Buying a House VS. Investing In the S&P 500 (Which Is Better?)

Transcript:

On this episode of the Personal Finance Podcast, we have a big episode in the versus series. We are gonna do the s and p 500 versus buying a house.

What's up everybody, and welcome to the person. Finance podcast. I'm your host Andrew, founder of Master money.co. And today on the Personal Finance podcast we're gonna talk about the s and p 500 verse Buying a House. If you guys have any questions, make sure you join the Master Money Newsletter by going to master money.co/newsletter.

And don't forget to follow us on Spotify, YouTube, apple podcast, or whatever podcast player you love listening to this podcast on it. If you wanna how out the show, consider leaving a five star rating and review on Apple Podcast, Spotify, or your favorite podcast. Player. Now, today we're gonna be diving into a huge showdown between the s and p 500 versus buying a house.

Now, when we say buying a house, in this episode, we are talking about buying your personal residence and what happens during that specific situation. So we're gonna go all the way back to 1970, and if you bought a house in 1970, you would have a 400% rate of return all the way up to at the point in time.

I'm recording this, which was right before 2026. If you put that same amount of money into the s and p 500, here is the crazy part, you would have a 7000% rate of return. And a lot of people out there think that buying a house is a fantastic investment. And we're gonna dive into the details today and the math behind why I am going to argue that is not the case.

In fact, I would say. Buying a house is a lifestyle decision more so than it is actually an investment decision. Now, there are some people out there who have done a tremendous job when they bought a house, and they've got some tremendous benefit outta that. We're gonna talk about some of those benefits in this episode, but a lot of other folks out there, if you look at the comparison here between the SNP 500 and what is going on with buying a house, you will see a dramatic difference in the rate of return.

Now the reason why we're doing this episode is there is a chart on Twitter going viral. We'll put it on the screen right now that shows you the difference between the s and p 500 and buying a house and what those returns are. And when you look at this, you're gonna see this is not a typo. A house has returned four times where as the s and p 500 has returned 70 times your money in the same exact timeframe.

Now that's before we even talk about property taxes and insurance and HOA fees and maintenance fees and all the other fees associated with owning a house. And owning a house has tons of hidden expenses that most people don't think about. We'll dive into all of those today. We're gonna talk about what homes actually appreciate after inflation at all costs.

We're gonna go through some case studies and see what happens if you bought a $300,000 home, a $500,000 home, and what happens if, even if you bought a million dollar home. And the difference between those two and when buying still makes sense versus renting. Plus when investing wins in those situations.

And we're gonna talk about how to calculate true cost of ownership by using my total cost of ownership calculator, which you can get down below in the show notes if you're interested in getting that. Right now, we have a calculator that's gonna help you do that. So this is one of those eye-opening episodes for a lot of folks out there.

Once they hear some of this data and they hear some of this information. So without further ado, that's something you're into. Let's get into it. So part one is I wanna talk about the a hundred year old truth when it comes to buying a home versus investing your dollars into the market. And what most people don't realize is that when you buy a house, there are so many other costs associated with owning a home that you need to understand that this is not an investment when you go out and buy a house.

This is a lifestyle decision. You are going and buying a home because you want to live in a specific location and you wanna stay in that location for a longer period of time. There are. Way too many people out there who do not understand the math behind this, and they feel as though they need to go out and buy a house, otherwise they're gonna fall behind with their finances.

That is absolutely not true, and the math is gonna show you right now why that is not true. So Robert Schiller has this timeframe between 1890 and 2024, where real appreciation, which is inflation adjusted for a home. If you bought yourself a. Over the course of the last a hundred years, you would see a 0.6 per year appreciation.

That is the real appreciation after inflation. Now, the nominal appreciation, which is before inflation, is about 3.5% every single year. My friends, you get more than that. Currently in a high yield savings account in most situations at the time I'm recording this, and so this is a really eye-opening thing to see because inflation is also eating away at your returns when you live in that home.

