How (and How Not) to Buy a House

Little MM tests out the public park that will be our new back yard!

Little MM tests out the public park that will be our new back yard.

Well, it’s official: The Mustache Family is buying a new house.

We’re pretty excited, as this is a chance to put many of our favorite values into action. It is a significant downsizing, at 1000 square feet smaller than our current place. This brings the chance to live more efficiently, with less idle space. It’s a bit of a fixer-upper, meaning I get to crank out another thousand hours of good old-fashioned hard work. The size and condition mean that it is $160,000 less expensive than our current house, which will allow us to transfer more of our savings to productive investments (and pay lower property taxes) forever. And it is situated with ideal Southern exposure (free winter heat), backing onto a beautiful public park filled with wide open grass areas and shade trees. This setting will allow us to do less of our living and entertaining indoors, and more of it out in Nature where we belong.

There will be plenty to talk about after we close on this house later this month, do some quick renovations, rent it out for one year, and then move over and sell the main house next summer. But this enticing story is just an example to introduce the real theme of today’s lesson, which is how to buy a house in general.

House buying has been on my mind for most of the past year. We’ve been shopping for our own downsizing residence, making several offers on other places around the neighborhood. Several friends have coaxed Mrs. Money Mustache into using her real estate agent powers to help them buy their own houses. The Longmont property market has heated up to a frothy boil, with the nicer houses selling on the first day after listing. And I’ve watched it all with some interest, noting both the successes and failures on the part of buyers and sellers.

How to Buy a House

You might think that buying a house is just something you do, rather than a skill that must be learned. But the truth is quite the opposite: for the typical nonmillionaire, a house is the biggest purchase ever made, and thus the opportunities for both grand mistakes and massive scores are plentiful.

Mindset: You can start things off by giving yourself a great gift that will make the rest of the process go much more smoothly: a calm and rational mind. Repeat after me: “I am not buying a flowery pillowcase of emotions or a future of warm memories. I am conducting a business transaction to purchase a piece of land and an assembled collection of construction materials.

Don’t worry, there will be plenty of time for the pillowcases and the memories after you buy the house, but don’t put the carriage in front of the horse. For now, you are a BusinessMan/BusinessWoman looking to conduct some business. The strength provided by this mindset is essential to get the results you want.

Location: Next you choose your location. You need to do this before you start looking at houses, because it is way more important than the details of the structure itself. Beginner buyers often say things like, “Oh, I’ll just live somewhere near the interstate, so that way it’s easy to get anywhere”. Instead, I suggest starting with the assumption that cars don’t exist, and designing a life around that assumption instead. You’ll still have your cars, of course. But your level of need for them, and thus the quantity of money and time you waste sitting on your ass in them, will be completely different.

With a bit of planning, it’s almost always possible to put work, grocery store, school, library, and anything else you need right within the area you live. By looking for public amenities, you can get many of the benefits of a country house right inside the city, as shown in the picture above. The more things you live near, the fewer things you need to own yourself.

Rent vs. Buy: There are a few bits of old folk wisdom that need to be put out of their misery. “Real estate is always a good investment, because it never goes down.” “They aren’t makin’ more land, so buy it now.” “Renting is just throwing your money away. You should buy, because you’re building your equity.”

In expensive areas (homes start at over $300,000), the math often comes out in favor of renting. In cheaper areas, especially with the currently-low interest rates, buyers usually win. In between, there are some considerations that tilt the balance: people who prefer not to maintain their own house should be renters (because the contractors will eat you for lunch if you do things like calling a plumber to fix a broken toilet). People who love customizing things to their own liking might still prioritize owning. But in either case, there are costs: if mortgage interest plus property taxes and insurance alone add up to more than rent for an equivalent house, you are throwing more money away by buying than you are renting.

Fixer-Upper or Fancy Luxury: much like the rent-vs-buy decision, this question often depends on how expensive the target area is. In pricey hotspots, everything sells at a premium – a renovated 3-bedroom house might be worth $200,000 more than the same thing in dated condition.  Since it costs far less than 200 grand to renovate a house, you’re better off with the fixer-upper. But there are still many US towns where houses are selling at less than their construction cost*, even assuming a land value of zero. In this case, you might as well get all the quality you need while it’s on sale, since even DIY-renovation will cost more than purchasing an already-nice house.

Ignore the Fluff, and See Opportunity in the Bad: When touring houses with buyers, I’ll often hear things like, “Oh my god, I love this pantry!”, or “Daaayumn.. this place smells dingy.. let’s get out of here.”

Small details like a set of wooden shelves with gourmet spaghetti sauce on them, or an old carpet that has absorbed more than its share of bodily fluids tend to have a big impact on buying decisions, when really they should not. These represent things that can easily be changed, at a tiny fraction of the cost of the house itself. Would you make a car buying decision based on how full the gas tank or the wiper fluid reservoir is?

Pay More Attention to Big Details: For example, which part of the house faces the sun? My pet peeve is houses that have little windows peppered into their exterior with no regard for what sort of heat and light they will let in. If you live in an area where heating is a significant expense, you want a house oriented on the East-West axis with a large area with lots of windows facing the sun. If you are in a hot climate, you want something with large roof overhangs and some shade. How efficient is the furnace, air conditioning, insulation, and water heater? These things make a difference of thousands of dollars per year, which makes them more important than most other home features. And good solar exposure and window placement can make for a happier living environment in general.

An interesting question is whether size, or square footage, is really a big detail. According to traditional real estate agents, it is one of the biggest. Square footage, relative to other houses nearby, is the biggest factor that goes into setting a listing price and doing appraisals. But as a buyer, you can safely ignore it. More important is, “is there a large enough common room for my family and friends?”. This can happen in an 800 square foot house, or be oddly lacking in a 3500 square foot one. Our “new” smaller house, for example, will be almost as useful as our current place, because a big chunk of the missing space is stuff that isn’t really living space anyway (hallways, staircases, an overly-big master bedroom, etc.) The new house is all at ground level, which makes for an efficient layout.

Take your Time: For the past eight years, I’ve researched every listing and every eventual sale in my area, so I’ve soaked up the market on a fairly deep level. Within the span of any given year, I see houses sell at both ridiculously high, and ridiculously low prices, given their quality and size. The market is hot in summer, cool in winter. And there are frequent random events, like a bank dumping a foreclosure at $100,000 below market value or an estate sale with an out-of-town realtor setting the price way too low.

Given the large sums involved, it makes a lot of sense for a home buyer to plan to shop for six months or more, rather than rush to find a house during a brief window of a summer vacation or a weekend househunting tour. If you spend 50 hours researching houses, but save $50,000 on a purchase because of it, what is your hourly rate?**

Move Fast when the Time Comes: You found a great house, and you know it is underpriced. Do you go away for the weekend and think it over, then maybe try to set up a showing next week? No. You tour it within a few hours of its arrival on the market, and you make an offer before you eat dinner that night. Good deals go quickly, so if you want one yourself, you must be even faster. Earlier this year, we found one of these bargains and had our offer in within 8 hours of listing time. We lost it to another person who only took 6 hours.

And that’s it! Sure, there are plenty of meat-and-potatoes details missing, but you can get those from a real estate agent who is trained for your own city, state, and country. This guide just represents my idea of what seems to be missing in the process for most beginners.

House shopping is much like car shopping: as soon as you train yourself to look beneath the superficial veneer, you gain a huge advantage in the marketplace. So good luck.. and maybe I’ll see you at the party in the beautiful park that is my new back yard later this month!



* I find that building a house in the US costs between $100-$200 per square foot (in the average-cost Denver metro region), depending on quality level. So a 2000-square-foot house selling for $150,000 is an unsustainable bargain – the prices will have to rise on these someday assuming eventual demand, because nobody can make more at that price. Omaha and areas near Dallas seem to have these amazing sales, among other places.

**One shortcut to this is if you can find that rare ultra-sharp, patient, analytical real estate agent to provide the market intuition for you. But these are 1-in-100 in my experience, and unfortunately Mrs. MM is not looking for more business :-)

Another big shortcut is to  strive to avoid wasting time: your own, the seller’s, and your realtor’s. So you start by getting all your information online – reviewing all available pictures, scoping out the area with Google Maps and Street View, and doing a walk-by inspection of any potential house.. all before setting up a showing. Only if you can still imagine buying the house at this point, do you bother committing to a tour, an act which involves consuming about 8 hours of other people’s time, and should thus be taken seriously.



  • Chris September 7, 2013, 9:32 am

    Wife and I bought a foreclosure in April, just outside of Sacramento. The plan was to downsize from our current 3000sqft McMansion into something smaller, more efficient, closer to work and more cost effective so the wife can stay home with our infant son. We moved within 12 miles of my job (closest you can get, considering I work at a remote site). The foreclosure: 2200sqft, needed a complete cosmetic overhaul and landscaping done. It took me two months to contract out the work and get it done. We’ve since moved in (huge effort!) and are loving it. The really cool thing is, our creative taste are everywhere in the finished product and we comfortably live on my salary alone while still saving and investing agressively.

    Final numbers: Bought the house for 160K (screaming deal), the house wasn’t even for sale, I researched the bank owner and struck a deal with them. Rehab costs-42K for 202K total invested. I owe 59K on the house now and the monthly mortgage is 568$ (PITI). Our previous mortgage was 2465$ (PITI) and is now rented out. This was a bucket list item (rehabbing a foreclosure) and I think our real estate portfolio is complete (3 houses).

    Cheers, Chris

  • Marcia @Frugal Healthy Simple September 7, 2013, 12:13 pm

    I hear you on the wasted space issue. I didn’t really think about it when I bought my house. It’s a 2BR, 1 BA 1146 sf house built in 1947. Originally, according to the plans anyway, it had a small LR and a small dining room. Right inside the front door was a hall closet, and both bedrooms had walk in closets.

    Now, of course, there is just one big room instead of the LR/DR. I prefer that. But the hall closet is gone and it’s bad feng shui. From the bathroom, if the doors are open, you can look right down the hall, out the front door, and through the arch in the hedge, right to the road.

    Other negatives: the hall is wide, and it’s just wasted space. We put some shelving in there for storage of toys, shoes, and books, but still – wasted. I didn’t realize that it was that bad until I visited a friend’s house down the street (also 2BR, 1 BA), and all of the rooms basically come off the center of the house, a tiny short hall really.

    Another negative: a previous owner changed the walk ins to along the wall type of closets. This is easy to get at, but we lose “wall space”. So the boys’ room has a lot of windows on the two sides. The third side is all closet, and we have one short wall with the door. It’s really hard to put two beds in there if you want to avoid being under the window (earthquake country) and there is no way to avoid covering a window if you want bunk beds.

