Why Owning a Home (Probably) Won’t Make You Feel Rich

Canadians have a complicated relationship with real estate. For decades, owning a home was seen as a surefire path to wealth. But financial consultant Elizabeth George argues that, even when buying pays off, it often doesn’t make us feel wealthy. In a recent Substack essay, George, who lives in Dallas and spent nearly two decades in wealth management, explains why. We called her up and asked her to elaborate.

At what age did you buy your first property?

I was lucky. I bought my first condo at 22. It cost $145,000, and I used money my grandparents had saved for me. I naively believed the finance books that said you should buy a property every other year. So, a year later, I bought a dilapidated duplex. My dad told me not to, and in hindsight, he was probably right. The duplex needed a total renovation. I cried in Home Depot more times than I can count.

I made money when I sold it 15 years later, but if I had left my money in the S&P 500, it would have done much better. [Note: Canadian stocks have generally outperformed home prices long term too.] 

What do people tend to get wrong about renting vs. buying?

People always compare the cost of rent versus their mortgage. But I like to remind clients that your rent is the maximum you will pay for your housing. Your mortgage is the minimum, since houses require constant maintenance. There’s also the time commitment. Instead of a weekend side hustle, you’re refinishing cabinets. When you rent, you’re outsourcing your housing to somebody else. 

But homeownership can be a great lifestyle choice, right? 

That’s true. I’m not anti-real estate. Owning real estate lets you put down roots and build equity. That said, I think the cons of home ownership are overlooked. 

Talk about the cons investing-wise. 

One is that having a large portion of your net worth tied up in any single asset, like a home, is risky. On a personal level, owning a home doesn’t necessarily make you feel wealthy, because you might have to drain your savings for a down payment. Then your equity is basically trapped until you sell. That, and your mortgage can leave you cash-strapped month to month. So many people watch their net worth grow on paper while their standard of living doesn’t improve.

In a footnote, you advise women against keeping the family home in a divorce. Why?

I’ve worked with many couples going through a split, and the wife typically wants the house for the kids’ sake, while the husband takes the investment accounts. But then the wife has very little liquidity [i.e., easily accessible money] and struggles to save for retirement while covering the mortgage. So she ends up selling the house anyway. I went through a divorce myself two years ago. My ex took his share of our home equity in stocks, which are up more than 50% since then. My home value is flat.

But surely there’s a catch to renting or everyone would do it.

A mortgage is a forced-savings vehicle. If you’re not going to own, you’ll need a disciplined savings plan.

How should someone decide to rent or buy?

It depends on your finances and goals. If you buy a house, enjoy it: you’ll have a high degree of stability. But renting has benefits too. If you want to be financially free, you can’t have half your income going toward your mortgage payment.

This interview, conducted by Marin Cogan, was edited for length and clarity.

Read more: Should You Buy or Rent? A Quick Formula to See