Now, one big caveat I want most people to know because when we bring this up, sometimes they'll say, what about investing in real estate and getting cashflow? All those different things. That's not what we're talking about here. We're talking about the home that you currently live in. That is your real rate of appreciation over the course of the last a hundred years.

Now, let's be very clear. Because inflation makes home prices go up in dollar terms. And so we wanna understand this and inflation is not a return. And so overall, I think we need to look at this and think about what is going to happen to home prices over the course of the next 50 to a hundred years.

Nobody has a crystal ball. Nobody can predict that. But if history. Serves us, any types of lessons whatsoever. We know that it's probably gonna be very similar to the last a hundred years. And if that is the case where we have ups, we have downs, we have supply issues, we have demand issues, there are gonna be all these other issues that will come up in the housing market.

And we need to know the housing market is a slow moving inflation hedge. It is not a growth asset. Whereas stocks and buying real estate as an investment is a very different story, and those are growth assets. Alright, so now let's look at the same exact timeframe. We're gonna look at 1926 to 2024, and I wanna look at that timeframe when it comes to the s and p 500 because there's very different rates of returns for the s and p 500 during that timeframe than we see in the housing market.

So the nominal returns over the course from 1926 to 2024. Is we're looking at 10.5% to 11.5%, and the real returns is 7% to 8% is where we are landing. Now, if you include dividends in this, it's gonna be 11.5% since 1970. So if we look back to 1970. You have an 11.5% rate of return since 1970 when you factor in dividend reinvestment.

Now, anybody listening right now who doesn't know what dividend reinvestment is? A lot of times when you invest in an index fund or you invest in an ETF and you're buying the s and p 500, you have the option to reinvest your dividends. It's usually just a little check box inside of your brokerage account.

Always check that checkbox unless you're looking to live on that money right now, because when you check that, it's gonna make sure that you are reinvesting your dividends and you are just growing your portfolio. Faster, especially if you are a long-term investor and you are looking at doing this for retirement.

And so this is the big deal here. Now we're looking at housing, which is four x since 1970, and the s and p 500 as we talk about at the top of the show is 70 x since 1970. So that is a 17 to 20 times difference during those timeframes, and this is why. The Wall Street Journal chart that we are talking about here that we showed at the beginning of the episode, we'll put it back on the screen right now, is so impressive.

You can see the drastic differences here, and the reason why there's drastic differences is because there is a huge, huge difference between the two. Now this is where 99% of the people who think about buying a house, this is when they get it wrong. Now everybody here, I want to understand the real cost of a home.

We're gonna break this down right now, and in addition, if you wanna run these numbers on your own, grab our total cost of ownership calculator. It's gonna be linked up in the show notes down below, or you can go to master money.co/resources. We also have it there. What this is, is this is a spreadsheet that is going to show you exactly how much.

You are spending when you buy a house, and in fact, it'll also do a comparison to the local rent in your area. So you put the local rent numbers in your area, it is gonna spit out a calculation that shows you exactly how much you're spending on a house. Now, I love this tool because this is gonna help you make decisions and make better decisions overall.

Or you may be able to realize, oh shoot, I probably bit off more house than I can chew. And maybe you have to make a financial decision, a big financial decision because you made a mistake and you just were not educated on this stuff yet. But we're gonna dive into the total cost of owning a home next.

Alright, so total cost of ownership is where 99% of people get this wrong. And what you need to do is understand the true cost of owning a home, and we need to list out all those different costs. So what we're gonna talk about first is mortgage interest. So obviously for most people out there, when you go out and buy a house, unless you pay cash for that home, you're gonna get a mortgage.

Now there's been a lot of conversations as of late of things like the. 50 year mortgage that's stretching out your mortgage payments. And if you want an entire episode on that, we will absolutely do it because that's a huge issue in and of itself. But for most people out there, if you go out and get a mortgage, you're gonna have an interest rate.

