

I just say they talk about location, location, location. The fact – this one we were a little bit aware of, but it was reinforced. Location amenities are going to make a huge difference, maybe even more than the housing amenities. The house we lived in was wonderful. We could walk to the library, walk to the grocery store, walk to the post office, walk to the pet store, walk to the mall, walk to dozens and dozens of restaurants right within walking distance, and that was awesome.

So pay attention to location more than house. I see a lot of people when they describe their perfect house, they describe the perfect house rather than describing the perfect location. Myth number nine is this. Maybe some of you have thought about it. You need a house to entertain. I know for a lot of people this is really important.

They want to buy a house to entertain in. They want to buy a house that has a beautiful giant pool with a deck and a big grill, or they want to buy a house that has a big living room or an open floor plan or things like that so that they can entertain.

My wife and I love to have people over. We love to entertain. I have a huge family. We have lots of people in our house all the time. But the fact is you don't need a house to entertain. It might be nice and it might be much more doable, but don't buy a house so that you can entertain.

This was one thing we seriously thought about because we do have a lot of people over. Sometimes we have people over with high frequency, maybe a lot of people with high frequency, and we also have lots of people over at one time. And so we, in considering going from a large 3-2 to a small 3-2 apartment, considered are we going to give this up?

But the reality is entertaining and the ability to be a host and the ability to be hospitable is not based upon the house that you have. You can entertain all over the place. So now we entertain in parks. Well, we still entertain at our home, but we entertain at the park.

We entertain at the beach. And I traded the big giant house and all the costs associated for that for a fancy – a few simple things that make it easier to entertain while out and about, a portable grill and some camp chairs. And we can set up an awesome party down at the beach and people can have a great time.

We don't have to own a huge house. So if you are buying a house for the purpose of entertaining, just recognize that you may – it may be something that you really love about that house, the ability to entertain in a really nice white manner there. But make it come out of abundance.

It would be cool. There are some housing developments here in Palm Beach County that I know that I think are awesome. And some of them have – these houses have huge pools and huge pool decks and outdoor kitchens. And I think that stuff is awesome. It is so cool.

And who knows? Maybe someday I'll live in a house like that. I don't know. But I'm not going to wait on the house to be able to entertain. Again, is it the goal or is it a means to an end? So I hope some of these lessons are useful to you.

These are, again, lessons that I learned and I'm sure I will learn more the next time. I'm sure that some of these I'm probably a little bit off and as my life experience grows, then maybe I will have a clearer idea and insight into other things. But these are just the lessons that I chronicled.

I sat down and talked with my wife and I said, "Here's what we learned from this transaction." And so now the next time if we are considering moving from where we live now to another place or we're considering buying another house, I'll revisit these things and I'll consider them.

And hopefully I'll make a better decision next time. And again, hopefully the theme of this show and yesterday's show is clear. I'm not telling you what to do. Put those safeguards underneath you. Think really, really carefully and really critically and think really coldly logically so that you're safe, so that you have exit plans.

The reality was even with that $42,000 difference, I still had the exit plan from the deal at $233,000 where I at least got my money back. Even if I had taken that worst-case scenario and I hadn't financed the difference or I hadn't put the house back on the market, even in that situation, I still had an exit plan.

So the planning, the financial planning, the really logical, careful side of things is really, really important. That was yesterday. Today, these emotional things hopefully will help you to assess what you really, really want. And it's up to you. You got to decide how to deploy your resources in a way that fit your life.

Hope you can learn and at least enjoy a little bit of my experience. And for now, yeah, we're loving where things are right now, so really happy about that. Good experience all around, but we're loving where things are. Thank you for listening today. Thank you for the patrons who support the show.

If you would like to support the show directly, please go to RadicalPersonalFinance.com/patron. If this has been worth any money, hopefully maybe I saved some of you guys $200,000 because I told you you don't need a house to entertain in. Or I saved you $30,000 because I told you you don't need a big house to entertain in.

Please go to RadicalPersonalFinance.com/patron. Sign up to support the show financially as little as a buck a month, as much as even a couple hundred bucks a month. And also remember, if you'd like to help me out, just a personal favor, please subscribe to the Encouraging Christian Fathers podcast on iTunes and help me with the rankings there.

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