Five Things You NEED to Know Before Buying a House

buying a house

I hate buying houses. I don’t “hate” many things. But I’ve lost millions of dollars buying houses.

The stress is unbearable when you need to sell. And you have no money when you need it.

It’s a prison. The white picket fence is the prison bars. The bank is the guards looking in. And the need to protect your family keeps you in a solitary confinement of guilt and anxiety and stress.


I won’t give all the reasons. Google “Altucher” and “home ownership”. I wrote about it a few times. Then someone wrote against my arguments and I responded to those. On and on.

(See, “Why I Would Rather Shoot Myself in the Head Than Own a Home” for links to all my reasons)

BUT, some people simply MUST own homes. I will no longer argue with them. Everyone wants to know: is NOW the right time?

They have good reasons:

  • roots
  • a lawn for their kids (somehow lawns costs a $100,000 down payment and huge interest rates)
  • a place where they KNOW they can be there for 20 years (even though, on average, Americans buy new houses every five years)
  • they love the neighborhood and there are no rentals in the neighborhood
  • they think it’s an investment.
  • it’s the “American Dream”. Blah.

Fine. Buy a house. Never forget that you are being brainwashed by banks, by marketing campaigns, by Fannie Mae (controlled by the government), by your job (that is afraid of you having mobility), by governments (that love to know where all of your assets are when they need to seize them), and so on. As long as you are aware of those, then you are ready for what I write below. 

But please at least do the below checklist before you make this decision. You have to say “YES!” to all of the below. And then it might be a decent choice for you.


Or talking about them. Or talking to people who love toilets.

Because, I hate to be the one to break this to you, but you are losing your hair. And clumps of hair will get in your pipes. And then your toilets will stop. And when guests are over the toilet will overflow and “stuff” will go all over the floor.

It will happen. Good luck.


Love it!

It’s so amazing: empty aisle after empty aisle. It stretches to infinity. And nobody seems to work there.

It’s like an abandoned Death Star. Where did all the Storm Troopers go? Is there one goddamn person who can tell me where the air conditioners are? And then the bug spray? And the shovels? I need a shovel. NOW! But there’s nobody.


I have nothing against that. A lot of people can’t do basic addition.

I’m one of them (see above: lost millions).

If you don’t know how to add I have a solution below that makes it so you don’t need to know how to add.

But first, what is the true cost of your house:

OWN = down payment + size of mortgage, + all the interest payments, + all the taxes (which can’t be calculcated since taxes will go up in unexpected ways) + all maintenance (which also can’t be calculated) + opportunity cost of time (which is minimal because you love Home Depot and toilets).

RENT = All of your rental payments added up MINUS what you would make buying bonds with the money you would’ve used on a downpayment.

Then compare the two. Which one is more? Don’t do the choice that adds up to more. (Unless…see parts D and E)

(the American Dream could be real, but only if your eyes are wide open)

You can argue that I should also MINUS what one would make from the rising value of a house. But it’s basically unpredictable and people put that money into buying the next house anyway.

Housing prices in many parts of the country are still down from ten years ago. So who knows? And housing has not gone up faster than inflation over the past 100 years.

And if you believe in housing as an investment you can Rent and then take what would’ve been your downpayment, borrow 100% against it (this is allowed in any bank) and buy a residential REIT on the stock market.

Then it’s liquid and you can sell any time regardless of how the economy is doing. So if you truly believe that housing is going up from here (e.g. you are a prophet from God and somehow know these things when nobody else does) then you can rent and put all your money times two into a REIT.

So ” a house is a good investment” is never really a good argument…unless…


There’s no way to predict if housing is going up or down. So you need to get Death, Debt, or Divorce on your side. These are basically the ONLY ways you can guarantee you are getting a better deal than anyone else.

If every house in an area is going for $400,000 then you want to make sure you don’t pay more than $200-250,000.

That’s called “good investing”. Good investing is not about predicting the future, it’s about getting a deal. This is an important concept no matter what you are investing in and it’s the concept everyone forgets.

You get a deal when someone dies (and the kids don’t want to handle the hassle).

You get a deal when two people get divorced (and they need to quickly sell their house, regardless of price)

And you get a deal when someone gets into too much debt (and, for instance, is foreclosed on).

That’s it. Sometimes you get a deal when someone has to move for work also but in these days, this is usually related to Debt.

Don’t buy a house unless you are getting a deal, even if you’ve convinced yourself you will living there for 30 years (remember: you can’t predict the future).

Well, you don’t need a deal if….

