The Personal Finance Podcast - Buying a House VS. Investing In the S&P 500 (Which Is Better?)

Episode Date: December 3, 2025

Join the community built to help you master your money, stay accountable, and reach financial freedom. 👉 Join Master Money Academy today! In this episode of The Personal Finance Podcast, Andrew reveals the shocking truth that while homes increased 400% since 1970, the S&P 500 returned 7,000% in the same period. He breaks down three full case studies showing the real total cost of ownership including property taxes, maintenance, insurance, and opportunity cost, plus when buying still makes sense and how to calculate your total cost of ownership. Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Listen to The Business Show here. Partner Deals Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Get 50% Off Monarch, the all-in-one financial tool at www.monarch.com/PFP Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/  DELL: Get a new Dell AI PC starting at $749.99, at Dell.com/ai-pc. Policy Genius:  Go to policygenius.com to get your free life insurance quote. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at shopify.com/pfp Wayfair: Shop outdoor furniture, grills, lawn games, and WAY more for WAY less DeleteMe: Go to https://joindeleteme.com/PFP20/ and Use Promo Code PFP for 20% off!   Resources Mentioned The Total Cost of Ownership Calculator Master Money Co Resources Connect With Andrew on Social Media: Instagram TikTok Twitter Master Money Website Master Money Youtube Channel Learn more about your ad choices. Visit megaphone.fm/adchoices

On this episode of the Personal Finance Podcast, we have a big episode in the versus series. We are going to do the S&P 500 versus buying a house. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of MasterMoney.com. And today on the Personal Finance podcast, we're going to talk about the S&P 500 versus buying a house. If you guys have any questions, make sure you join the Master Money newsletter by going

to MasterMoney.com. slash newsletter. And don't forget to follow us on Spotify, YouTube, Apple Podcasts, or whatever podcast player, you love listening to this podcast on it. If you want to hop out the show, consider leaving a five-star rating and review on Apple Podcast, Spotify, or your favorite podcast player. Now, today, we're going to be diving into a huge showdown between the S&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 going to 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 is right before 2026. If you put that same amount of money into the S&P 500, here is the crazy part. You would have a 7,000% rate of return. And a lot of people out there think that buying a house is a fantastic investment. And we're going to dive into the detail. And we're 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 out of that. We're going to 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

S&P 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&P 500 and buying a house and what those returns are. And when you look at this, you're going to see, this is not a typo. A house has returned four times, whereas the S&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 going to talk about what homes actually appreciate after inflation in all costs. We're going to go through some case studies and see what happens if you bought a $300,000 home, a $500,000 home, and what happens 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 going to 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 going to 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, if that's something you're into, let's get into it. So part one is I want to talk about the 100-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're going and buying a home because you want to live in a specific location and you want to 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 going to fall behind with their finances. absolutely not true, and the math is going to show you right now why that is not true. So Robert Schiller has this time frame between 1890 and 2024 where real appreciation, which is inflation adjusted for a home. If you bought yourself or home, over the course of the last 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 will say, what about investing in real estate and getting cash flow, 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 100 years. Now, let's be very clear, because inflation makes home prices go up in dollar terms. And so we want to 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 100 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 going to be very similar to the last 100. years. And if that is the case where we have ups, we have downs, we have supply issues,

we have demand issues, there are going to 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. All right. So now let's look at the same exact timeframe. We're going to look at 1926 to 2024. And I want to look at that time frame when it comes to the S&P 500 because there's very different rates of returns for the S&P 500 during that time frame then 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 going to 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&P 500, you have the option to reinvest your dividends. It's usually just a little checkbox 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 going to make sure that you are reinvesting your dividends and you're just growing your portfolio faster, especially if you are a long-term investor and you're

looking at doing this for retirement. And so this is the big deal here. Now we're looking at housing, which is 4x since 1970. And the S&P 500, as we talked about at the top of the show, is 70x since 1970. So that is a 17 to 20 times difference during those time frames. 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. 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 going to break this down right now. And in addition, if you want to run these numbers on your own, grab our total cost of ownership calculator. It's going to be linked up in the show notes down below, or you can go to mastermoney.com slash 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 will also do a comparison to the local rent in your area. So you put the local rent numbers in your area. It is going to spit out a calculation that shows you exactly how much you're spending on a house. Now, I love this tool because this is going to help you make decisions and make better decisions overall. Or you may be able to realize,

