Owning a home is the single biggest way to build wealth – and has been for generations. If wealth and financial freedom (and not get-rich-quick schemes) are your goals, then you need to get serious about buying a house one day. If you spend enough time learning about personal finance, you’ll see tons of financial advisors telling you that home ownership is necessary to build wealth (specifically generational wealth).
A 2020 report that details research from the Federal Reserve and Harvard states, “U.S. homeowners have an average net wealth that is 400% higher than that of renters with similar demographics and earnings, and home equity represents the largest proportion of wealth (34.5%) for U.S. households.”
400%!!! This is because of the way money flows around home ownership. Yes, you take out a mortgage to buy the house, and this is debt. HOWEVER, every single mortgage payment you make on a house you own is essentially a long-term investment. This is called EQUITY. Equity means that you own that percentage of your house if you ever sell it. For example, you buy a house for $100,000 and put a down payment of $1,000 when you buy it. Your mortgage is $1,000 each month, and you live in that house for 5 years. After 5 years, you sell that house for $100,000. I know what you are thinking: no profit, right?? WRONG! Your equity has been building with every mortgage payment. You get back $34,885.02! Because that’s how much of the loan you’ve paid off and how much equity you have now!
A quick disclaimer: All of the information here is according to my own experiences, research, and what has worked for me for the past 4 years. Your needs and priorities might be different based on your own situation. And remember, this is a blog to learn about financial and renovation information. I am not your advisor and cannot guarantee any results. There also might be affiliate links on this page, but I will NEVER recommend anything that I do not personally use and love.
How to Afford a House
Okay, great, Kathleen. I see how much home ownership could help build wealth, but I can’t afford a house!
According to the February 2025 J.P. Morgan Research report, ”New homes for sale are at 481K, the highest level since 2007, and speculative homes for sale are at 385K, the highest since 2008.”
Trust me, there is no way I could afford a house that expensive either. That’s why I’m telling you to buy the ‘ugly’ house. It should be no surprise that the “ugly house” in the neighborhood is going to cost less and will have fewer people trying to buy it. Most people don’t have the skills, the patience, or the money to renovate a house after they’ve just bought it. However, the beauty of buying an ‘ugly’ house in a great neighborhood is that it will be worth a lot more once you make it just as beautiful as the others. This way, when you sell that $100,000 house for $150,000, you’ll get your equity AND the extra $50,000 you sold it for ($84,885.02!).
Don’t Make Yourself House-Poor
When my husband and I were trying to find a house to buy in 2021, we didn’t want to be house-poor, where all of our money was going to a mortgage instead of other things we wanted (like traveling). But we also wanted a house that we could grow into since we were newly married (two years before) and thinking about starting a family fairly soon (our Baby Bean was born 2024).
Our max budget was $200,000 since that was approximately what our current rent was. We live in a rural place and knew that our housing market wasn’t going to be crazy expensive, but the average in the area was definitely closer to $300,000. We looked at A LOT of different houses, and they all had roughly the same theme: something was wrong with them. They were too small, in a bad neighborhood, run-down, or just plain terrible. When we discussed our priorities, we decided that the neighborhood and the cost were at the top of the list. So, we agreed that the trade-off would have to be to buy an older, uglier house. BUT that didn’t mean it had to stay ‘ugly.’
Our First Home
Eventually, we found a house that was built in 1987 and had never been renovated. It was a moderate size, at approximately 1400 square feet. It was in a great neighborhood! The house had been on the market for a couple of months, even though other houses were selling like hotcakes. When we went to tour it, we saw plenty of problems: nothing had ever been updated, the ceilings were popcorn, the walls had the original wallpaper, and the master bathroom wasn’t currently functional. It even still had the original 1987 fridge with leather handles! People didn’t know what to do with it and didn’t want to take on a project that big. But my supportive husband and I decided that this would be our adventure, and we put in our bid. Below asking price. By $10,000. And they accepted it! So, our adventure began.
Not All ‘Ugly’ Houses are Created Equal
There were definitely a few houses that we saw that were ‘ugly,’ but would’ve been a terrible investment to make. When you are trying to weigh the pros and cons of houses to invest in, it is important to really take your time and know what you are looking for. After all, it will be a lot of time and money in the end. Take into consideration what your DIY level is and what the house might need to be fixed. Ideally, we would’ve found a house that only needed surface-level changes like wall paint or cabinetry. We didn’t have a lot of options, so we didn’t end up with a house like that. BUT there are some things that you HAVE to have in order to even be able to renovate a house.
Here’s what to look for:
Strong Foundation and Structure:
A house with “good bones” has a reliable foundation, sturdy framing, and a well-built roof. You can strip just about everything else, but if you have to replace framing, you might as well build a new house.
Good Layout:
You can’t out-organize a bad home design. Some walls you can take out or rearrange, but you really don’t want to have to. You also run the risk of not being able to move walls when push comes to shove.
Quality Materials and Craftsmanship:
Unless you are up for rewiring or re-plumbing, you have to make sure these essentials are done well to begin with. It’s also important to remember that if you touch it, you have to bring it up to code (which might have changed a lot since the house was built!)
Potential for Aesthetic Changes:
“Cosmetic” changes are the best types of renovations where you just need some paint and elbow grease. These changes cost the least but give you a huge boost in resale value.
You can easily avoid buying a house that is missing any of these things in one simple step: Property Inspections. You are not the professional. So, when you tour a house, you can only see so much of the potential problems. While good professional home inspections can run you a couple of hundred dollars (maybe more), they will potentially save you tens of thousands! Make sure to invest in a good inspector or inspection company. You are taking a risk, and you should CYA (if you get my drift).
Interested in buying an ‘ugly’ home but don’t want to get screwed over? Read more about the red flags to look out for here. There are a lot of things you can spot yourself if you know what to look for, and that can save you precious time and money.
You’ve convinced me; now what?
Start looking into your own home-buying environment by talking to a local realtor (make sure you talk to a couple so you find one that understands the vision). Even if you’re not ready to buy right now, seeing what’s out there is a huge motivator and learning experience.
Start learning how to do DIY renovations! My husband and I have been renovating our home since buying it in 2021. If you’d like to learn how to DIY your own renovations, stay tuned here on Kathleen Anne Co. to follow along and learn from our experience. We’ll be posting in-depth how-tos for all of our previous renovations, including flooring, a bedroom, two bathrooms, and other little DIYs along the way. We’re also embarking on some new projects this year, the next of which is building a shed from the ground up for extra storage (1987 didn’t believe in storage, apparently).
Comment below if you want us to dive into a specific DIY topic first! Maybe you have a bathroom reno coming up soon and you want the deets for bathroom renos ASAP (We’ve already done two!)