    If I were to redesign the house, I’d get rid of the hallway – we could add a tiny bit of space to the bedrooms and a half bath.

  • Brenden September 7, 2013, 1:12 pm

    I love the advice about the south facing windows. I live in Wisconsin and my apartment has south facing windows. I turn off my heat when I leave for work in the winter and I come home and it is still fairly warm. Plus my plants love it!

  • Kassandra September 7, 2013, 1:36 pm

    Thanks for the article! Very timely for us. We are living in Seattle. Sold our home in Tacoma to be closer to spouse’s work. Moved to an expensive but walkable neighborhood with “good schools”. After giving up on buying and in a moment of desperation we rented a large and expensive house. Which we thought would be fun. Even though the square footage was huge, the design and functionality were not great so I always had a feeling of just wasting money living there. Lease is up and owners put the house on the market. I jumped on a much smaller and much cheaper “college quality rental”. It’s an older house that has been a rental forever, seriously forever. It is super cheap for the area and very functional for us but not super pretty. Any way we are still going round and round about renting vs. buying. This place is a lot less than the mortgage of anything we could buy in the area but there’s little modern conveniences I miss, like not having a crappy cheap coil stove and ancient fridge… drawers that don’t open and shut easily… washer and dryer down in spider filled basement, not having any closet space and having to get super creative with where exactly to put my clothes…. but having said all of that it’s CHEAP, a half a mile from a major grocery store and about 1.2 miles to main neighborhood business district, it has a nice back yard and a view! I’m mostly interested in your take that at above 300,000 you would be better off renting. Can you expand on that? EVERYTHING in Seattle is well above 300,000. I guess I still have the nagging parental voice in the back of my mind saying the cliche things like, “you are just throwing your money away if you aren’t building equity”, “you’ll never be able to get back into the housing market”, etc…, etc….. Then there’s the little things that drive me nuts like the vertical blinds that are all falling apart but not wanting to shell out our own money to put something nicer in because it’s a rental. And round and round I go….

  • CS September 7, 2013, 7:48 pm

    Thank you for the awesome article! My husband and I are reevaluating our housing needs (we’ve owned our home for 8 years and we’re thinking of selling and renting instead) and this article was very timely. :) I have been reading your blog for a couple of months now and really appreciate all the excellent advice. By the way, the Thai Coconut Curry soup recipe was absolutely delicious–made it yesterday for our dinner and it is now a permanent part of my recipe book!

  • Jed September 8, 2013, 8:50 am

    Didn’t you just say the best time to buy a house is in a poor housing market? I just sold my house last month after only two years of ownership and made a 20% profit. How do you justify buying a house now, when the housing market is so hot?

    It was your blog that sparked our decision to sell. We are now renting less than a half mile from my work, which is a great perk!

    • Gerard September 9, 2013, 6:32 am

      A hot market is a great time to buy a smaller house and sell a bigger one, because the difference between the two is larger.

  • JayP September 8, 2013, 8:55 am

    Another thing to consider is the maintenance involved with keeping neighborhood “norms”. Our home is in an expensive subdivision where everyone keeps their lawns manicured, and perfectly landscaped. That sh/t is expensive! Fortunately, after renting for a year, we found a house on the end of the street which has a private driveway and is completely surrounded by woods(its on the side of a mtn, the surroundings would be difficult to develop).

    We love it because we’re surrounded by woods while having the luxuries of a nice subdivision, and being biking and walking distance to the parks/greenline trails.

    We made an offer the first day, and found you have to be ready to know what you want, what the market is, and be ready to jump!

  • MoneyAhoy September 9, 2013, 11:58 am

    Congrats on the new house! My wife and I plan to do something similar (sans the renting out the current house) in about a years time.

    I’m real excited about all of the savings that come with having a smaller house (interest, taxes, heating, cooling, etc.).

    Good luck with all the renovations!

  • George_PA September 9, 2013, 12:24 pm

    MMM, it is a reoccurring theme, I noticed you are always moving a lot;

    Even before you wrote this article, I noticed in http://www.mrmoneymustache.com/2011/09/15/a-brief-history-of-the-stash-how-we-saved-from-zero-to-retirement-in-ten-years/

    Even back then it is a tread, it seems you are constantly moving or changing houses, it appears to be a key step in building wealth;

    So this a lesson I should be learning?

    do loop

    Currently live in House A (with paid off mortgage)

    While in House A wait for opportunity to buy other cheap HouseB in need of repair; also while waiting: accumulate stash;

    if opportunity = true, then Use stash cash to purchase house B

    Fix up House B

    Move into House B

    Keep House as Rental A to increase stash

    if HouseA greatly increases in value, then sell HouseA and add to stash


  • Starling September 9, 2013, 6:25 pm

    As a Canadian, living in the Toronto/GTA area, I’m lucky to find a house that costs in the neighbourhood of $400K, let alone under 300K. At the same time, quality rental houses are difficult to come by and very expensive–$2000+/month. I’m 29 and I’m currently renting a 2 bedroom apartment in Toronto with my partner for $1150. The rent is a great deal because our neighbourhood is somewhat depressed and our building has cockroaches (which we’ve managed to greatly reduce in numbers in our unit, but which are still a minor ongoing issue). I’m glad that I’m able to save a lot of money by living where I do, but I’m starting to really look forward to having my own home: a modest house with a small yard, a dishwasher, and my own laundry facilities (and no pests!) I’m also anxious to reduce or eliminate my commute, which is currently 50 km one-way.
    My job as a teacher limits my ability to move away from this expensive area, because teaching jobs are scarce and I’m lucky to have one at all.
    With a small down payment of $45K and the cheapest house in the area being $400K, I’m not sure if I should keep renting and saving (and hope the Canadian housing bubble pops?) or finally get into the market. Thoughts?

  • Mr freeze September 10, 2013, 10:42 am

    A couple years ago a foreclosure came up within 2 miles of my edge of suburbia house. It was 9 acres with a 3000 sq ft simple rectangle structure with a 1000 sqft attached office, all for $200k when the market was bottoming in my area. After probably less that $50k of work it would be worth close to $500k in today’s market. I asked about it but wasn’t in the appropriate financial shape to capitalize and it was already in negotiation so I still remain on my suffocating 1/4 acre lot and drive by every couple months bummed that I could’t capitalize. Never seen anything remotely comparable since.

  • Orngkat September 10, 2013, 10:51 am

    I wish we were ready to do the same but circumstances prevent our moving anytime soon. We are in a large Texas city, 1950s close in bungalow. Though the appreciation has been wonderful, the property taxes are hard to take. Currently on this 1600 sf 2br very modest house we are paying over $7000 annually. Because we are close to everything and not out in the burbs – groceries, libraries, parks closeby – it has become like a status symbol to be here. They are buying up our “smaller” homes, tearing them down and building mega houses or renovating existing ones to double size. I was hopeful that the up and coming generation wouldn’t be so obsessed with keeping up with each other but to our eyes, it looks like that is the motivation.

  • LMaS September 10, 2013, 1:38 pm

    Very nice. We seem to be a bit behind the MMM curve. We bought our house a year ago on the same 2 child premise as your current house. Who knows if in 5 years we’ll decide to stick with one kid and then we’ll be the ones looking for a nice small place. Were you able to get your mortgage like a primary residence, or did you have to call the new house an investment property?

  • FromAtoZany September 10, 2013, 3:17 pm

    Hey Mr. MM,

    First-time reader: love the blog!

    Question: how do you think a buyer should factor school district into his/her plans? Here in Cincinnati, the school districts play a huge role in property values, more so than any other factor (even house size). Not hard to fathom why: being able to send your child to the top-ten-in-the-state school districts of Wyoming or Mariemont for free means you have money to spend on your mortgage that you aren’t spending on private school tuition. Of course, homes in those communities can be twice as expensive as comparables in the less-desirable districts. Is it a worthwhile trade-off?

    • MoneyAhoy September 11, 2013, 5:15 am

      I’d do an analysis of the trade-off. If you can get the annual tuition costs for a decent private school, break this down to a monthly charge.

      Then, price out the cheaper house with that cost vs. the more expensive house. Go with the less expensive solution!

  • Willis Montgomery III September 11, 2013, 3:31 am

    Great news MMM, good to see you downsizing.

    I bought the smallest house I could find within cycling distance of my office in 2002 (991 sq ft.) in suburbia/Vacation Nightmare Land. Can walk to stores. Fixer upper. Did almost all the work into the remodel myself with the help of friends and family. Spent the most on efficiency, solar panels for hot water, solar PV for electric, insulated and sealed house, added a wood stove. I’m happy I bought a small home. Living small is less stressful. If I do get canned from my job, I could make ends meet raking leaves or doing odd jobs, or consulting. Personally I like a 9-5, but only for a non profit. I don’t help rich folks get richer anymore like in the dot com days. I would never work for a for profit company, unless it was mine.

    One book I would recommend is “Small is Possible” by Lyle Estill. The content and message is excellent. http://lyleestill.com/the-books/small-is-possible/ The folks in Chatham County, NC have figured it out.

    Good luck out there everyone. Keep turning off those televisions.

  • winstongator September 11, 2013, 4:55 am

    My wife and I custom built our house 3+ years ago and I would say, financially, it is probably the wrong way to go. We didn’t over-build and tried to get some nice outdoor spaces, but we still ended up spending more than we would have had we bought a ‘nearly-new’ home. It feels like new homes depreciate like new cars, instantly once they are driven off the lot.

    We did carefully consider location, and while we have a HOA, we have lots of neighborhood amenities including a pool we can walk to (but don’t have to take care of ourselves.)

    What we did not consider was buying a ‘fixer-upper’ and keeping our old home. We actually sold our old home before ours was done and rented for 6 months. We avoided homes that needed work because we did not want to be living in a home while we were renovating. The rental market in our old neighborhood was weak at the time, and we didn’t want to have 2 payments (not a rational idea, but our mind-set at the time). That is an attractive option and one I’ll push my wife to consider for our next move.

  • Jacob September 11, 2013, 11:28 am

    “Would you make a car buying decision based on how full the gas tank or the wiper fluid reservoir is?”

    Thank you thank you for saying this! This always KILLS me when i hear this crap.

    “Oh, why didn’t you buy the place? It was undervalued by $100k and perfect for your family”

    “You should have see it. The paint was horrible, and we really didn’t like the trim in the house. Not to mention one of the toilets looked dingy. Gross.”

