Say I call you tonight as you are sitting down to dinner and I say,

“I have an incredible investment opportunity for you!  Give me $55,000 up front, then $20,000 per year for 10 years.  When you are ready to cash out it could take up to 6 months to sell, and I’ll need $16,000 in fees.  So, you will give me a total of $271,000 and in return, I will give you back $270,000…That’s a return of -%.04 in 10 years…Before inflation.

Still not convinced?  What if I told you this is one of the most popular investments in America?  Over 65% of Americans have purchased this investment!  Can that many Americans be wrong about anything?”z

You would probably tell me to stop calling you from that unlisted number.  You would probably tell me I’m selling a horrible investment, and that you would rather buy into that pyramid scheme involving Aloe Vera that your uncle Harold was pimping last year.  You would probably tell me that it isn’t an investment at all.  I believe you would be right.

The numbers that I gave you in the first paragraph are real.  They are almost exactly what I spent in purchasing my house last year (closing costs, realtor fees, down payment) plus the annual costs I can expect to pay (taxes, insurance and maintenance) plus the realtor fee to sell in 10 years, all compared to the increase in home value I expect in that 10 years (based on the Case-Shiller index for the last 50 years).  Pretty sad, huh?

Here’s my point.  Many of us have bought into the idea (mistaken, I believe) that our house is an investment instead of a cost of living.  That leads us to think about it differently than we do anything else we use on a daily basis.  We don’t evaluate Hattie’s coffee based on what we could sell it for in the future, that would be silly (and a waste of good coffee).  We don’t evaluate a Sunday meal at the Urban Table based on ROI, or a vacation, or even our car.  So why the house?  The home is to ROI as Miley Cyrus is to music.

There are exceptions.  Money can be made in real estate, the last few months in Prairie Village are a good example (if you are selling).  Just watch all those shows on HGTV.  Those are all fact based…aren’t they?  Even Ted Turner believes in real estate ROI (largest landowner in the country).  But not in a personal residence.  On average, all things considered, a personal residence does not perform well as an investment.

So what?

Here’s what.  Since the “space” you inhabit has a profound impact on your happiness, relationships and general well being (refer to my “sex” article), there is something more important to consider than ROI in your home–I call “ROL” (return on life).  Schmaltzy, I know, but I think you get my point.  I want us to think less about the preferences of an unknown person that might buy our house at an unknown future date.  Let’s consider the idea that a home is not like a 401k because it usually doesn’t do well in that role (think Machine Gun Preacher Gerard Butler in a rom-com), and treat it more like our home.  The place we eat pancakes, argue, weep, sleep and love.  That matters more than Zillow.

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