E) YOU HAVE A LOT OF CASH. If you buy a house, have 4x the amount of the mortgage sitting in cash in your bank account.

That seems like a lot, right? Why not just buy the house in cash?

Because then you might run out of money. Particularly if there is a prolonged economic slump (again, unpredictable but why risk the worst-case scenario when you don’t have to). I don’t like to risk bad worst case scenarios.

I don’t think there will be a big slump. But why take a chance with your life?

Worst case scenarios are too scary! You can die!

Cash is a beautiful thing. Having cash in the bank keeps you calm when everyone else is committing suicide.

Treat your cash nice so it treats you nice. Don’t throw it all into a down payment on a house. As I explain in prior posts, that’s a very nasty thing to do to your cash.

So there, that’s my checklist.

I assume you do all the other things whether you rent or buy: look for good schools, live in a nice area, etc.

This is not an argument against buying a house. I respect that many people want to own a home for whatever reason.

This is just MY checklist.

This is an argument to keep you sane so you can focus on other things in your life.

Follow this checklist and whether you rent or own you will preserve enough of your sanity to be able to be creative and explore the world.

Be an explorer, not a prisoner.

  • kevin

    Kevin !
    Hi Bruce ! You are smart man ! At your age you are thinking like that ! means you will be more clever the next coming years ! Thanks for your thoughts ! I love it and I like it ! Good luck ! Bruce !

  • Meejay4

    What is good for the goose is not good for the gander. I can see your point but you are rife with blanket statements and cynicism!
    My parents moved CONSTANTLY while I was growing up and it was, frankly, miserable. Now that my Sister and I left the nest, one parent lives in a Converted Bus one is living in a Camper March-October. I say good for them! While I’m glad they are happy, I tend to value things like heat and toilets attached to real live sewer systems!
    My husband and I plan on buying a house in 4 months. For $200 more a month, including the estimated increase in utilites, we can live somewhere where we don’t have to hear our neighbor’s stomp up and down the stairs. We will pay a paltry $5,000 out of pocket (I’m not really worried about losing my 0.0025, savings account interest), and take out a 30 year mortgage which we will pay off in 15 years or less. The important part of our plan is we will buy the house that meets our needs, not max out what we can afford. A house is NOT an investment, it is a place to live. In 15 years the only payments regarding our house will be taxes and home insurance and we will be doing whatever we like with our money.
    I don’t mind alternative views, in fact, I encourage people to live in a way that makes them happy. The judgement and belittling of those who have done their homework is a little overdone. It’s typical investor speak to encourage people to turn the wheels of the real estate rental machine instead of encouraging people to live within their needs!

  • akbigdog

    James, do you happen to know where to find images from the ad campaign you mentioned from the 50s with the white picket fence describing the ideal American dream? I think you said it was something Fannie Mae did back in the day. I want to include it in a book I’m writing, as well as some quotes from you! I love the prison metaphor for owning a home.

  • Pat

    Did not mention that you never truly own your home. The government has a permanent lien against your property. It is called property taxes. Property taxes, in my opinion, are one of the most, if not the most unfair of all taxes. Who gets to vote on how high property taxes will be? Everybody! Who gets to pay property taxes? Only the property owners. If only property owners pay property taxes, then they should be the only ones who vote on the property tax rate. Makes sense to me. The best solution would be to abolish property taxes. Then you could truly own your home.

  • jerry l.

    The only reason any male has any interest whatsoever in buying a house is his wife. SHE wants the security of a HOME and to fulfill her since-little-girl fantasies of being Mommy in her own kitchen, ad nauseum, ad BS

  • Daniel Embody

    It makes sense to rent instead of buy if you must relocate in the near future. Even there you can own a real property and rent it out.

  • johnny disco

    owning a home is for pussies… and then complain about how you could not handle your stress? sounds like you are the pussy my friend. And since you forclosed are you no longer a pussy? or are you a pussy until it is no longer on your credit report? not being able to balance your finances and fix your relationship is for pussies. But let me guess, its not your fault.

  • indigo1898

    Just pay cash, and no mortgage, and all will be fine…

  • James Kirkby

    Nice Rent v Buy Calculator. However, as they mention, guessing the return on your real estate over a long period of time is an issue….

  • James

    Great post, a real estate agent can reall help you when it comes to buying a home… it is their job and they want to make sure you’re happy and enjoy your new home!

