The American Dream

Today's Newsletter:

• My Latest

• The Housing Myth

• The American Dream

• A Money Question

My Latest

My latest (a throwback) dives into key elements of selling your business

I teach you:

• What to be thinking about

• How much you can spend

• Key factors that play a role

• Ensure you “win” after selling

You can check it out here ⬇️⬇️⬇️

The Housing Myth

I have been given a lot of financial advice over the past 16 years.

Some of it good.

Some of it great.

Some of it…well, let’s just say not good.

Yet there is one piece of advice that felt counterintuitive, and has served me well:

“Jacob, consider your house as a place to live, not an investment.”

It came from a family member, and at the time I thought, ok, sure but it is still an investment.

Well, fast forward three houses, and I get it.

In fact, I don’t just get it, I preach it.

Your house is not an investment.

A financial one that is.

That is what we are going to talk about today.

I am going to show you the numbers behind this.

I am going to break the “American Dream” propaganda on homeownership.

Let’s dive in…

______________________

The American Dream

Ok, let’s level set, you have to live somewhere.

The two options are either buying or renting.

If you are anything like me, you grew up hearing “renting is throwing away money”.

Yet what if I told you buying can often be “throwing away even more money.”

Now, some of you are flat out appalled I would say that and ready to send me an email with your situation.

I know, I know, there are situations where you bought at the right time, in the right area, for the right price, and it turned into a good investment.

(I have done that too).

Yet buying a house is still not an investment…

Still not swayed, let me show you some numbers.

Owning a home consists of the following expenses:

• Mortgage

• Closing Costs

• Property Taxes

• Homeowners Insurance

• Maintenance/Upkeep Costs

Renting a home consists of the following expenses:

• Rent

I just want you to see that before we dive deeper into the numbers.

Now, let me break a little myth for you:

“A mortgage is me paying down a house, while that rent payment is just money going out the window.”

True, but not in the way you have been sold.

A mortgage is broken down into two areas:

1. Principal

2. Interest

In the first 10 years of a 30-year mortgage, you will pay roughly 70-80% to interest and 20-30% to principal.

Said another way, in the first 10 years, you are “throwing away” plenty of money; it is just going towards interest, not rent.

Now consider that the average homeowner lives in their house for ~ 11 years.

Starting to see what I mean?

Ok fine, let’s take it a step further, let’s say you pay extra principal on your home, or simply buy your house in cash.

Boom, no interest…

Great, now let’s talk about opportunity cost.

For our example, we are going to use a $700,000 house (the cost of my last house, more on that later).

I put down $700,000.

I now have to compare the “return” of that money stuck in my house compared to other options.

Here are those returns:

• Residential Housing Market - 4.2% (since 1928)

• S&P 500 or Stocks - 9.96% (since 1928)

• Gold - 4.9% (since 1928)

As you can see, the residential housing market has only returned on average roughly 4% a year.

Yes, I know there are unique areas that have done better, but again, the facts remain.

To drive this point home, let’s use me as an example.

I “made” $300,000 on my last house.

I bought it in 2015 and sold it in 2024.

I had paid for the property in cash.

So consider my opportunity costs of the investments above.

My house went from $700,000 to $1,000,000

Investing in the S&P 500 would have returned 185% over the same time period.

So my $700,000 would have turned into $2,198,000.

(I use the S&P 500 for my example, as all free cash I have goes into equities.)

So, my opportunity cost was $1,198,000.

(Yes, I know there would be rent due, but the point remains)

So was my house a “good” investment? Not a chance.

To add to that, consider that in my time owning that house, I paid roughly:

• $100,000 in property taxes ($10k per year)

• $70,000 in upkeep/maintenance costs (1% of the home value)

• $60,000 in homeowners insurance premiums ($6k per year)

• $50,000 in real estate agent fees to sell it (5% commission on $1M)

So even with no interest payments, I put $280,000 into “owning the home”

So that $300,000 I made was closer to $20,000.

I show this because we have been sold a lie.

“Homeownership is a great way to build wealth.”

Trust me, I have run the numbers, and I assure you it is not.

Now, does that mean you shouldn’t buy a house?

Absolutely not, my wife and I bought a new house in 2024.

It is one of the best purchases that we have made.

It just isn’t an investment.

In fact, it is a cost center.

Yet we will make countless memories there.

So for us, it is far and away worth the trade-off of “making a better investment”.

I share all of this because, just like much of personal finance, you need to know your numbers.

Run the numbers for yourself, and I assure you one thing ~ You will make better money moves.

______________________

I hope today this newsletter has given you a fresh perspective on homeownership.

I know for me, it was ingrained in me that renting was throwing away money and homeownership was an investment.

I assure you both of those are myths.

So my ask of you all is this: just run the numbers for yourself.

There are areas of the country where buying outweighs renting.

There are areas of the country where renting outweighs buying.

There are stages of life where buying outweighs renting.

There are stages of life where renting outweighs buying.

Until next time my friends!

____________________

A Money Question

What percentage of your mortgage is going towards interest?

My hunch is that for many, this number would surprise you.

______________________

3 Ways I Can Help You

💰 Schedule an introductory call with Moment. We help athletes, entrepreneurs, and key employees build and protect wealth.

📹 Check out my YouTube channel. A safe place to get smarter with your money.

📷 Interact with me on Instagram. Where I provide bite-sized daily content to level up your money game.

Moment Private Wealth, LLC is a Registered Investment Advisor, located in the State of Missouri. Moment Private Wealth provides investment advisory and related services for clients nationally. Moment Private Wealth will maintain all applicable registrations and licenses as required by the various states in which Moment Private Wealth conducts business, as applicable. Moment Private Wealth renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or under an applicable state exemption or exclusion. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice.