My husband Thom and I have been real estate brokers and investors for over 35 years. And while I’ve been mainly writing about the subject for most of those years, Thom has actively been a specialized commercial broker. Even better, we’ve used our knowledge and background to manage our own purchases and investments. Then about seven years ago we began switching our thoughts about real estate ownership; what it means and what it can do. That’s when we started gradually rightsizing our lives. Lately, it occurred to me that while I often take what we’ve learned through the years for granted, it might benefit others to see it through our eyes. In fact, in many ways real estate is a perfect mirror for a rightsized life.
First, here’s some background. When we first got involved in real estate back in the late 70s and early 80s we became house-flippers. Even though my parents had offered us a great example of how you could make money buying and holding properties, we needed the cash to pay our bills. So rather than hanging on to them, we fixed them up and sold them as quickly as we could.
In some ways, it worked. Even though we had very little money, we bought over a dozen homes with nothing down and fixed them up before we flipped them. Back then you could buy a decent little house for less than $50,000 and flip it making $5,000 or $10,000 rather quickly without much to loose. But even though we were fairly lucky, it sounds more ideal than the reality. The truth was that while we learned a lot, and managed to live in some very interesting homes through the years, we still seemed to struggle to pay our bills. It might sound romantic to be a house flipper and offer a path to financial security, but without the ability to easily hold the properties for any length of time, our success was fleeting. And let’s face it, with no guaranteed income, it is a stressful way to live.
I wish I knew then what I know now. With that in mind, here are our views of SMART and rightsized real estate ownership today.
12 SMART & Rightsized Tips For Buying Property
- You are not your square footage. When we were younger, size mattered a lot to us. It is so easy to be impressed by things that look opulent and spacious without considering the cost of the tradeoffs of paying for and maintaining it day-in and day-out. Most of us need far less room than we think we do. Avoid defining your true nature or worth by the size or image of your home. Remember, you are so much more than that!
- Layout matters. What does matter is the functionality of your home. We’ve viewed homes with twice the square footage of our current home but they seem cramped and awkward. That’s because builders, who are mostly men, build to make money—not to maximize space and comfort in a home. When you pay less attention to the square footage or the “look” and more attention to the function, you will be pleasantly surprised.
- Buy the best location you can afford. There is a reason for the statement: location, location, location. The first home we bought was a duplex on a busy corner in Colorado Springs, CO. We ignored the traffic and the noise because we thought we were buying it at a great price and that living on a busy street wouldn’t matter—wrong! After living there a couple of years and putting up with all the commotion, we had to discount the price just to sell it. Location matters.
- Never buy more house than you can easily afford. Thinking otherwise is gambling with your future. Lenders are in the business to give you the biggest loan they can. Unfortunately, many real estate agents also push to sell you a bigger home so they make more commission. Then add all that to the media’s constant push to insist that you won’t be happy unless you have a bigger fancier home than your neighbors and people frequently buy a home they can’t afford. Even if the buyers manage to scrape by enough to not lose it in foreclosure, the ongoing stress they endure is an unacceptable price to pay.
- Live as close to where you work as possible. Research proves that some of the unhappiest people are those who regularly commute long distances. Not only are they unhappy, they are up to 40% more likely to divorce. Long commute times lead to more stress, unhealthy eating and sleeping, and poor health. (1) And if a person thinks they are buying that big house in the suburbs for the family, what kind of unhappy, unhealthy, stressed parent would they ever be?
- Sometimes it is better to rent than to own. I wrote a blog post about this before so I won’t go into details here. Just remember, rightsizing suggests that you take the time to figure out what really matters most to you and decide from there. If you do sell, it is often very SMART to rent for a while in different locations while you get very clear about what’s important to you and where you want to live. Sure, it can be a hassle to move twice, but much easier if you are just renting!
- Keep in mind that your home is an expense—it is seldom the best investment. It’s true that while it may (or may not) go up in value, you always need a place live. Constantly remember that your home is not ready cash and its primary value has little to do with its price in the marketplace. Instead of thinking of it as an investment, think of it as the expense of shelter for you and your family. While you want it to be comfortable and fulfill your needs, thinking it adds to your “worth” while costing you money to live there is just wishful thinking.
- A second home is seldom a good investment either. While realtors, lenders and anyone who wants to sell you something will do their best to convince you of all the money you will make on that ski condo in Aspen, the truth is that it is seldom that easy. Even if owning that cottage in Hawaii seems incredibly romantic, the truth is that you probably won’t visit it as much as you think. Sure you may be able to rent it out on AirBnB, but do you really want that job—because it does take more time and energy than most people have. Most 2nd homeowners greatly exaggerate the amount of time they will use their 2nd home and dramatically underestimate the cost and time to maintain and pay for it.
- If you want to invest in real estate—and we suggest you do—buy an investment property based on the numbers, not emotion. Investing in real estate has been very, very good for Thom and I. But when we buy something it is based on its return on our investment (ROI), not the emotion of owning something sexy or cool. If our investment doesn’t have the ability to bring in the ROI that we want and expect, we patiently wait until the right one comes along. On the heels of this idea is if we want to travel and stay in a property just for fun—we use the ongoing money from our investment cash flow to pay the cost.
- Don’t wait until you are too old to start thinking about where you want to live when you aren’t as mobile, flexible or financially free. According to a recent article in AARP, “Only 1% of all houses in the U.S. are adequate for people to age in place.” But far too many people wait until they are in their 70s or 80s before they start realizing they won’t always be able to climb those stairs even if that is the goal. Or what about having a multi-acre home site that requires ongoing maintenance, not to mention the need to drive just to pick up a carton of milk? Hopefully, we are all aging for a long, long, long time but if we wait until we don’t have much desire or capability to move, chances are the decision about our “last home” will be made by someone else.
- Having no mortgage on your property is one of the best things you can do to achieve financial freedom and peace of mind for yourself and your family. I know this can be difficult but believe it or not, nearly one-third of all homeowners in the U.S. (approximately 21 million people) own their own home according to Zillow. Here is another blog post I wrote about how to go as debt-free as possible: Rightsizing Your Finances.
- Never forget that the look or size of your home isn’t what makes what makes it a happy home.
If more people spent time thinking about their needs, the functionality of a potential home (or investment) and what the tradeoff to own is before buying anything, they would likely be much happier in the end. Unfortunately, most people get into a real estate agent’s car or surf the Internet looking at glossy photos until they find something they fall in love with on sight. Within days (sometimes hours!) they are writing up an offer, searching for a loan, and a short time after that moving into their “dream home.” Instead of considering that a buying a home is often the most expensive purchase anyone will make in their lifetime, many go about it like impulse buying on Black Friday.
Back all those years ago Thom and I would never have guessed we’d end up thinking about real estate as something you could rightsize. But like so many aspects of life, there is no going back to mindless living or mindless real estate ownership. And as usual, it is SMART remember that a rightsized life is what most of us really want at the end of the day.
I am not a flipper or have anything to do with real estate, except live in it. I recently inherited a house in a small college town in the South, and am retiring there soon. I have family there and lived there as a kid, have gone back to visit throughout my life many times, and so I know what I’m getting into. Now I live on 5 acres in AZ with so many things to keep track of and do that it is overwhelming. I’ll miss being in a rural place (love nature!), but driving 50 miles RT for groceries is coming to an end. My job is in the opposite direction, 65 miles RT, so I spend too much time in a car. I am looking forward to walking or biking one mile to buy groceries, go to the library, eat at a cafe or restaurant, etc. Both houses are the same square footage, but the layout is better in the Southern house. I really get the importance of layout! It just seems bigger and more functional. I’ll miss 2 bathrooms and my dogs will have to adjust to 1/3 of an acre, but we’ll figure it out. This is rightsizing for my next life adventure. Your article validates me! Oh, and no more mortgage.
