Remember that $75,000 car I was absolutely obsessed with a couple months ago? It was a black and white Ferrari 360 – one of the most beautiful cars I have ever seen. Man it would be awesome to drive that thing to work every day! Plus, we actually had the money in the bank to do it, so we went to the dealership and bought it, right? I mean look at this thing!
Instead, Liz and I bought a 100 year old, 3 bedroom 1 bath, fixer-upper house with the exact same price tag… $75,000…
7 Reasons I Bought a Crappy House Instead of My Dream Car
So what are the reasons I bought a crappy house instead of an amazing $75,000 car that goes 0-60 mph in 3.8 seconds? Well first of all, the car would probably kill us (I have no business driving something that goes so fast), but there are actually a ton more reasons why it makes total sense for us to ditch the car and fall in love with (eventually…) the house.
Take a look, and at the end be sure to let me know if you think we made the right decision!
1) There’s Upside Value
We bought the house for $75,000, and we’ll probably have to put another $20,000 into it to bring it all up to date (and to….you know…give it walls, and ceilings and stuff…it’s really a hot mess right now). BUT, when we’ve got it all done, it’ll be worth approximately $140,000.
The car…that’s another story. There’s really nothing I can do to it to give it more value. In fact, when I drive it off the lot it’ll probably be worth $70,000 instead of $75,000.
2) Appreciation vs. Depreciation
Let’s say we get the house fixed up and it’s worth $140,000. What will it be worth in 10 years?
And what about that car?
It’ll mayyyybe be worth $35,000 yet. I mean, it’ll still be cool, but the older that hunk-o-metal gets, the more worthless it becomes. That’s just the nature of owning a car.
Before we get too far here…let’s just take a look at points one and two. Over the course of 10 years, the house has helped our net worth by $150,000 (from $75,000 to $225,000). The car took us down $40,000. These were the two HUGE factors in our decision, and for those that ignore upside value and depreciation…they start out broke and they stay broke.
Even though the house will soon be worth more than the car, the maintenance costs will still likely be cheaper on average.
- The house will cost roughly $1,400 a year, and
- The car will cost an average of $1,600 – and that doesn’t even count the crazy insurance costs!
4) Cash Flow
The car…will only produce a cash flow if I charge people $10 a piece for rides. Otherwise, this thing is just eating up my wealth from month to month.
On the other hand, the house will be producing a $1,300 income every single month! After insurance, taxes, and maintenance, we’ll clear $11,000 a year from this place!
Long term, this house decision is really kicking tail so far!
5) Delayed Gratification Wins in the End
If I went out and maxed out my credit on a new car, a boat, and a wild trip to Vegas, that would sure make for a fun year! But what would it do to my future?
I think we would all agree on this one – It would paralyze my finances for the next 10 years and I wouldn’t be able to get ahead until everything was paid off and I finally had a positive cash flow again.
So what if I did the exact opposite?
What if, instead of buying up everything I wanted now, I bought income-producing assets instead? What would this do for my future?
- It’d boost my net worth
- and it would also improve my monthly income.
By doing these wise things instead of the impromptu foolish ones (like so many of us do today), I could go on any trip I wanted just a little bit later in life and it wouldn’t even show up as a glitch in my net worth!
By the way, I’m NOT saying wait until you’re 80 years old to do anything (that would really suck). But taking a trip when you’re 30 instead of when you’re 23 won’t kill you, and your financial future will thank you for it!
6) It’s WAYYYY Easier to Get Rid Of
About how many people would you say are in the market to buy a $75,000 Ferrari 360?
Out of the 300+ million people in the US, I’d say maybe 2,000 are even considering a car like this as an option.
And how about a house? How many people are interested in buying a $140,000, 3 bedroom, 1 bathroom home? Oh I don’t know, probably 30 million. Heck, there’s probably over 20,000 people that would be interested within just 25 square miles!
If Liz and I looked at each other tomorrow and said, “Ugh…this house. I wish we would have never bought it. Let’s sell it and never think about it again.” Would we get our money back? Absolutely. In about 1 week as a matter of fact.
What if we bought the car and had the same experience? How quickly would we be able to sell it? Ha, probably 6 months…at best. And there’s no doubt in my mind that we’d lose money on it too.
We bought the safe bet. If we hate it, we can always sell it.
7) It’s Propelling Us Toward Our Long-term Dreams
Liz and I…we don’t dream about cars. But you know what? We don’t dream about houses either.
You want to know what we do dream about?
- Living a life with options
- Going on month-long vacations as a family each year
- Funding our kids’ college
- Retiring early
- Earning money with our passions – our way on our time
- Volunteering and helping those less fortunate
What are the main reasons I bought a crappy house instead of my dream car? The car would make me happy today, but the house will make us happy for life.
What Are You in the Market For?
So what about you? What is it you’re in the market for? Do you just want to drive around in a sweet ride so that everyone will envy you? Is that really the best you can do?
What if, instead, you started dreaming BIGGER?! And don’t just think about bigger and better stuff – think about things that really matter to you.
- Helping your family live a better life
- Working less, and having more fun
- Traveling and experiencing new things and different cultures
- Volunteering more and thinking of yourself less
Yes, the car was awesome and I still wish I could drive it right now…but the goals and dreams of my future are just so much better.
It’s time to let some of the good stuff slip away so that we can set ourselves for what’s best!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.