    “……oh….that’s it? I figured the place was infested with rats who ate through all the insulation and drywall, and cats peed through all the carpets so you would have to gut the place down to the sticks…..because that would be the only logical reason NOT TO BUY THAT AMAZING DEAL!”……

    • winstongator September 12, 2013, 4:34 am

      Lots of people buy new cars, not to know that the gas tank is full, but that the brakes, clutch, A/C, tires are all new.

      People may see the reno project as too daunting. Even with all the DIY shows and Home Depot & Lowes there are still a lot of people that do not DIY. Now, a single item like a toilet, or even complete paint is not that big.

      We looked at a home in 2009. It was OK, but there were some significant things my wife wanted to do – master bath and some kitchen work. At the asking price in 2009 plus renos, would have put it close to a newer or updated home. So the home just sold, 15% off 2009 asking price, and at a price where the reno budget would put the total close to an already updated comparable home (builders in my area aren’t that creative, and there are a lot of homes with very similar floorplans/sqft-layout).

      A lot of renovation projects don’t sell quickly because they aren’t great deals. The great deals tend to sell quickly. Those, at least in my area, tend to be estate, foreclosures or relocation sales.

      • Jacob September 13, 2013, 1:10 pm

        Totally not saying you should get a house that will cost you more in the long run, especially if there is a turn-key house at a great deal. What I AM saying is that too many people don’t look at houses through the correct lens. They hate the paint color in the kitchen and the old raggedy couch, and throw the baby out with the bathwater, as it were, and walk away from amazing deals.

        We are definitely more DIY, and it helps my wife is an interior design major, because we look for houses with a great layout and good bones, and ignore the petty stuff like the color of the paint and a dirty mirror.

  • L September 11, 2013, 3:22 pm

    I really enjoy the blog!

    Having just sold a home in one state and purchased another home in a second, wildly more expensive state, here are a few thinking points I’ve learned along the way:

    * Use the New York Times Buy v Rent Calculator to help guide you in deciding whether to buy or rent. Note that every setting can be adjusted, including the annual percentage at which rents are rising in your area versus how much homes are appreciating. Rents in my area were rising like crazy; so even if appreciation wasn’t that impressive, the crazy rents were pushing us to buy.

    *Get familiar with real estate terms — PMI, principal, amortization (which seemed like the biggest racket of all time when I first bought a home), your credit score. I find a good amortization calculator like at bankrate has been helpful in seeing how much sense it can make to pay off a bunch of principal early in the life of a loan (if this is possible).

    *Definitely sign up for Zillow or Redfin alerts, as mentioned here. Redfin will send you alerts regarding homes in your area, then again once they are pending, and then again to inform you of how much a place sold for. This is very helpful in getting you a portrait of how the list price may differ from the selling price and in understanding how quickly things can move (as MMM pointed out wisely!!).

    *Think about what it is you want to do with your time. Work 60 hours a week so you can buy a place that has a pool that needs constant attention? Spend your weekends installing ceiling fans? Certain homes will require that amount of diligence; maybe you’d rather be sleeping or spending time with friends and family.

    *Remember that the things that are in vogue will not necessarily make you happy. Our new place has a tiny bathroom that is not updated. However, there is a giant mirrored cabinet that has grown on me because it provides so much storage, makes the room look larger, and allows us to put all of our crap away so it’s out of sight. It will not be featured on HGTV any time soon, though. I clean the bathroom frequently, keeping the supplies under the sink (I used to think I wanted a pedestal sink until I realized how much storage it would take from us), and put out a fresh hydrangea every week so it looks inviting.

    *Have a healthy skepticism of the real estate machine. All home inspectors aren’t created equal, for instance. And there’s a good chance you may have a realtor who’s pushing you toward the far, far end of your financial comfort zone. Remember what your priorities are; write them down if that helps or speak about them with friends and family.

    *If you have other people — children, partners, elderly parents — who factor in your decision-making, involve them early so when the right place comes along you are ready to move.

    *Buy a place you enjoy coming home to (or will enjoy after some modifications). A big old window in our house has really meant more to me than fancy wainscoting would have.

    Hope this is helpful for anyone contemplating the big leap. If not, renting really is kind of the bomb in a lot of ways, so enjoy:)

  • A. Nash September 11, 2013, 3:43 pm

    Downsizing rules. I lived in Manhattan in a 1100 square foot two bed apartment with a roof deck. In NYC , this a very valuable property, but between the mortgage and coop maintenance my monthly nut was about 6K. I hardly used the 2nd bedroom and felt i was wasting so much money. I sold the apartment for a nice profit and purchased a 825 square foot 1 bedroom apartment in Williamsburg Brooklyn. Since i was able to pay for the place with the profit from my first apartment, I was able to buy it for cash with no mortgage. So now, my monthly nut is around 600 dollars. Thats right I went from 6K a month to 600 dollars. My commute to work in Manhattan is about 6 minutes longer but I am so less stressed without that huge monthly animal hanging over me!

  • Survive The Valley September 11, 2013, 4:34 pm

    Great tip on the home orientation!

    When we were active in the market back in 2010 our #1 criteria for finding a house was whether it was a South facing in the main area where we’d spend most of our time. Lots of double paned windows to let in natural light was a close second. 3 years later we’re extremely glad we stuck to that criteria because now our home is warm in the winter and cool in the summer… in contrast to lot of friends who’ve purchased homes with bad orientation. Saves us a bundle on heating costs too!

  • Zera September 12, 2013, 10:11 am

    Brand-new reader (and definitely fan) here. Great article! We just bought a house recently, so in addition to MMM’s advice, here are a few ideas that helped us.

    If you aren’t as astute as MMM in inspecting the basic structure of the house (electricity, plumbing, foundation, etc), hire an inspector to pore over the house with a fine-toothed comb to unearth any potential problems. Our inspector found about $5,000 worth of repairs that were finished (at the then-homeowner’s expense) before we purchased the house.

    Even if you’re not new to the process, read a few of the basic books on house buying. There are a few gems here and there that might not otherwise occur to someone.

    Understand the difference between remodeled and redecorated. Quite often, we’d see houses that had new tile on the kitchen floor and new counters and were labeled “remodeled,” when in fact, those new floors and counters were just covering up some other features that really needed replacing.

    Here’s a trick that our realtor used to helped justify the price of home — telling us that the owner paid $XXX for some aspect (house sound system, etc). With that logic, does that mean my computer today is worth what I paid for it 5 years ago?

    MMM alluded to this, as well: never fall in love with a house (or at least never let your realtor, if you have one, find out) before you are the owner. Any strong feelings for a house can and will be used against you in negotiations.

  • L.Mo September 12, 2013, 1:48 pm

    This article definitely hit the mark. When I went shopping for my first house, the realtor was a little surprised (and I don’t think believed me at first) when I told her I didn’t care about square footage, or the number of bathrooms and bedrooms (I live by myself so these were non-issues).

    I totally get what you mean about the layout being much more important than sqft. There are wonderful websites such as apartment therapy, and innovative furniture design and some personal ingenuity that can make small spaces a non-issue. Because really, it’s the available free space within a room which makes a room feel big or small, not the size of the room itself. Filling up a large room with large, single-function furniture can make a room feel smaller than a standard size room with multi-functioning and scaled-down items. On the other end of the spectrum, A room so large that it has TOO much free space is just wasteful and depressing. Unless you want to live in a dance-studio, or plan on regularly having 10+ people in the same room (and no option to move furniture around) having tons of free-space is usually a mindless desire because of the equation of more is better..no matter what.

    The thing that gets me the most is when people feel the need for large bedrooms. Why??? You have the whole freakin’ house! All you do in a bedroom is sleep…other stuff too, if you’re lucky. Or people who complain about the size of a closet. You have 4 walls, put a shoe rack and/ or an armoire up…or get a large dresser. Or a bed that has drawers underneath. People hate to think and love to complain…grr deep breath :)

    The most important thing was the location, the quality of construction, original character (I asked to keep the search at mainly home pre-1980’s) and the look of the neighborhood. I wanted to live in an older, established neighborhood with old trees and natural Florida landscape…not razed neighborhoods of all ranches with front lawns of grass. I specifically wanted a fixer-upper, not just for financial reasons, but I knew I would want to make it my own and I didn’t want to A) Pay extra for a remodel that’s not my taste and B) Wrestle with the idea of waste everytime I wanted to replace something new because I didn’t like it…not to mention the cost of replacing something that I had to pay extra on the price to get…whether I wanted it or not.

    This actually made the search pretty easy because I didn’t hold to a strict set of guidelines and I got to see some pretty cool places that may have put off the typical buyer. I even enjoyed looking at the spaces that would make a rat cry because it made me feel excited about what it “could” be.

    I eventually became the owner of solidly built little jewel. 1964 concrete block 1-bedroom bungalow with a detached concrete block guest studio which had it’s own bathroom and kitchen. It was a total gut, haul, and remodel but the quality of the structure (with the original elements…including cast-iron tub and HUGE double avocado green cast iron kitchen sink…with an original vintage lucite spaghetti lamp hanging above it (the house hadn’t been remodeled since the 70’s). The house was built with a lot of attention and thought of the location (not like many of the houses built today). I’m in Florida, so it was raised, with a crawlspace, AND a concrete slab foundation to protect from flooding and termites (it’s 2 blocks from a river). Wide eaves to shade from the sun, and the coolest attention to details, they situated the house sideways off the road, with the smallest ends of the house facing east and west, so not too much heat came in through the windows.

    4 years and about $30k later it’s been transformed thorugh hardwork, help from handy family and friends, and though that was a lot of money to spend on a small house, I get to carry a PITI payment of half the cost of rent in this area which has freed up my finances for some incredible opportunities.

  • m- September 12, 2013, 7:12 pm

    Hey MMM,

    Hope the family is safe with all the Colorado Flooding.


  • JJ September 13, 2013, 6:29 am

    I wonder if you have an opinion on which organizations in the Boulder, Lyons, Longmont area that would be able to handle donations given the recent flooding. I like to donate and I’d trust you with suggestions of which organizations to donate to. Maybe the media is making it out to be more than it is. It’s hard to tell sometimes. Looks pretty bad tho.

    Hope all is well with you guys… not sure to what extent Longmont has been affected. Mostly been hearing about Boulder and Lyons.

  • Brian Smith September 14, 2013, 12:36 pm

    Location: There is an app for that.

    Highly recommend WalkScore.com before buying.

    We bought in a neighborhood with good bones, a few shops, and great transit that was bound to become a hipster hangout.

    It has been fun watching our WalkScore go from 75 a few years ago to 86 (very walkable) now.

