In the early 1970s, I wrote my first column about luxury real estate and the difference between portfolio houses and paycheck houses. Paycheck houses are the houses most people know about and borrow to buy.
Portfolio houses are different. They’re the houses you see in magazines. They’re big. They have views of mountains, lakes, bays or an ocean. If you were an East Coast person, as I was at the time, it was about summer homes in Hyannis, Marion, Nantucket or Martha’s Vineyard if you went south from Boston. Or Annisquam, Rockport, Eastern Point or Manchester by the Sea if you looked north. Further afield there were places like Santa Fe, Ketchum or Big Sky. True bi-coastal types had La Jolla or Santa Barbara.
For all the variety in these locations, all share one amazing attribute. It made them quite different from paycheck houses. That single quality made them a better deal than paycheck houses. Be patient, I’ll explain later.
Time hasn’t been so kind to buyers of paycheck houses. Buying one is a lot more difficult. Prices have risen faster than paychecks. I bet you already knew that.
But the level of difficulty is stark.
In 1970, the median sales price of U.S. houses was just under $24,000. Median household income was just under $10,000 in the same year. You could buy a house for about 2.5 times median household income.
At the end of 2025, the median sales price of houses sold in the U.S. was $405,000, down from a peak of $442,600 in the fourth quarter of 2022. Median household income in 2024 was $81,600. That means you’d need about five years of household income – twice as much – to buy a median-priced home.
Yes, there are lots of things to adjust for if we want a true apples-to-apples comparison. Houses are bigger today. Windows are insulated. Kitchens are more elaborate. Bathrooms are more numerous. Full-house air conditioning is a given.
And let’s not forget the things that won’t be missed! Like Harvest Gold appliances. Or dishwashers that simulate the noise of departing jet aircraft flights.
Still, it’s a lot more difficult for a paycheck person, or couple, to buy a paycheck house today than it was 50 years ago.
But if you’re lucky enough to be in the market for a portfolio house, they’re still a great deal. Just as they were decades ago.
How can that be?
Simple. Paycheck houses are built where the paycheck is. Portfolio houses are built in locations that are difficult to expand and impossible to duplicate. Portfolio houses are the epitome of “location, location, location.”
Yes, they cost much more than a paycheck house. Beyond that, however, they are relatively inexpensive to operate. Please note that word: relatively.
Yes, I know this is difficult to believe. But hang in with me. Let’s consider expenses.
- Real estate taxes. Usually the largest single cost for owning a house, portfolio houses carry relatively low taxes because there are lots of them in their area. So there is a lot of appraised value per person needing services. The public-school portion of the tax bill tends to be small for the same reason. With most homes occupied only a portion of the year, the need for other services is reduced. Finally, portfolio homes are held longer, often for many decades, so their tax appraisal tends to lag. And comparables are scarce.
- Insurance. Portfolio homes typically have 50 percent of their total value in land, not structures. Paycheck homes are more like 80 percent. You don’t have to insure land. And large policies tend to cost less as a percent of value insured than smaller policies. The extreme of this is manufactured homes. Insuring them costs about twice as much as a comparable value conventional home.
- Utilities. A portfolio home may be 5,000 or 8,000 square feet, but the number of people needing light, hot water and electricity or gas for cooking generally isn’t much higher than paycheck houses. In addition, portfolio houses are second or third homes, so they aren’t occupied that many days a year.
- Maintenance. While external maintenance costs are similar, the less-use principle of utilities applies to maintenance as well.
Does the all-in difference amount to much?
It depends on how you measure. The annual bill for running a portfolio house will be higher in dollars. But it will be lower measured as a percent of value. While a typical paycheck house can cost about 5 percent of value a year to operate (excluding any mortgage payments), the portfolio house is likely to cost about 3 percent of value.
That’s an important difference.
With appreciation running at 3 percent a year, or more, portfolio homes tend to gain more in value than they cost per year to operate. That makes them off-the-books savings accounts. Cash comes out of pocket to pay the bills. But magically appears in another pocket as the value of the house rises.
Better still, if the owner still owns the house at death, the house and all its accumulated appreciation passes to heirs tax-free.
Is this guaranteed? No, nothing is. But it’s a nice little part of how the rich tend to get richer.
Related columns:
Scott Burns, “Paycheck Houses and Portfolio Houses,” 6/27/2010: https://scottburns.com/paycheck-houses-and-portfolio-houses
Sources and References:
Federal Reserve Bank of St. Louis, “Median Sales Price of Houses Sold in the United States,” (1963-Q4 2005): https://fred.stlouisfed.org/series/MSPUS
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: William Sun/ Pexels.com
(c) Scott Burns, 2026