That interest rate is a true cost to you that you are spending in order to borrow money to buy your house. Now, this is a cost that is associated. Most people think about this cost and they know this is associated with the cost of buying a home. And so a 30 year loan means that 50 to 70% of your payments are pure interest if you stay in that home over the course of 30 years.

Now, most people are like, well, I am not gonna stay in my home for 30 years. Maybe I'll stay what the American average is, which is seven to 10 years. If you stay in that home for seven years, here's what they do. The banks are smart about this. They know you're going to do that. They know most people do that, and they don't stay in their home, and they usually on your mortgage will front load the interest, meaning the majority of the interest is gonna be up.

Front because most people leave and so they want you to pay that interest early and that way they can make the most possible money. That's how they typically do it. And so you wanna make sure that you understand that. Number two is property taxes. So no matter what, even when you have a fully paid off home, you are going to have to pay property taxes, which makes your home somewhat of a liability when you live in it because you're always gonna have costs for the rest of your life.

You're gonna be spending money. It's sure, it's, it's an absolutely an asset. I'm not saying it's not, I'm not Robert Kiyosaki. I'm not gonna argue that it's not an asset. It's absolutely an asset, but there are liabilities that you have to pay, and there are things that you're gonna have to pay for the rest of your life, even if you pay it off in cash.

And taxes are one of those things where on average, 0.4% to 2.2% of your home value every single year is going to be in property taxes. I have a new build home. Okay. What I built my home in this community, they also had to put in sewers. They had to put in roads, they had to put in water, all these different things.

And so we pay an additional fee on top of our taxes called CDD fees, and we have to continue paying these over the course of the next 20 years so that they can recoup some of that money. This is in addition to already paying property taxes. So my taxes in my specific area are actually very high. And if somebody doesn't run the numbers or understand how this works, they could get themselves into a.

Sticky financial situation when that happens. Now the national average for taxes is 1.1% of the value of the property. So that's something that you wanna make sure that you note is that you're gonna be paying property taxes. And if you don't bake those numbers in and you don't know what that number is, it's very important to know what that number is.

If you're shopping for a home and you're like, I don't know where to find that number, just go to your local property appraiser. It can either be the county appraiser, sometimes it could be a municipality or a city, but it's usually your county appraiser, especially where I live, at least. And you can look it up and see what the property taxes are on any house in that area.

Then you're gonna figure out, okay, well if they've owned this house for a very long period of time, maybe there's gonna be some sort of adjustment when I purchase this home, if I'm purchasing it for a lot more than they originally purchased, or where they have the assessed value currently. And so you wanna make sure that you look at that too, because the number could go up when you buy that home.

Now, here's the big one most people miss, and this is where I want you to think about your home. And if you are a homeowner, you know all about this stuff and when it rains, it pours. When some of this stuff pops up, is at least 1% of your home value per year. And for a lot of people it's two to 3% of their home value is for maintenance and repairs.

Now, it may not be every single year that you pay one to 3% maintenance and repairs. It may be most years you pay more than that. It depends on how old your home is. It depends on where your home is. It depends on the weather conditions in your area. It depends on honestly, the quality of the products in your home, like your water heater and some of those other things.

And so most people just need to understand, well, a roof is gonna cost me a roof. Used to cost five grand on a on a. 1500 square foot home. Now it's costing between 10 to $25,000 on a 1500 square foot home. And you may be saying to yourself, well, yeah, but I'm not gonna have to get a roof for another 10 to 12 years.

That is still a cost that needs to be baked in every single year and saved up for HVAC systems, six to $12,000 for an HVAC system, a water heater is one to $3,000. All of these things, if you live in a home for 30 years. All of these things will break plumbing, foundation, painting, flooring. So if you wanna update the home with some flooring or if you want to repaint your house, what you need to repaint the exterior of your home every 10 years and in the interior of your home, depending on if you have kids and pets and or if you have less people living in your home, it.

