Suppose I was trying to sell you an investment, and I asked you to give me a sizable amount of money, say $50,000 — but I’m not actually giving you anything in return. Instead I tell you that I still own the investment until it’s completely paid off. We are co-owners, but you’re the one responsible for all the maintenance and taxes and, by the way, there’s no guarantee your investment will be worth more than what you paid for it when it comes time to sell. In fact, it could, and frequently does, lose value. If it does lose value, you still owe the full amount of your original investment, plus interest.
Once you sign the contract, I’m going to sell the investment to someone else and you get to deal with them. They don’t really know you. You have to make monthly payments to that uncaring entity, and those payments are structured so that very little of the money you pay the first 10 years actually goes to pay off the principle, with most of it being interest. If you’re late with a payment, which amounts to 36% of your combined income, they get to tack on extra fees and, miss enough payments, and they get to reclaim the original investment. Oh, and it wasn’t even really my money in the first place; I borrowed it from the government. Sounds like a pretty bad investment deal, doesn’t it?
Think disruptively about housing options to stay out of the financial trap of bricks and sticks with a tarpaper roof, financed with a 30-year mortgage.
Pitching home ownership as an investment like that — honestly — makes the industry seem laughable. Yet people line up for that very deal, and think they’re making a shrewd financial move. Buying a home is one of the worst financial decisions most people make, and the idea that you’re building equity on any time horizon short of 10 years is just delusional.
If you are shrewd enough to see what a bad deal the retail real estate market really is, what are your alternatives? You can rent, which can be another bad deal; or you can take that money you’d use on a down payment and explore one of the really fun alternatives to owning a home.
Live in an RV or Camper
The vision of a camper most people have is some cramped, bubble-shaped, one room flimsy trailer. A few are like that, but many modern RVs have side panels that extend for more interior room, full-size appliances, central A/C and heating with zone controls, dishwashers, washer/dryer combos, and big screen satellite TVs. With an RV you buy the unit, and rent the space it sits on. If you don’t like the park or the neighborhood goes downhill, you can pack up and move to a place you like better — in a matter of hours. You can find places to park your RV that are less expensive if you want to save money, or pay a little more and live in a luxury five-star gated resort with swimming pools, club houses, a workout center, social activities, tennis courts, and hiking trails. While most campgrounds in northern states close over the winter, the majority from Tennessee on south will be open all year. RV living is a good fit for people with careers that require moving frequently.
Live on a Boat
There are two types of houseboats: those that have engines and those that have to be towed. While big boats can be fantastically expensive, the kind that have to be towed cost much less and some offer very high end amenities. Like with an RV, you buy the boat and then pay to park it somewhere, like a floating cabin. Moorage can be cheap or expensive, depending on the amenities of the marina. While there are many places you can anchor a boat for free, you still have to tie up somewhere to empty your waste tanks and fill up on fresh water and supplies. If you’re holding down a day job, you’ll want to live at a marina.
Build a Tiny House
The tiny house people took the concept of an RV, and built small homes either on a trailer base, inside used shipping containers, or set on a concrete pad like a normal house. A small footprint home can run anywhere from a 110 to over 450 square feet. Most tiny house builders opt for trailer mounting in case they want to move their home to a different property. The advantage tiny house people have is if their space needs change in the future, they can either add on to their current tiny house, or opt for building a separate garage, barn, or office space.
Unlike the RV crowd, tiny house builders usually eschew campgrounds, and look for ways to lease or rent space on someone else’s land. The advantage to building a tiny house on wheels is that, in most states, they are regulated the same as campers and RVs.
Build an Earthship
There are a variety of different types of construction materials that can be lumped together in the “earthship” category. Various styles of rammed-earth construction supply the structural basis of many homes — but other construction materials, such as compressed hay bales and shaped concrete, have been used in construction. The high thermal mass of the earthship design cuts down on heating and cooling costs, and many are designed to be completely off-grid. The size of a rammed-earth home is limited only by your budget and enthusiasm. The designs range from compact and efficient to sprawling, multi-story, high-tech cathedrals.
With zoning laws being largely written by the construction industry, there’s no fear any of these options will be turning up in trendy suburbs — and none of these options will work for everyone. You’ll want to explore alternative housing options thoroughly before jumping in. The idea is to get people to think disruptively about housing options, and to stay out of the financial trap of bricks and sticks with a tarpaper roof, financed with a 30-year mortgage. Modern materials and technology have opened up many new housing options and, before you commit to laying out 35% of your salary for 30 years, take a good hard look at the alternatives.