oh, shoot, I probably bid 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 going to dive into the total cost of owning a home next. All right, 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 going to 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 going to 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. Ended up. itself. But for most people out there, if you go out and get a mortgage, you're going to 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'm not going to stay in my home for 30 years. Maybe I'll stay

what the American average is, which is seven to ten 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. 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 going to 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 want to 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 going to have costs for the rest of your life. You're going to be spending money. Sure, it's an absolutely an asset. I'm not saying it's not. I'm not Robert Keosaki. I'm not going to 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 going to 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 want to make sure that you note is that you're going to 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. And then you're going to figure out, okay, well, if they've owned this house for a very long period of time, maybe there's going to 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 want to 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 2 to 3% of their home value is for maintenance and repairs. Now, it may not be every single year that you pay 1 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 the weather conditions in your area. It depends on honestly the quality of the products in your home, like your water heater and some those other things. And so most people just need to understand, well, a roof is going to cost me. A roof used to cost five grand on a, on a 1500 square foot home. Now it's costing between

$10,000 to $25,000 on a 1500 square foot home. And you may be saying to yourself, well, yeah, but I'm not going to 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, $6 to $12,000 for an HVAC system. A water heater is $1 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 want to update the home with some flooring, or if you want to repaint your house,

which 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, expensive if you hire somebody, interior or exterior. So painting the exterior of a home, depending on your square footage, is 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 going to add up and you're going to continue to have to pay for this stuff. 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 mortgage 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 an absolutely no if and or buts. You must have that on your home if you're a true wealth voter. 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-laws house is in Florida, and it is a house that my wife's grandfather bought way back in the day for 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 going to 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 hand, 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 them. One of them just told me they had a fire at the house. They had to actually use insurance because of the fire that just happened. So there's just so many different things that you want to make sure that you insure on your home.

Now, in addition, we have utilities. Now, sure, you're going to 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 time frame. Also, HOA fees. If you live in a location with HOA fees, I have HOA fees, but there are $100 a year. And the HOA doesn't really bother me. It's 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've got to 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's side, you have closing costs of 2 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 6 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 make it. 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 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 had to pay three to six percent 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 six percent of that.

And so this is why the returns go down so much over time on. 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 read the kitchen in the bathroom. In some situations, maybe if you're going to sell it right away,

way, but over time, that kitchen and bathroom, we're going to slowly start going out of style, and then you're going to want to 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 after you do that renovation because it's a newer renovation. If you put some wear and tear on those, then you're going to 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, you know, it's $100 a month, or it could be something where if you, you know, mow your own lawn and you enjoy doing that, the products to keep up your lawn, the mower maintenance, the gas, all these different things are going to cost you money.

And they're going to 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 lows all the time. You have to frequent those stores. You got to 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've got to maintain the pool. You got to clean the house.

You've got to 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 were paying for them out of your pocket. So instead of getting those dollars invested or putting your emergency fund or wherever else you want to put them going on vacation,

you instead are going to have to pay for it out of pocket. And the opportunity cost could be great. Let's say, for example, it's $500 over the course of 30 years. We know $500 over the course of 30 years is going to get you to a million bucks in a Roth IRA. And so because of that, if you 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 will 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 there. We don't even think about opportunity costs, but it is sitting there for us to look at this.

Now, next, what we're going to do is I put together a few different case studies. We're going to look at these three different case studies. We're going to look at a $300,000 home. We're going to look at a $500,000 home and a million home and just look at these three case studies and what the difference would be. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, Indeed is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs, help you stand out and

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because local news is big news. Choose news, not noise. CBC News. Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a life. lifetime. I wonder if my out of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IG Private Wealth.com. All right. So up front, I want to 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 going to 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 utilities increase or anything else, maybe it's another $200 that you add in there. And if you have an HOA or something, it could be $100 a hundred bucks a month. So your total monthly cost would be $2,300 to $2,800 per month over the course of that time frame. 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 $100,000. over that time frame. Okay. Now, you're going to have to pay taxes anyway. And I would even make an argument if you are renting. You're paying the landlord's taxes. So I would make an argument, honestly, that you're paying those taxes when you're renting to. 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 a month. And then if you had an HOA of $100 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 in most people don't think about. This is what I was trying to say up from, 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 because 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 this 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. 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 a 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 of years is $200,000 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 over the course of 15 years.