Will depend on the frequency, but for us for specifically, I have three kids under the age of seven. We had two older dogs, and so we were repainting the house interior all the time, and painting is expensive. If you haven't looked at this lately, paint is expensive. Painting a home is expensive. If you hire somebody, interior or exterior, so painting the exterior of a home, depending on your square footage, it's going to be tens of thousands of dollars.

I mean, it is a real expense that you must factor in. And so if you don't think about this stuff, these capital expenditures, they will come and bite you in the butt when it's. Time to get ready. So you need to make sure you're saving on the side for some of this stuff. This is why emergency funds also exist, so that when these come up and surprise you, it is not a big, big deal.

Now, we also have things like plumbing issues pop up, like little maintenance things. Maybe a toilet breaks, maybe a sink has an issue. Maybe you need a new faucet. All of these costs are gonna add up and you're gonna continue to have to pay for this. Now, here's another cost that you really should never get rid of, no matter what, even when you have the home paid off.

I know Mower Ranch providers require you to have this, but you also should continue to have this even if you have your home paid off, which is insurance. Home insurance is a absolutely no if, ands, or buts. You must have that on your home if you're a true wealth builder, why It's protecting you against a number of different situations, and it could be financially disastrous.

If you don't have it, let me give an example. My in-law's house is in Florida, and it is a house that my wife's grandfather bought way back in the day for it really cheap. It is right on the ocean. Two years ago, I guess it was a year and a half ago now, you know, hurricane Milton came in and it didn't look like it was gonna be as bad as it was, but they are so close to the water that they had eight feet of water in that house.

The entire house flooded. The entire thing. And so because of this, thankfully they had flood insurance to be able to repair the entire inside of the house. They had to gut the entire thing. They weren't living in their house for like six months because this hurricane came on and it flooded their entire house.

You may live in an area where there's tornadoes. You may live in an area where there's a fire. You may live in an area where there's just some sort of issue that could come up into play. And if that happens to your home and you don't have the cash on end, it could be financially disastrous for your life.

You must have insurance always. Always, always, no matter what, I have people in my real estate network, for example, who have a number of different rental properties and there's always something disastrous that happens to one of 'em. One of 'em just told me they had a fire at the house. They had to actually use insurance because of the, of the fire that just happened.

So there's just so many different things that you wanna make sure that you insure on your home. Now. In addition, we have utilities. Now, sure, you're gonna have utilities when you rent a house too. So typically those could be a wash. But if you buy a bigger house than what you're renting, then that cost could go up over that timeframe.

Also, HOA fees. If you live in a location with HOA fees, I have HOA fees, but they're a hundred dollars a year. And the HOA doesn't really bother me. Not a huge deal for me, but for some of you out there, that could be 100 to $300 per month depending on where you live. And I've heard of HOA fees being even higher than that.

And so you gotta make sure that you factor those in. Now, here's a big one most people don't think about, which is closing costs. Now, if you're on the buyer side, you have closing costs of two to 5% based on you going out and getting a loan and having to go through the application, and there's all these different closing costs associated with that.

If you're on the selling side, it could be six to 10% because you have to pay agent fees and commission. You have to do prep on the home and make sure you are renovating and making sure everything's painted, making sure everything is ready to go. These costs are. Big, and most people don't think about that.

When we sold our last home, for example, we painted the exterior, we painted the interior. We actually redid parts of the kitchen. We had to redo parts of the bathroom so that we could get the maximum value on that home. Then we had to pay agent fees, so you have to pay three to 6% on agent fees. Depending on what you have going on there.

It's really expensive. So just to get out of your own home, you have to pay 6% of that. And so this is why the returns go down so much over time on a home because you have all these different things Now. The last thing we haven't even talked about yet is renovations. Most people renovate their home and renovations are great, but they are not an investment in your home whatsoever.

In fact, it is very hard to find a renovation where you even recoup 100% of your return. Now, if you haven't done the numbers on this or looked into this, you have to look at the real true value of the renovations that you're doing, for example. A lot of people think kitchens and bathrooms, they'll recoup that.