  • K September 18, 2013, 12:23 am

    Earthship style DIY built and designed house on a medium sized block of land in the rural residential area of town somewhere on the coast? Yes please! $150,000 for the land and maybe $200,000 to build and fit out the house with solar power and greywater recycling systems.

    This is half the price of a dull, energy intensive suburban 4×2 house in Australia and many times more interesting and comfortable.

    It also doesn’t hurt that I am a qualified town planner, my girlfriend is a qualified interior designer and my brother is an architecture student (with a few years left to go). I’ve also got a lot of friends from school who are builders, carpenters, plumbers, tilers and electricians.. I really should get my sister to go into real estate and then that’d be the complete package!

    If you aren’t very handy yourself, it is definitely good to find some friends or extended relatives who are so they can help you out with DIY projects and show you the best way of doing things. Here in Australia you can often pay friends/family in ‘beer currency’ to compensate them for their time. Usually people are more than happy to assist for free, they say this anyway, but showing your appreciation goes a long way and will increase the chance that they will be willing to help out again for the next project.

  • Anne-Marie September 19, 2013, 10:15 pm

    Another cost saving when buying a house is skipping the real estate agent. It is easy to arrange a sale without one, by paying a lawyer a few hundred bucks to review the contract. Your offer may be more attractive to the seller if he can get his selling agent to pass along the savings on the buyer’s agent commission (typically 3% of the price).

  • Devorah September 25, 2013, 5:28 am

    Among the choices I didn’t see a hand-built home, like from Cob, Adobe, Straw Bale, or other kit.
    Any thoughts on those options?

  • Dan September 29, 2013, 9:24 am


    Regarding the location/axis of a house. A lot of houses in the neighbourhood I can afford and is close to my work are attached town homes with garages out front and little windows on the first floor but generally have a couple large windows on the second floor to let light in.

    Does the floor really matter? My guess is yes because heat tends to rise, so I assume you’d want the sun coming in on the first and then rising to the second floor.

  • Zelle October 10, 2013, 2:52 pm

    Ha, yes! I see $300K an think ‘so cheap!’.
    We live in Melbourne now and would love to buy, however I’m not sure the numbers stack up at well in excess of $600K to get anything family sized remotely close to work ($800K+ in our current suburb). We’re originally from NZ, and are considering additional rentals down south (Dunedin), but even then $200-$300K would be a steal! I’m always amazed at how much house is available in the US for the money, with six figure income jobs just a short distance away. A good friend of mine has begun buying rentals in the US because of the price/yield, but that of comes with all it’s own challenges.

  • djbluemonster October 22, 2013, 7:35 am

    Mr Mustache, what do you think of the tiny house movement? My wife and I are definitely considering of building one of these quality cottages and eliminating the need for any mortgage whatsoever (we hate McMansions and HGTVs continued promotion of them).

    I think by combining your strategies on energy/house with their quality over quantity ethos, we’ll be happy campers.


    We’re DINKs so the 3 bedroom place at 850 sq ft is plenty for us. B53 Model.

  • Steve October 25, 2013, 9:53 am

    I am looking to build my own home (acting as the general contractor that is) I can do the plumbing, electrical, trim, flooring, etc. which will really take down the price since labor is more than the materials a lot of times. I also have 5 children but plan on building no bigger than 1200 sq ft with a basement. At least 3 of the kids will stay in the basement. That way, when the kiddos leave home, I don’t have to worry about heating and cooling space that is not being lived in.

  • Marc November 17, 2013, 7:26 am

    If you guys like small houses you should move to the UK.

    Our new builds are seriously tiny and they are definitely not cheap! Often have tiny gardens too.

  • C de L January 29, 2014, 9:06 am

    Well, first I read your post and I do quite the same. I have two apartments and I am looking for a house in order to get off the condominiuns demoniacs taxes. I contact the sellers, ask for more information and pictures and research all legal stuff envolved. Soon or at the same time I look at google maps and whem posible I walk around the neighborhood at night and at day. Well, if it does not work I do some exercise at least. This is the only way to notice security, noise, polluction, bad neighbours, trash on street, bad smelling, commerces near and whatever can get a plus on your decision. In some of them I saw terrible things that made me change completely the idea on living in that area. What if you buy a place that is being sold just because of some terrible problem? If it is being sold, in 90% of cases it is because there is a problem. Most are not finantial problems.

    • SUSAN January 29, 2014, 6:51 pm

      Great advice, so only 10% of houses for sale may be a good buy without problems, no wonder I am having a hard time finding one,

  • Jacob Ding October 10, 2014, 3:16 am

    Buying a home is a very emotional process, but if you allow those emotions to get the best of you, you may fall prey to a number of common home buyer mistakes.
    There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home.

    Mistake 1: Falling in Love With a House You Can’t Afford
    Mistake 2: Assuming There’s Nothing Better Out There
    Mistake 3: Being Desperate
    Mistake 4: Overlooking Important Flaws
    Mistake 5: Overestimating Your Handyman Skills
    Mistake 6: Rushing to Put In an Offer
    Mistake 7: Dragging Your Feet
    Mistake 8: Offering Too Much

    It’s natural for emotion to come into play in the home-buying process. Buying a house is a big decision, but this is exactly why you need to ensure you are making rational choices, rather than getting wrapped up in the notion of a dream home.

  • Superman December 28, 2014, 6:57 pm

    Congrats on the new house! Just started reading your stuff about a week ago and I love it! Saw that you resided in Denver and was wondering…….

