11 years ago my wife and I bought our first house in Asheville, NC. This was during the financial crisis and at that point, I had been investing for nearly a decade in real estate. I would research areas that I thought would be popular over the next 5-10 years and make purchases of single-family homes and then rent them out.

During our due diligence we looked at all the areas of Asheville before our move and (along with the help of a good real estate agent) decided that West Asheville would be a cool, walkable area that would increase in popularity. We use the same methodology today as we assess two dozen different data points in identifying prime markets to buy multifamily properties. We found a 3 bedroom townhouse in West Asheville that we bought in partnership with my stepfather. We lived there while we built a new home in a new neighborhood nearby.

Looking back a decade now, many friends talk about how “lucky” we were to get in early on the market here or “how much money we’ve made.” I agree that we chose a good area to buy and live. Financially how has it looked?

We put a contract on our house for $315,000 in April 2008. At 20% down plus some closing costs this amounted to about $65,000 at closing. We sold our house for $505,000 in September of 2018. Pretty great right? Let’s dive deeper into the financials to find out (for this analysis I assume that I could rent a similar home for the same amount as my monthly mortgage payment):

Initial “investment”: $65,000 

Time period: 9.5 years

Net proceeds: $230,000 

Total return = 254% 

Rate of Return (IRR) = 13.38%

Not too bad! Unfortunately we’ve put a fair bit of money into the house over the past 10 years. We spent $12,000 on a solar panel system, $20,000 on landscaping, $10,000 on a new basement, another $18,000 on repairs, maintenance, etc. This adds up to another $60,000 or about $500 per month. So, let’s redo the numbers:

Initial investment: $65,000 

Monthly investment: $500/mon. 

Time period: 9.5 years

Net: $230,000 

Rate of Return (IRR) = 8.36%

WOW! So after adding in typical maintenance/improvements on a home the return isn’t as great as most people assume. If you consider we also have to keep a portion of our capital after we sell to buy another house (unless we rent), then you’d have to set aside another $100,000 to buy a similar house today with 20% down. No wonder nerdwallet.com states that owning is more expensive EVERYWHERE in the country.

If I could’ve put that money to work ($65,000 plus $500/month) at 12% I’d have nearly $330,000 today, or about $100,000 more! I could use the cashflow from that sort of investment to pay a mortgage or rent.

Does that mean I would go back and not buy the house? No, buying a home is as much of an emotional purchase as an investment for me and I derived a lot of pride and value from planting a garden and starting my family in that home. But, it’s important to weigh the financial realities when making such a large financial decision.

If you’d like to learn how I used the Next-Level Income strategy to build a portfolio of passive income investments, you can get a free copy of my book and learn how to get access to cash flow investments.