Plus they'll make money because they redid the kitchen and the bathroom. In some situations, maybe if you're gonna sell it right away, but over time that kitchen and bathroom are gonna slowly start going outta style and you're gonna wanna upgrade it again when you sell the home. And so most people think they're making an investment in their home, but instead they're actually spending money on something that they value.

If you value renovations, nothing wrong with that. I would renovate. You know, if I had an outdated bathroom, I would be happy to renovate it. That'd bring me joy. If I had an outdated kitchen, I'd be happy to renovate it. That'd bring me joy and happiness, but it's not an investment decision. Your money would be much better served investing those dollars.

You need to realize this is a lifestyle choice, not an investment decision. We have done tiktoks and Instagram videos talking about the average rate of return on specific home renovations, and almost none of them get a 100% rate of return. It's like a front door. Maybe some hardwood flooring can get you a 100% rate of return, but again, that's when you sell it right.

A. After you do that renovation, because it's a newer renovation, if you put some wear and tear on those, then you're gonna have to do some upkeep or fixing before you actually go out and sell a house. Then there's the maintenance stuff, the regular old maintenance stuff, the lawn care, which could either, if you hire someone, it's got, you know, it's a hundred bucks a month, or it could be something where if you, you know, mow your own lawn, you enjoy doing that.

The products to keep up your lawn, the mower maintenance, the gas, all these different things are gonna cost you money. And they're gonna cost you money frequently over and over and over again. New homeowners. You know you're at Home Depot all the time. You're at Lowe's all the time. You have to frequent those stores.

You gotta be on those rewards programs because it's just costly to own a home. But think about some of the other maintenance items. If you have a pool, you gotta maintain the pool. You gotta clean the house. You gotta do all these different things. You can't call up a landlord, just get anything fixed.

Every little thing that needs fixed is your responsibility. And so all of those maintenance items that we're talking about here have an opportunity cost. And it's the opportunity cost that if you rented the house, you would have the ability to go out there and you could call the landlord and they would pay for all of those things, but you are paying for them outta your pocket.

So instead of getting those dollars invested or putting your emergency fund or wherever else you wanna put 'em going on vacation, you instead are going to half to pay for it outta pocket. And the opportunity cost could be great. Let's say for example, it's 500 bucks over the course of 30 years. We know 500 bucks over the course of 30 years is gonna get you to a million bucks in a Roth.

IRA. And so because of that, if you've got the average rate of return, that's a big, big difference in comparison. This is an overlooked killer, is the opportunity cost. And I think most people don't think about this, but that'll eat away at some of your returns as well. And that's not even factored in to some of these charts and some of these opportunities.

Theres, we don't even think about opportunity costs, but it is sitting there for us to look at this. Now. Next, what we're gonna do is I put together a few different case studies. We're gonna look at these three different case studies. We're gonna look at a 3000 hundred thousand dollars home. We're gonna look at a $500,000 home and a million dollar home, and just look at these three case studies and what the difference would be.

Alright, so upfront I wanna do case study number one, which is the $300,000 home. All right? So if you put 20% down on a $300,000 home, you know that is going to be what? $60,000? Okay? So $60,000. If you have a mortgage at 6.5%, that means you're paying $1,520 per month on a $300,000 home. I don't know if you've looked at the market lately.

There's not a lot of areas in this country that have $300,000 homes. Now, the property taxes on that is gonna be about $3,300 per year and insurance right around $2,000 per year. And then maintenance, if it's 1.5%, which is the average across the country, it'd be right around $4,500. Per year. Now, if you have, you know, utilities increase or anything else, maybe it's another 200 bucks that you add in there.

And if you have an HOA or something, it could be a hundred bucks a month. So your total monthly cost would be 2300 to $2,800 per month over the course of that timeframe. Now, your total cost over the course of 30 years will be even greater. So let's look at this for example. Your mortgage interest over the course of 30 years is $120,000.