    We currently live outside of the US, but will move back to America within a couple of years. One of our locations we were thinking about moving to was Denver or Dallas (Tx). I grew up in Dallas, Texas where my mother and father currently reside. We like the idea of Denver because we have some very close friends that live there and we saw that the property tax is pretty reasonable.

    What area would you recommend in Denver for a family of four from Asia. We have saved enough to buy a house. We have two boys (2 years / 5 years). And we share similar beliefs in lifestyles as yours. My wife has never lived in America and my boys were born abroad.

    Again, awesome reads!

  • Morricol October 27, 2016, 2:28 am

    Hi MMM, I know this is an old post but I’ve watched your World Domination presentation and have been wondering how buying a house fits in to the 10 year plan.

    In my part of Queensland, Australia a basic home 30 – 40 years old with 3 bedrooms and 1 bathroom on less than 1/4 acre (typical suburban home) costs upwards of $350,000. The closer you live to the city of Brisbane the more expensive it will cost with houses within a radius of 10km from the city centre starting from $700,000 and upwards. Brisbane is not the most expensive capital city in Australia but it is more expensive than living in a rural area where jobs are less likely to be available.

    I wonder what you would advise young people trying to accumulate that first $Million in order to retire early. Should they rent (rents here are upwards of $300 per week, for the basic 3 bed, 1 bath house) and still retire after 10 years in the workforce?

    Wages vary, naturally but a typical office worker such as receptionist, clerk, book keeper etc. could earn on average about $700 per week after tax, and a professional person could earn up to $2000 per week, for someone employed as a dentist, accountant or engineer. Perhaps you could offer some suggestions for how we can get ahead and retire young here in Australia?

  • The Gib Jr July 15, 2017, 12:07 pm

    MMM: Great article! I agree with you on nearly every point. To my friends who are shopping for a house, I preach the same ideas as you (location, then specific property). I would like to offer one additional point to your article: buying a house allows you to fix your monthly living expenses, whereas rent fluctuates with market rate. I feel this way because (1) your mortgage payment remains constant (assuming you get a fixed-rate mortgage), (2) your taxes can only move by a certain percentage from year to year in most locations.

    For example: in 2000 in Royal Oak (a nice suburb of Metro Detroit) Michigan, a 2 bedroom duplex rented for $850/month. Most 2-bedroom starter homes cost roughly $110-140k at that time. I purchased my first house in 2000 for $140k, leaving me with a $900/month house payment on a 15-year mortgage and $200/month taxes. Now, this was $250/month more than I paid in rent, but it became a fixed expense. Fast forward to 2016: that house is paid for (and worth $200k) and taxes are $233/month, whereas a 2-bedroom duplex now rents for $1600-1800/month.

  • Suburb Mom August 4, 2017, 6:34 pm

    I realize this is an old post but I really need some guidance. I currently live in a too expensive subdivision house 30 minutes outside of Detroit in the suburbs. My families expenses are becoming too high and we can no longer comfortable afford current house let alone get ahead financially. Also I want to move to an area that has greater walkable amenities such as stated in this article. My problem lies where in the school districts. I have two young children and I’m planning on putting them in the public school district. I currently live in one of the top 14 school districts in my state. More affordable cities, with better amenities, have lower ranked school districts. I need to downsize regardless, the question is do I downsize in my current area and find something within my current school district but lacks walkability…I.e. the middle of a subdivision. Or do I move to a more urban environment, with more walkable options, but not as highly ranked schools?

  • Derek McDoogle August 14, 2019, 10:00 am

    I like how you suggested looking for the location you want before looking for a house. My wife and I are ready to start the buying process and we want to make sure we live in a good neighborhood. I will share this article with my wife to give her more ideas about buying our first home.

  • ThisTooShallPass January 21, 2020, 2:19 pm

    Appreciate the wise minds of this forum to put me in the right direction.

    In less than 6 months I plan to retire early from my job. Wondering if it is better to buy a house 100% cash or go for mortgage (20% down).

    Excellent credit rating, 15 year APY @ 3% and 30 years at 3.8%

    $400k comes out of the savings account earning 2.35%

    Age: 44, Married with two children

    Currently Renting. Relatively closer to work. High cost of living area with the highest property tax in the country.

    Planning to buy a house in low cost state (DE) but not too from where I live so current friends are “accessible”.
    Brand new house priced at $400 (2,300 Sq. Ft. , already factored in for some upgrades like bigger lot for vegetable garden, moving costs and certain one time costs ).

    Expenses at FI would be $25k but we are flexible both ways.
    The magic number $625k in taxable accounts (30% bond, 70% stock index for now but will transition to ~90% to stocks over time)

    ROTH, IRA’s are in good shape (don’t like to touch this for 15-20 years, however, may take out some money from ROTH early for children’s collage in few years.

    Thank you, let me know if any additional information is required.


Leave a Reply

To keep things non-promotional, please use a real name or nickname
(not Blogger @ My Blog Name)

The most useful comments are those written with the goal of learning from or helping out other readers – after reading the whole article and all the earlier comments. Complaints and insults generally won’t make the cut here, but by all means write them on your own blog!


welcome new readers

Take a look around. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.

For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. Go ahead and click on any titles that intrigue you, and I hope to see you around here more often.

Love, Mr. Money Mustache

latest tweets