“A house is not just an investment, it’s a place to live. This is the only significant financial investment that has two functions. Things like cars and boats always go down in value, so most of the time, if you’re investing, you’re doing it in something that you don’t have to fix, water, fuel or live in. You shouldn’t fall in love with a bond or a stock or a piece of gold, because if you do, you won’t be a smart investor. The problem (as people who sell and fix and build houses understand) is that you just might fall in love with a house. What a dumb reason to make the largest financial investment of your life.”
How to buy a house, Seth Godin
This is a really good point to think about. A house is a place to live first, and an investment second. A house can be too expensive just like a box of cookies can be too expensive. Although I may buy an over-priced box of cookies from a girl scout, I don’t fool myself into believing I’m buying it because I’m getting good value for the cookies. I do it because I want to help out her organization — the cookies are just a bonus. In a similar way, you should buy a house because you want to live in it (and can afford it), the investment part is just a bonus.
The problem is when you reverse the two priorities. You buy a house for an investment and you also want to live in it. But you don’t want to live in just any house, you want to live in a nice one with hardwood floors, granite counter-tops and a jacuzzi in the backyard. Now the house is no longer just an investment, it’s something else. And this something else can lead to much disappointment if you’re not careful.
Emotions and investments don’t mix. When they do, something suffers (frequently both). The best types of investors are the emotionless robots (what little boy hasn’t dreamed of this?) but for most people this isn’t possible. The best alternative is to decide which one you’re going to put first and make sure you separate the other.
Put 1 first, for sure, and remember to re-evaluate every once in a while! You don’t want to be treating your investment abode like crap if you’ve fallen in love with it. It might never forgive you! Likewise, with something that you used to love, no longer. Sometimes you just gotta move on.
Good point. Periodic reflection is always a good thing.
The hard part is separating emotions from any decision. Being rational when you should is much harder than it sounds.