Think of your home as a car, not an investment

I was 22 when I bought my first car, a used green Audi. I loved this car. Every day that I got into it, I appreciated everything about it. Regardless of how much I loved it, I had no illusions that after driving it for many years, I would sell it for more than I paid for it. I got my money out of it through using it, but I didn't view it as an investment.

What would change if we thought about our homes more like cars — an asset that ranges from utilitarian to pleasurable, but not one on which we plan to make a killing? Unfortunately, most people view their homes as stocks — expecting them to go up in value. I understand that there are investment aspects to a home — principal pay down, tax benefits, potential appreciation — but there are also sizable costs. Once you realize that the primary purpose of a home is housing, rather than investment, you grant yourself permission to act differently.

If you plan on living in your home for a while, you have permission to pay more than the asking price when a market is overheated. There may be limits; we have a client who got in a San Francisco bidding war and walked away at 50 percent more than asking price. But if you have done your due diligence and found a place you can afford and really imagine living in for several years, don't forgo the chance to own it because of a fear of making a bad deal. You may lose money when you sell it down the road, but you spend money on cars or vacations and you don't make money on those either.

If your home is not an investment, you also have permission to move. If you bought the wrong place, don't let your home become your prison. Break the rules of needing to stay for five years and figure out how you can end up somewhere that is more consistent with what you want from your life. Clients often get anchored on what they have put into their home rather than what they want their lives to look like.

Most important, if your home is not an investment, you have permission to rent. While you don't build up equity, you increase your flexibility, mobility, and can reduce ongoing or unexpected costs. Some people love the sense of community through neighborhood stability, but many buy something just because they feel like they are wasting money if they don't. They're not.

My current car has 140,000 miles on it and we've been in our current home 13 years. I'll lose money on both when I sell them. They both were worth the ride.

Spend your life wisely.

Ross Levin is the founding principal of Accredited Investors Inc. in Edina.