Kathy Gottberg says
Hi Brickhorse! Thank you for stopping by and sharing your personal experience with us. It sounds like you’ve come to realize that sometimes all that “space” comes with a high price. But if you’re anything like me, you needed to learn that on your own. It sounds like you will now be able to many of the things that focus on the “joy of simple things” once you get moved and retired and I think that will suit you nicely. That’s exactly why I believe rightsizing is so great because it allows you to make the adjustments when they feel right to you, and only to the extent that feels right. But you know what? If you find you make that move and it still doesn’t fulfill you, you can just change again. We are NEVER stuck unless we think we are. Good luck. I hope you check back now and then and let us know how your life is unfolding! ~Kathy
Terri Webster Schrandt says
You always have such sound advice, Kathy! I’m still living in the “starter” home I bought 29 years ago with my first husband. Yes it is a small house 960 sq feet, but our mortgage payment was never higher than $500 a month (in California!!). As my life and circumstances changed, I could never afford to move out of this house. It is in a great location, central to all of Sacramento in a nice working class neighborhood with parks and school nearby, as well as a freeway (plus I’m a 90 minute drive to South Lake Tahoe, and 60 minutes from the delta). My new hubby and I planned a master BR addition in 2015 so we refinanced at a MUCH lower rate, saving us $200/month. Took out a HELOC and built the addition (280 sq ft–I have a huge backyard), added the second bathroom and some awesome office space for me and I will live here the rest of my days. Hans has a house (paid off) in Hawaii (long story) that we are going to renovate and rent soon. If everything else tanks here we can always run to Hawaii!
Kathy Gottberg says
Hi Terri! You and Hans are great example of SMART and Rightsized real estate owners. Making your property work for you both space-wise and financially-wise is evidence of that. Thank you for sharing your great example. It’s so important to realize it isn’t really about size compared to others, it is recognizing what size is “right” for you and embracing that. ~Kathy
Tom Sightings says
Having recently sold our old house (2800 sf) and bought a new one (2100 sf), I don’t know how anyone makes money flipping real estate … the transaction costs are so high! Now we’re getting ready to do some renovations. Do you have any advice for us?
Kathy Gottberg says
Hi Tom! Yes, you know from personal experience that all those costs to sell (and buy) are expensive. That’s one reason why we did get our licenses so long ago because we knew that would help defray the costs. But the loans will eat you up and rising construction costs–even if you can do much of it yourself, will do the same. As far as renovation costs go, when we bought our current home we wanted to make the changes we knew were important to us right away. In the past, we’d wait until we were ready to sell (or flip) to fix it up. This time we wanted to do it right away so we could enjoy it ourselves. We did our best not to over improve for the neighborhood but ended up spending extra on energy efficiency (like solar) and desert landscaping because it was important to us. What we did was really, really researched our options, and shopped for best prices, once we’d decided what is important. The good news is that the smaller the house, the less you have to (or can) change. And furniture and window coverings were limited too. Good luck! ~Kathy
Angus Reed says
I agree with all of your tips. Layout is an important thing before buying a home. Location is the main thing about buying a home. It’s really important to choose a location which has low noise and less traffic around your home.
Kathy Gottberg says
Hi Angus! Layout and location seem like easy things to get a handle on…but personal experience told me that it is also easy to be romanced into ownership even when you question those things. So important to tell your real estate agent up front so you don’t get led astray! ~Kathy
Carol A Cassara says
You and I agree on all of the above. I definitely think renting is under-rated.
Kathy Gottberg says
Hi Carol! You are so right…it is not a black and white issue. That’s why I love thinking about it from a “rightsized” perspective. We are all different and have different needs and wants. So important to fit our real estate to what matters most to just us. ~Kathy
Yes flipping is not for everyone and. An cost youmoney. I bought cheap cottage and spent too much money revamping it after finding many hidden problems including termites!! Tradesman and materials always cost more than you think and even all the work I did myself cost me in time and effort. I made a small profit after months of trying to sell. Subsequent owners doubled their money during a real estate boom. . My blood pressure was not good during it and all the stress. It taught me to be content with what I have and not follow trends!! Life is too short to be always worrying and trying to keep up with the Jones.
Kathy Gottberg says
Hi Yvette! Thank you so much for sharing your own personal flipping story. Sorry it didn’t work out as well as you hoped but at least you got out with a little profit–not everyone does that. The real estate market is always in flux so counting on it to always be appreciating can be disappointing unless you have the ability to hang on to it for a while. Everyone is so excited at the current real estate prices but after 35+ years in the business I can tell you one thing is for sure, prices will go up, and prices will go down. It is learning to ride those cycles that serve a person the best when they invest in real estate–and flipping usually doesn’t offer the ability to hold out. Good for you for learning that it was too stressful for you and that you don’t need to follow trends. I so agree that life is too short for that! ~Kathy
Susan Mary Malone says
Great post, Kathy! I love how you break all of this down.
