✫️ TL;DR
JL Collins calls your primary residence a lifestyle expense, not an investment. But in many real-world scenarios—especially in high-growth areas like Silicon Valley—owning a home can be a smart financial decision. This article breaks down the seven reasons why.
📌 The Problem
You’ve heard it before:
“Your house is not an investment. Buy index funds instead.” — JL Collins
But what if that advice is overly simplified? What if it doesn’t apply to families building long-term roots in places like the Bay Area? What if, for many people, owning a home is one of the best financial decisions they can make?
JL Collins’ philosophy is powerful for promoting simplicity and low-cost investing. But let’s explore the counter-argument—why your house might be one of your smartest financial decisions.
🚀 1. Forced Savings That Actually Works
Most people struggle to consistently invest their income. Life happens—expenses, impulse purchases, lack of planning. A mortgage, however, acts as a forced savings plan. Each month, part of your payment goes toward principal—which builds equity, not just pays for housing.
Rent? That’s 100% gone.
Sure, stocks might yield better returns, but only if you invest consistently. The truth is, most people don’t. Homeownership helps those who struggle to save or invest with discipline by doing it automatically.
Think of your house like a 401(k) with walls.
📈 2. Leverage: A Tool for Building Wealth
Real estate is one of the only asset classes where middle-class people can use large-scale leverage safely. Put 20% down on a $1M house, and you control a $1M asset with $200K.
If that house appreciates by 4% annually, you’re not earning 4% on your $200K—you’re earning 20% (ignoring taxes and costs for simplicity).
And if you’re in an area with strong demand like Silicon Valley, 4% may even be conservative.
Yes, JL Collins warns against debt. But responsible, fixed-rate, long-term leverage—backed by a real asset you use every day—is not the same as speculative margin trading.
📃 3. Tax Benefits and Capital Gains Exclusion
In the U.S., homeowners enjoy meaningful tax advantages:
- You may deduct mortgage interest (if you itemize)
- You can exclude up to $250K (single) or $500K (married) of capital gains when selling your primary home (as long as you meet the ownership and use tests)
This means tax-free income from an appreciating asset—a benefit that most other investments don’t provide.
Compare that to stocks. Even in tax-advantaged accounts, dividends are taxed, capital gains are eventually taxed, and withdrawals can be penalized or limited.
Your home? Live in it. Sell it. Pocket half a million tax-free. That’s hard to beat.
🏚️ 4. Stability, Control, and Psychological ROI
There’s a huge psychological return to homeownership:
- You can design and renovate it to your taste
- You’re not subject to rent hikes or unexpected eviction
- You choose your school district and stay as long as you like
- Your kids feel a sense of continuity and belonging
People often dismiss these as “soft” factors. But these qualities have long-term impact on quality of life, emotional health, and yes, even financial stability.
When you rent, you’re always at risk of change. When you own, you have agency.
📉 5. Renting Isn’t Always More Rational
The JL Collins argument assumes rent is cheaper and more flexible. That’s not always true—especially in high-demand areas like the Bay Area, Austin, or New York.
In these places:
- Rent can exceed mortgage + property taxes
- Landlords may not renew leases
- Moving every few years incurs serious transaction costs
Owning locks in your cost of housing (assuming fixed-rate mortgage). Over time, this becomes a hedge against rent inflation.
Plus, every month of rent is lost equity.
🪙 6. Inflation Is Your Ally, Not Your Enemy
Inflation hits renters hard. Rent increases are common, and in many cities, there are no limits.
But if you own your home with a fixed-rate mortgage:
- Your monthly payment stays flat
- Your real housing costs shrink over time
- Your home value may rise with inflation
That’s a powerful combo. Your income likely rises with inflation, while your housing cost stays the same. That creates more margin to invest, save, or build.
Owning a home is like putting part of your budget on a time-freeze—while the rest of the world inflates.
🔑 7. Optionality: The Hidden Superpower
Renters are limited. Homeowners have options:
- Refinance if interest rates drop
- Open a HELOC to fund home upgrades, education, or a side hustle
- Rent out a room or convert a garage for income
- Airbnb during vacations or busy seasons
- Sell and capture gains, then move equity elsewhere
That’s flexibility and optionality that builds over time. The longer you own, the more tools you have at your disposal.
⚠️ When JL Collins Is Still Right
Not everyone should buy a home. It’s not always a win.
Be cautious if:
- You move frequently (every 2–3 years)
- You stretch your budget to buy
- You ignore maintenance or tax obligations
- You don’t have an emergency fund
- You’re not investing in other assets
The key is balance. Don’t buy if it makes you house-poor. But also, don’t rent forever just because someone said homes are bad investments.
✅ AtomicMoney’s Take
JL Collins’ guidance helps prevent lifestyle inflation and investment mistakes. But when you look closer:
- Homeownership is a form of investment
- It builds equity
- It provides optionality
- It protects against rent and inflation shocks
- And it offers tax-free wealth transfer in many cases
If you buy smart, stay long, and diversify elsewhere, your house can be one of the most practical and stable investments you ever make.
It’s not just where you live.
It’s a cornerstone of wealth—if you treat it right.