  • faxmebeer

    Renting is cool, I’ve rented for years. The problem is that I’m getting to the point that I’d like my house to be what I want, and not just a place to sleep, and I’m not putting my dream bathroom, kitchen, and den in a house I don’t own. I’m giving away well over $12,000 per year, get no tax break for my rent as I would with interest on a mortgage, and that is leaving me writing checks to the IRS at the end of every year, in addition to what I pay in from withholdings. My 401k is maxed, and I’ve put all I can in IRAs. The stock market is over valued due to extended periods of QE based low interest rates ensuring that bonds and other fixed income vehicles produce negative real returns.

    There is little left but to buy. I could rent a better place, but for 10 years of those payments, I could have just bought a house. I completely get that the taxes, maintenance, and interest are a drain – but at 3.5% on a $250k note, the interest runs $8,700 (diminishing), taxes bite another $4,300, and maintenance is likely $5,000, so $17,000 per year, minus $2600 in deductible interest, plus 2% annual appreciation, and you’re down to real costs of about $12k – it’s basically a break even with $1,000/mo rent, which is less rent than I pay. And, I’m at least picking up a couple grand a year in equity, plus whatever down payment I made, so there is some liquidity there, assuming that lightening doesn’t strike twice in the housing market. Even if it does, though, that only really matters if you have to sell during the down turn, and then only if you haven’t built meaningful equity.

    Buying a house is nerve racking to me, but I don’t think there is much of an economic case to be made for not making a home purchase. Especially if the total coat of ownership is on par with the cost of renting.

  • I attach importance
    to reading this post that could make the people think. Furthermore, thanks
    for allowing me to comment!
    Insurance Tallahassee

  • kayumochi

    In October 2008 I got pressured into buying a house by my parents and wife. My daughter was finishing up a dual-immersion school and because I could no longer afford a private education I wanted to put her in a very good public school system. I found that in the town I moved to. She is now at a state university and I have no reason to be here anymore: a long commute to work and neighbors that suck. Now my parents and my neighbors say I can’t sell this house for what I paid for it and may have to walk away. I could return to Japan (my wife is Japanese) where my credit score will mean fuck all and return to the simple, debt-free lifestyle I enjoyed there but I really have no desire to live in Japan again … I feel like the stupidest fuck in the world sometime.

  • These are the only post from James that are just crazy to me. (I really do agree with most of what he writes). But I’m not sure why he believes everyone pays a huge down payment for a home…

    Just like buying stocks or bonds, you can be smart when buying a home. Right now to rent a home in my neighborhood I’d be paying around $2400/mo. I pay about $1900 for the mortgage. And it’s a really nice house. If I were to need to sell, the current time on the market in my neighborhood is about 30 days. And at the moment about 700 of what I pay goes towards the principle every month. OH, and as a bonus the house has appreciated about 12% since I purchased it based on recent sales of my neighbors nearly identical homes.

    Here’s the kicker. I paid a 10% down payment on this house. But EVERY SINGLE PENNY of the downpayment came from earnings on two previous properties where I put a grand total of $5000 into down payments. And I financed at a crazy low rate that still allows me to avoid PMI. All three of my most recent homes were purchased brand new which means I’ve had zero maintenance beyond lawn care. My last home was during the bubble, so I had to build out an attic to keep it level. But I got all of the money I put into the house back out of it upon selling. And the rates were so low on the mortgage I came out smelling like a rose compared to renting.

    If I were paying rent I’d just be out $2400/mo. Even if I lose every single penny of the $700 currently going towards principle then I’d still be ahead because the payment is so much less than I could rent the same house for (this goes for much of the U.S. at the moment).

    Oh, and in the 36 years that I’ve lived in a home I’ve never had a toilet clog with hair… My toilet at my office however, that I rent, has constant toilet issues and I’ve still had to fix it myself to get it working in a timely manner. That damn toilet…

    I don’t know where james thinks your going to get all of this extra money to invest when your paying an extra 10-20% a month in housing costs for rent.

  • Marc

    I love these posts. But have bought for other reasons. ALTUCHER is mostly correct. But when considering uncertainty, I worry about unpredictability of rental rates, the possibility of being displaced by a landlord that wants to gouge or tear down and the cost of moving a family. If you can afford to pay cash on a house and skip bank closing costs in a low tax locale renting may cost quite a bit more than owning. Moreover, tying up assets, limits ones ability to blow that cash in the bank on bad loans to people who know you have money and bigger better Christmas piles that become next year’s 2 cents on the dollar garage sale or goodwill donation , making room for the year after that.

  • Michael Jon Carlson

    Hi James — great article. I’ve worked in the affordable housing sector for about 18 years now, and have provided much that same advice to them, as you’re offering here. You’re spot on.