You paid that out of pocket. It went to the bank, $120,000. Over the course of 30 years, taxes would be a hundred thousand dollars over that timeframe. Okay, now you're gonna have to pay taxes anyway. And I would ha, I would even make an argument, if you are renting, you're paying the landlord's taxes. So I, I would make an argument honestly, that you're paying those taxes when you're renting too.

Insurance, another $60,000, then you have maintenance, $135,000. We have utilities. And if it's a utilities difference of a couple hundred dollars, which usually when you live in a house, it is 72,000. If it's 200 bucks a month. And then if you had an HOA of a hundred dollars a month, it'd be an extra $36,000 over the course of 30 years plus, we're thinking about closing costs.

So your closing costs on a home like this, 15,000 to buy 20,000 to sell. So this is something most people don't think about. This is what I was trying to say upfront, is that your closing costs just to get in and out of a house like this, that's $35,000 to buy and sell the home. 'cause that's what it costs to buy and sell a home.

And so because of this, this is another huge, massive cost that's baked in just from buying a house. Okay? So the total cost in this home is 560,000 to $600,000, depending on if you have HOA fees and all those other things, not including opportunity costs. So. Doesn't even factor in Opportunity costs over the course of 30 years out of pocket, not including the stuff that went to your home.

This is everything externally. Outside of you putting value into your home is $600,000. My friends, that's on a $300,000 house. Holy guacamole. That's a lot of money. Okay, so now let's look at the home value after 30 years. Okay, so the home value, after 30 years, we can say it's 300,000. If we look at the average rate of return, you know, we can look at something as the real value as being 500 to $550,000.

That's reasonable enough to me, where you could see the appreciation over the course of those couple years is two to $300,000. Now we have seen some years. You know, over the course of, you know, the last 15 years, we've seen appreciation like that on a home, uh, over the course of 15 years. That's half that timeframe, but we don't see that normally.

And so we're going off the averages to see how much we could be looking at this. Now, you take those exact numbers, okay? And you invest them. Instead. If you invested $60,000, the down payment alone at a 10% rate of return, that is $1,004,000 is what you would have over the course of 30 years. But then in addition.

If you took $400 per month, let's just say it's an extra $400 per month that you'd be spending on all these other areas, that'd be $830,000, which total is 1.8 million. So stocks are beating housing by 1.3 to 1.4 million on a $300,000 house. It's a crazy number to think about and it's a crazy number to see, but the differences are absolutely massive.

Now, let's look at a $500,000 house. I know I'm gonna be talking about this a lot with these three case studies, but I want you to understand what the true difference is when you run the numbers and do. The math. Now we're gonna have an entire episode, by the way, on buy verse rent coming up in early 2026 here.

So really, really excited for that. Make sure you're subscribed to this podcast if you're not already. So you can see that episode. We're gonna do a deep dive just like this on that episode. Alright, let's look at case study number two. So a down payment on a half a million dollar home 500,000, home is a hundred grand.

Okay, that's 20% down. So your mortgage payment is gonna be $2,550. Your property taxes will be about 5,500 bucks and maintenance will be another 7,500 bucks per year. And then insurance would be 2100 per year. And then any other increases like utilities increase, or HOA, it could be an extra $300 per month.

Now you could take those out and I will in a minute. Uh, if those don't not factor in. So over the course of 30 years, on a half a million dollar house, you would pay. $200,000 in mortgage interest. If your average mortgage interest was what it is today, six and a half percent taxes, $180,000 maintenance, $225,000 because.

Increase square footage or the size, and that number is gonna go up. Insurance, 63,000 utilities, $110,000 difference. And if we look at closing costs in HOAs, that could be another a hundred thousand dollars. So total cost all in is 880,000 to $1 million over the course of 30 years. So the net gain overall is the real value of your home could be around 800 to $900,000 on a $500,000 home when we look at the averages, whereas the s and p 500 are going to look at a hundred thousand dollars at 10% rate of return over the 30 years as 1.7 million.