That's half that time frame. 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 $1,4,000 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 $8,000,

which the total is $1.8 million. So stocks are beating housing by $1.3 to $1.4 million on a $300,000 a half. 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 going to 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 going to have an entire episode, by the way, on Byverse Rent coming up in early 2026 here. So really, really excited for that. Make sure you're subscribe to this podcast if you're not already. So you can see that episode. We're going to do a deep dive just like this

on that episode. All right, let's look at case study number two. So a down payment on a half a million home, $500,000 home is 100 grand. Okay? That's 20% down. So your mortgage payment is going to be $2,550. Your property taxes will be about $5,500 and maintenance would be another $7,500 per year. And then insurance would be $2,100 per year. And then any other increases like utilities increase or HOA could be an extra $300 per month. Now, you can take those out and I will in a minute if those don't not factor in. So over the course of 30 years on a half a million, house, you would pay $200,000 in mortgage interest if your average mortgage interest was what it is today, 6.5%. Taxes, $180,000. Maintenance, $225,000 because increased square footage or the size, and that number

is going to go up. Insurance, $63,000. Utilities, $110,000 difference. And if we look at closing costs in HOA's, that could be another $100,000. 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&P 500 are going to look at $100,000 at 10% rate of return over the 30 years

is $1.7 million. Just that lump sum investment of the down payment. And the real savings, if invested, an additional $600 per month, is $1.25 million, meaning that the stocks are going to beat this by two million dollars. Stocks would beat the value of your home by $2 million if you compare it to two. That is absolutely crazy 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 decision. There are a lot of reasons to buy a home, but they're not financial. And that's what I want most people to know. Now, we're going to 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. $7,000 to $8,500. Now, you may be saying to yourself, $7 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 commercial property. And so when we look at this over the course of 30 years, just your mortgage interest alone, you would have 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 want to pull my hair out. That is a shocking number, and the higher the value of your home that you purchase, the more opportunity cost 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. It's about $1.6 million. So your net gain is 0 to 2% annually. That's right around where you would land. The nominal gain, if you got the nominal gain, to be about $2.8 million. Okay?

Now let's look at the S&P 500 and the difference here. And this number is going to be shocking. So just get ready. $200,000 at a 10% rate of return is going to be $3.5 million. So just the down payment alone is worth $3.5 million. The monthly savings, if you got a $2,000, at $2,000, $500 difference is another $5.2 million. And so in total, the S&P 500, if you invested those two amounts over the course of 30 years,

it would be $8.7 million. So stocks beat housing by $7 million in this comparison. $7 million. 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 $500,000, $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 an opportunity cost, you're losing. And that is where the numbers have. 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 want to 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 can plant roots for you and your family so that you be in a specific location near family. Great reason to buy a house. You want to 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 for savings. And this is something that I want to, we'll talk about even more here in a second, but 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. And 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 homeownership 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 going to live there long term. I think homeownership can make sense. Now, 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 note is if you know someone who is bad with money but they own their home, at least they have a store of value someone.

They have some what of an asset where at least if that gets paid off, they force some savings into a specific location. I don't love it as the best asset. But if they're not going to invest in the market, they're not going to buy real estate, they're not going to buy gold, silver, Bitcoin, all these different options that they have available to them. And they want to 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 price of this rent's going to 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 a lifestyle reasons. It's a lifestyle reason, not a financial reason. Long-term inflation. 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 going to outpace inflation, homes are going to keep up with inflation is kind of what you want to think about in your head there. And so that's what we're going to look at that. And then low-cost stability for family.

So the cost differential, if you have a family, I do think owning a home. 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 going to help you tremendously just think about running these numbers. It's going to help you when you are looking at different scenarios or situations. And it's going to give you buy-verse rent calculations as well. It's one of my favorite tools that we have here at Mastermoney. If you go to Mastermoney.com slash 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 going to help you tremendously in the long run when you are looking to figure out if you want to buy a house, if you want to rent a house, or if you want to 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&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 time frame 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 going to 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

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