Buying a House

I’m in the process of buying a house. The options are enough to make you go crazy. 3 bedrooms. 2 baths. Oh wait that’s 1.5 baths. 1200 square feet. Big lot. Small lot. Is there hardwood or is that laminate? What about the crime rate? I think someone’s car was stolen in that area.

I can afford $110k right? But $125k houses look like a lot better value and it’s only like $75/month more. Can I afford $75/month?

What is my credit score? What IS a credit score?

Then there are “fixer upper” options. They’re $80k but need $25k+ of work. Can I get a loan for that? With the allure of thousands of dollars in profit over the course of a few years, a few (hundred) hours of sweat equity seems worth it.

Yesterday I was talking to Rusty at work and his advice was helpful. “Stephen”, he said, “you wouldn’t be able to do much other than fix the house for a year. All your time will go into the house. No freelancing, no side projects, none of it.”

Priorities for Earning Income

I’m still evaluating priorities for what to do. There are too many options to say it comes down to one factor or another, but it made me stop and think about my three avenues for profit.

  1. Entrepreneurship: I’m committed to creating value for people through business creation. It’s something I know I want to do. I want to lead businesses to answer the question: “what can we do now that wasn’t possible before the internet?”
  2. Full-time work: Behind entrepreneurship, my second mode of earned income is vocational work. A day job allows me to work on a team I’m not leading and grow from the experience of my teammates. It provides structure, safety, and insurance as I grow.
  3. Investment: The 8th wonder of the world is compound interest. Time + Capital + Adequate Risk = a healthy chance of return. Investment is useful when I’ve reached the limits of my ability to productively apply capital to entrepreneurship.

The problem with a “fixer upper” house right now is it serves as a value investment at a time when I need to be devoting resources, energy and focus to growth opportunities. I’m early in a financial growth stage and sinking a majority of my resources into a value opportunity is a relatively bad investment. Sure, I could make $X in a real estate deal a few years from now. And that would be an splendid. But what about the expected value of building businesses that could create monthly revenue for a decade?

For me, the opportunity cost of building a business is higher than the value I get from investing sweat equity into a house.

Removing the Small Frame

I’ve been reading the book Decisive by the Heath Brothers (authors of Made to Stick and Switch). They talk about reframing your decisions outside of “should I buy this house or not” and thinking in terms of “what are other things I could do with this money and time?” For me, Rusty’s warning about investing too much time into a house helped me evaluate those resources.

It’s not a question of whether or not I buy a house but the kind of house I choose to own. And the more I think about it, buying a decent house in a quiet neighborhood at near-market prices makes sense. Not because I didn’t do the work to find a deal but because my maximum value comes from another avenue.

Focusing means saying no to almost everything.

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