Dollars. Just that lump sum investment of the down payment and the real savings if invested in additional $600 per month is 1.25 million, meaning that the stocks are gonna beat this by $2 million. Stocks would beat the value of your home by $2 million if you compare the two. That is absolutely crazy if you, if you ask me.

And so the more home that you buy is the difference. This is why I'm saying it's a lifestyle ization. There are a lot of reasons to buy a home that, but they're not financial, and that's what I want most people to know. Now, we're gonna talk about some things here in a second that we'll talk about. There is still good reasons for people to buy a home because it's a store of value.

We'll talk about that in a second. But let's look at one more case study, and let's go ahead and think about this one more time. A million dollar home. Okay. The down payment is $200,000. The mortgage would be $5,000 per month, $5,050 per month. Actually, property taxes, let's say if we look at this at 1.25%, it would be $12,500 per year.

Okay? Insurance is $3,500 per year. That's even a little low to me. Maintenance is $15,000 per year. HOA, if you have an HOA, it could be more, and utilities could be a little more too. So your total monthly cost, we're looking at 7,000 to $8,500. Now, you may be saying to yourself seven to $8,000 if you've never owned a home.

That's absolutely crazy. I just ran the numbers on a million dollar. It's a $1.2 million commercial property just recently, and the numbers came out to about $9,000 per month in maintenance, after insurance, everything else that came into play. It says not out of line whatsoever. I've run the numbers on these properties in the past, and I just did that on the, the commercial property.

And so when we look at this over the course of 30 years, just your mortgage interest alone, you would've spent $420,000. Taxes, $375,000 maintenance, $450,000. This is shocking Insurance, $105,000 and all the other costs baked in, your total cost would be 1.6 to $1.9 million. This doesn't even include opportunity cost.

That makes me wanna pull my hair out. That is a shocking number. And the, the higher the value of your home that you purchased, the more opportunity costs you were actually losing. Now, let's look at the home value over the course of 30 years. And the real value is right around, if you take, the average is about $1.6 million, so your net gain is zero to 2% annually.

That's right around where you would land the nominal gain. If you got the nominal gain, it would be about $2.8 billion. Okay. Now let's look at the s and p 500 and the difference here. And this number is gonna be shocking. So just get ready. $200,000 at a 10% rate of return is gonna be $3.5 million. So just the down payment alone is worth $3.5 million.

The monthly savings, if you got a 2000 to $2,500 difference is another $5.2 million. And so in total, the s and p 500, if you invested those two amounts over the course of 30 years, it would be 8.7. Million dollars. So stocks beat housing by 7 million. In this comparison, 7 million. Dollars. I don't know about you.

That is a shocking difference. Even when I ran these numbers, I was shocked. It is a shocking difference to look at this. And so let's talk about this because why do most people think homes win? It's because of behavioral finance. So nominal gains look big. So when they look at a home and they go buy it and purchase a home, they think, oh, I just bought a $300,000 home.

It went up to 500, 600, $700,000. I made $400,000 in this house when it's absolutely not true because of the other costs associated with this. And they don't think about inflation, they don't think about costs, and they don't think about opportunity costs. Honestly, if you add in opportunity costs, you're losing.

And that is where the numbers have to make sense for your specific situation. Now, let's talk about this for a second, because most people go and buy a house thinking it's a good financial decision. It's not a financial decision, it's a lifestyle decision. So you go and buy a house and you wanna be in a good school district so your kids can go to the best possible school.

Great reason to buy a house. You go to a house, buy a house so that you could plant roots for you and your family so that you can be in a specific location near family. Great reason to buy a house. You wanna buy a house because you love decorating your home and customizing it and being able to do all these things.

Those bring you true value. Awesome reason to buy a house, but as a financial investment is not the reason to buy a house. There's also a leverage illusion. So putting 20% down and buying 100% of an asset is a leverage illusion that a lot of people think. It's also forced savings, and this is something that I want to, uh, we'll talk about even more here in a second.