Number 10 is the one I’m chewing on now. I love, love my home. I have it perfect for me and all the dogs. BUT, and this is a big but, it’s two story, with the bedrooms upstairs. I keep thinking that at some point, that might be difficult. But, I don’t want to move!
So, just chewing on it 🙂
Kathy Gottberg says
Hi Susan! Yeah, I can imagine that it is a tougher decision when it is fitting your lifestyle so well right now. I do think that considering what it would take to make it suitable for you no matter what is a good thing if you’re convinced you’ll never want to live anywhere else. Doing it when you can (and have the financial wherewithal is important too.) I think asking ourselves where we plan to be at 95 is a good question. While we can’t know for certain what will be important to us then, or how physically fit we will be, we can recognize that our priorities change as the years add up. Directing those priorities in ways that will serve us is a key–and maybe that’s another factor in rightsizing! ~Kathy
Such a great post! I know of a few people who flip houses. Only one makes any money at it, but he is very careful about what he buys, when he buys, and he has a team behind him who he trusts to do the work (he actually does most of it himself). The others got in after “everyone” else did and found themselves holding a very expensive piece of property with no buyers.
Both my husband and I had rentals at one point but now we are happy to be out of the landlord business – we no longer dread those middle of the night or weekend calls.
Kathy Gottberg says
Hi Janis! Thanks for sharing some of your personal experience with others who are “flippers.” It has surely gotten so competitive now but the TV shows continue to imply that it is fun and easy money. As you say, many are stuck with expensive properties they are unable to sell. And yes, rental homes CAN be a huge pain if you management them yourself–that’s why Airbnb renting only works for some people. And we tend to prefer Commercial real estate because it is far less management intense as well. Most all of it is a trade off–that’s why it is so important to “rightsize” what works for you and your family with everything that you own. ~Kathy
Great post Kathy! Too many people don’t think of their future and look at their home for it’s resale value but they really have no plans to sell it! 2 or 3 levels does not really keep you in that great of shape! Acreage is a lot of work.Living out in the boonies as you age is not so great for future medical services. My heart went out to folks I saw from parts of Oregon having to drive or fly into Portland to get their cancer treatments.
Kathy Gottberg says
Hi Haralee! I so agree that what appeals to us when we are younger doesn’t necessarily translate the same 20 or 40 years down the line. When we were young Thom and I used to dream of acreage too. Now we wouldn’t do that for anything. We know from experience that the more land you have the more maintenance. And although some people believe that gives you more privacy or quiet, all it takes is for your neighbors to own a bunch of barking dogs and there goes the quiet. Good neighbors are a key whether you are in the country, the suburbs or an apartment in town. And being close to services that you appreciate and enjoy is primary for us. ~Kathy
Depends on the acreage. We have 12 acres and let most of it stay natural, no maintenance, but beautiful to look at versus a house next door. We downsized when kids were young and became debt free. We retired to a large home in a beautiful low cost State (energy costs, food low) with minimal possessions and love the “space” not cramped and room for friends and family who visit. Because we have been debt free our retirement funds go a long way to paying for travel with minimal monthly costs. It is truly delightful living and yes, we VRBO only too.
Kathy Gottberg says
Hi Lisa! Thank you for offering such a wonderful example of rightsized real estate ownership. You are correct that it doesn’t depend on the size of your lot/acreage or the size of your house really. It all depends on whether it gives you joy and fits closely with your time, finances and what you love doing. It sounds like you have discovered what really matters to you and live life on those terms. Good for you and thank you again for sharing it with all of us. ~Kathy
Still the Lucky Few says
I agree with all of the points above, and have applied most of them. One stands out as something I have not done since the 80s, and that involves renting. I bought my first home in 1983, and never regretted it. I was so glad to leave the rental experience behind! Always so good to read your knowledgeable posts, Kathy!
Kathy Gottberg says
Hi Diane! It is wonderful that you have been able to own your own home from so long. Hopefully it is a place where you can continue to “age in place” for as long as you can. Unfortunately, as AARP says, only 1% of the homes in the U.S. allow people to do that for the reminder of their lives. Not sure about Canada where you live but it is something to consider. I think the longer we live in one area — not to mention in one house — the more attached we can get making it VERY difficult to make a move if it becomes necessary. Sometimes renting then is the best option. And IMHO it is always good to have options. ~Kathy