Most of the time, the buy-vs.-rent debate revolves around the best financial decision. That’s for good reason: As you’ve undoubtedly heard more than once, buying a home is the biggest purchase you’ll probably ever make. Most people need to borrow hundreds of thousands of dollars to make it happen.
It’s not a decision to make lightly, and the numbers involved are something you need to take seriously — especially when the adage that buying is always better than renting is a myth, not fact.
In some cases, you shouldn’t buy a home because it’s not the financially sound choice. Taking on a large amount of debt for the long term after shelling out that much cash up front could put you in a precarious financial position.
But let’s just say the numbers do check out for you, and you want to buy a home. In that case, you still need to consider one other factor that might make buying a bad choice: your career.
The Finances Check Out, But That Still Doesn’t Mean You Should Buy
At worst, buying a home could sabotage your career opportunities. Even in a less-dramatic situation, your house could seriously limit how much you could advance in your career — and affect how much money you can make.
It’s not that employers ask, “Do you have a house?” and put you on some sort of weird blacklist for being a homeowner. It’s that owning a home reduces your flexibility to pursue jobs and opportunities that may make it easier for you to build serious wealth over your lifetime.
This doesn’t apply to everyone. You may find yourself on a highly stable career track that you have no intention of leaving, and the time is right to deeply root yourself and your family in one spot. If committing to one location would have zero impact on your career opportunities and you want to buy a home, it might be the right move.
But for many other people, committing to living in a single location for years could seriously interfere with their ability to grow their career, expand their business, and earn more money.
It’s Difficult to Move to Follow Career Opportunities
It’s hard enough to move from one place to another when you rent. Moving is a hassle, to put it mildly, and seeking out a new place to live before you can move from your old one is a process in itself. But moving as a renter is considerably easier than moving as an owner, because you can’t just up and leave any time you want when you own your home.
As a renter, you always have the ability to break your lease if you need to. You could also negotiate with your landlord to end the lease early without penalty (or with a smaller penalty than what the lease originally stipulated). Depending on the terms of your lease, subletting or even putting your apartment on Airbnb until your rental agreement expires could be options, too.
But as a homeowner, you can’t just call up the bank or anyone else and ask them to take the house off your hands. You need to go through the entire process of selling your home, which could take far more time than you actually have.
If you’re trying to move to chase down a career opportunity, you need the ability to be fast and flexible. Depending on what the real estate market looks like at the time you want to move, that may not be possible.
It might be hard to remember what it was like in the past thanks to our tendency to fall victim to recency bias, but less than 10 years back the idea of easily selling your home — and making money on it — was laughable. The market looks good now, but we know it won’t always be a seller’s market. Eventually, when the supply and demand inevitably shifts, buyers will have the advantage again.
And that could put you in a tough spot as an owner looking to sell fast.
You Might Not Be Able to Afford to Move
Assuming you have more time to move and you’re willing to put up with the difficulties of relocating, that doesn’t mean you can afford it (even in a good real estate market).
If you bought within the last three years, you sunk a lot of cash into your home. In an average market, it’s unlikely that home prices will have risen to a point where you could break even, let alone make a profit. Unless you’re willing to lose money on the house you might have bought as an “investment,” you might be in a position where you can’t afford to move.
In this case, your career is stuck where you are, whether you like it or not.
A Lack of Career Flexibility Could Lead to a Lack of Wealth
The inability to move to explore a new position, role or career opportunity could limit your ability to earn a higher income. Taking new jobs or calculated career risks are both great ways to potentially earn more money than to sit at your existing job and cross your fingers hoping for a raise.
When you’re in your prime, what you earn matters. It’s what drives your cash flow — and the more you earn, the easier it is to save and invest. If you can put away large amounts of money now, you could find your way to financial independence easier and faster.
When you earn more money, you get to choose how much to save for the future, which puts the power in your hands rather than at the whim of the real estate (or stock) market.
Buying a Home Limits Your Flexibility
Of course, all of this is just something else to think about when you’re making a decision on whether or not to buy. You may not need much career flexibility at all, and that’s fine. But failing to account for this could turn into a big financial mistake.
You do need to understand how buying a home can limit your career flexibility. It can limit your ability to chase down an opportunity if it arose unexpectedly. It also limits your financial flexibility and liquidity over the short term, because it requires you to put a good chunk of your liquid cash into an illiquid asset.
A house payment can weigh on your cash flow, too, meaning you have less choice about where your money can go each month — especially when considering home maintenance and upkeep costs, homeowners association (HOA) or condo fees, property tax and home insurance increases, or even the amount of mortgage interest you pay if you have an adjustable rate increase that bumps up your monthly payment unexpectedly. All of these combined make housing costs a much larger variable than a one-time annual rent increase.
“Less flexibility” is a trade-off you make when you buy a home. Whether that’s acceptable or not is up to you — but the bottom line is that you must think about this factor if you want to make a fully informed, responsible decision around buying real estate.
Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow.
Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.
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