But the mortgage payments does equal some automatic wealth building, meaning at least you're saving some money somewhere because you absolutely have to make that payment. And so for some people, they have this forced savings. A lot of baby boomers who did not plan for retirement properly, they at least had this forced savings within their home.

Where this is a lot of where they get the value from is from their home building up over time. There's also media hype on housing. You know, housing prices, housing news. Those types of things are all part of this scenario. Now, when does home ownership make sense? Because this is the big question a lot of people have.

I gave you a couple different scenarios, but you're looking for a stable place to live. You're gonna live there long term. I think home ownership can make sense. Now I'm, by the way, I'm recording this entire episode as a homeowner. I have been a homeowner over the course of the last. 13 years. I've been a homeowner now, and so I'm someone who buys homes.

I live in my home and I buy them. I don't rent my homes. I do it for different reasons that are not financial. Another reason to buy a home is emotional and lifestyle value. So again, being close to family, being close to friends, being close to people you love. That's another great reason. It's a store of value for people who don't invest.

So this is the one thing I want most people to know is if. You know, someone who is bad with money, but they own their home, at least they have a store of value somewhat. They have some somewhat of an asset where at least if that gets paid off, they forced some savings into a specific location. I don't love it as the best asset, but if they're not gonna invest in the market, they're not gonna buy real estate, they're not gonna buy gold, silver, bitcoin, all these different options that they have available to them, and they wanna go buy a house, at least they have some sort of store value.

And so I do like it for those specific reasons. It also gives you protection from rent increases. So if rent does go up over time, you are protected from that. Like if your landlord can't just walk in and say, Hey, the, the price of this rent's gonna double now, that's happened to people before. And when that happens, you have to move.

It forces you to move. And so living in a home gives you a little more stability, which is why if you have a family, it does make a lot more sense for lifestyle reasons. It's a lifestyle reason, not a financial reason. Long-term inflation hedge. So it does help you hedge against inflation, kind of maintain that stored value long-term.

And so when you are looking at the difference between stocks are gonna outpace inflation, homes are gonna keep up with inflation, is kind of what you want to think about in your head there. And so that's where we're gonna look at that. And then low cost stability for family. So the cost differential if you, you have a family.

I do think owning a home is great for lifestyle reasons, and I really do think that's a huge, huge difference. So here's what I would say for most of you out there. If you have never run total cost of ownership and you're looking to buy a home, I highly encourage you to get the total cost of ownership calculator down below.

This is gonna help you tremendously. Just think about running these numbers. It's gonna help you when you are looking at different scenarios or situations, and it's gonna give you buy verse rent calculations as well. It's one of my favorite tools that we have here at Master Money. If you go to master money.co/resources, you can get it, but it'll also just be linked up, down below in the show notes.

So make sure you check out the total cost of ownership calculator. It is gonna help you tremendously in the long run when you are looking to figure out if you wanna buy a house, if you wanna rent a house, or if you wanna invest those dollars instead. And so for most people out there, you know, buying a house is going to be a lifestyle decision.

It is not an investment decision, whereas investing in the s and p 500 is something you would do for your retirement. So I want people to understand the differences because this is going viral. There's a lot of arguments out there, and most people lose their mind when you say buying a house is not that great of an investment because they don't understand the math.

And because they've never run the number, so I highly encourage you, do your own research, do it yourself. Go see where you would land if you bought a house and go see what would happen over the course of that same timeframe if you decided to invest those dollars instead. Opportunity cost is a real thing.

And when you factor in opportunity cost, in addition to all these other numbers we talked about, that is where you'll see a huge, huge difference. Listen, I truly appreciate each and every single one of you listening to this episode. We are gonna keep coming and bringing as you as much value as we possibly can on this podcast.

Our goal is for each and every single one of you to become very wealthy, and in fact, our goal is to create a million millionaire. So I hope you are one of them, and I know you'll be one of them if you continue to listen to this podcast. Thank you again so much for being here, and we will see you on the next episode.