Is your primary home really an investment?

[lumbollo]

Originally Posted by sterlinggirl

Property, by definition, is an investment,.....

Actually that is the definition of that particular dictionary. The have gotten it wrong. If you are in the United States the official dictionary is Websters. I recommend that you read that definition.

You can have a certain amount of money invested in property but the property is not the investment. This is where people often get it wrong. Furthermore, the OP was is your "home" an investment, not property. Go back and read what I posted about this. Your home is never an investment. You purchase a home to live in. You invest money to make a return on said money. Thus property can never be an investment unless you are making an income from it.

[Texas User]

Originally Posted by lumbollo

I was the 2nd person in this topic to have posted this. Read back.

Great.

[Texas User]

Originally Posted by lumbollo

Actually that is the definition of that particular dictionary. The have gotten it wrong. If you are in the United States the official dictionary is Websters. I recommend that you read that definition.

You can have a certain amount of money invested in property but the property is not the investment. This is where people often get it wrong. Furthermore, the OP was is your "home" an investment, not property. Go back and read what I posted about this. Your home is never an investment.

Are you making profit off of this investment?

[pghquest]

Originally Posted by Texas User

Stock market has returned an average of over 12% in the past 80 years. I have gained over 50% myself this year. Lot of people don't do well because of the lack of Asset Allocation.

A person who puts their money in the bank for 30 years with an average of 3% Interest will have a lot less money then someone who puts in in the Diversified portfolio for 30 years.

As much as me and traderx butt heads here over trading strategies etc, he is correct. For the most part, over time, some people can indeed make more in the stock market than paying down the mortgage but the issue is this, if your making it, it means someone else is losing it, and one day, they will be making it means you'll be ..... ?

Paying down a mortgage is a guaranteed return, where as playing/investing the stock market is not guaranteed.

I have entered the market earlier this year after cashing out another investment and my stock portfolio is up 751% (and yes, I can prove it). For the most part I've made these gains by making very risky trades and got lucky having them pay off to the point that I've pulled out my original investment to buy properties that I lease to good quality tenants (like the USPS).

The reason I've taken out these funds is because investing is my primary business, not necessarily the stock market but investing in general. For me the safety and security of being able to be risky can only take place if I have other safer investments going on.

What you need to remember is, in order for us to make profits in the market, someone has to be losing money. If I've sold an option and made money on the trade then that means someone else was on the losing end. Regardless of what side of the trade one sits on, most are in a better positions with guaranteed investments, and yes, paying paying down a mortgage is one such example.

There isnt a chance in the world that I'll be able to maintain such returns overtime and I'd be a fool to presume that I could. I've talked to numerous more experienced traders to learn how to better manage risk and even formed relationships with some authors of books on investing, and one individual who is an advisor to a brokerage firm. I've learned to do better research, (for example, I called Carl Icahns office just yesterday to research on a trade) because I know if I dont learn to better manage my risks and allow for lower rates of returns, I'll end up being the one losing my profits while someone else on the opposite side of the trade being rewarded for my stupidity. I know luck only gets individuals so far before stupidity kicks in.

Yes, I'd much rather pay down debt and go for long term growth over a slam dunk or drown trade now that I've increased my portfolio size. I think this is what traderx is referring to, guaranteeing your profits by paying down debt rather than risking it in something that may or may not return a profit at all.

Traderx, please correct me if this isnt what you implied/meant. I dont mean to speak for you, this was just how I interpreted your response.

[pghquest]

Originally Posted by sterlinggirl

Property, by definition, is an investment, and if you want to argue that your home isn't property I'll let you do so with your tax assessor.

Whether a home is a wise investment is a different matter entirely. Right now it's probably a losing bet for anybody needing leverage to buy one, but then again it could be a GREAT investment if the Dollar goes into serious decline and we follow Germany's example of backing currency with real estate.

Thats not what the link says..

"Money committed or property acquired for future income"

Homes are not acquired for future income, in fact they arent acquired for an income at all. They are acquired to have a place to live. They bring in no income, only liabilities like mortgages, taxes, maintenance etc, all of these are expenses..

Can a property provide you with a "profit" later, sure, if you happen to acquire a property for the right price, manage to time it right, but as long as you dont acquire a home for "income" it is NOT an investment.

[Traderx]

Originally Posted by pghquest

Traderx, please correct me if this isnt what you implied/meant. I dont mean to speak for you, this was just how I interpreted your response.

That pretty much sums it up. Nothing wrong with investing in stocks longterm, it's just you're probably better off attacking the mortgage first and locking in the guaranteed return. This isn't a new concept. Until just recently having a paid off mortgage was a primary goal of most people. So I guess our grandpa's were a lot smarter than a lot of us.

Btw, as for that 12% annualized market return, don't even get me started. Anyone who believes that BS means anything with respect to anticipated returns shouldn't be in stocks. Reminds me of the saying, figures don't lie but liars can figure.

[pghquest]

Originally Posted by Traderx

That pretty much sums it up. Nothing wrong with investing in stocks longterm, it's just you're probably better off attacking the mortgage first and locking in the guaranteed return. This isn't a new concept. Until just recently having a paid off mortgage was a primary goal of most people. So I guess our grandpa's were a lot smarter than a lot of us.

See, we do agree more than you think...

Originally Posted by Traderx

Btw, as for that 12% annualized market return, don't even get me started. Anyone who believes that BS means anything with respect to anticipated returns shouldn't be in stocks. Reminds me of the saying, figures don't lie but liars can figure.

See my response to paragraph 1

[NCN]

No our home is not an investment; it is our home. But it is really great to be retired and not have to pay out each month for a place to stay. We can choose when to do repairs on most things and when to update the decor.

[marcusj245]

The problem with "owning" (more appropriate term = going into debt) for a home is that the appreciation rate of homes, on average, is only 1-3% a year. The average rate of inflation has been 3-5% a year. What this means is you'll either break even or lose money when going into debt for a home.

There is also the problem of interest rates (almost like buying one item for the price of two) and the gigantic amount of debt on your balance sheet.

[pghquest]

Originally Posted by marcusj245

The problem with "owning" (more appropriate term = going into debt) for a home is that the appreciation rate of homes, on average, is only 1-3% a year. The average rate of inflation has been 3-5% a year. What this means is you'll either break even or lose money when going into debt for a home.

There is also the problem of interest rates (almost like buying one item for the price of two) and the gigantic amount of debt on your balance sheet.

I'm not so sure that is a proper equation.

What you are failing to add into your equation is that while the rate of inflation goes up renting costs go up while your mortgage doesnt (excluding taxes).

A homeowner can use inflation to their advantage because costs stay consistant (where in real dollars they are decreasing), but a renter has the inflation working against them because properties are sold, and landlords look for a certain profit %. As inflation take place, they increase their rental rates and tenants have to pay more.

Here http://www.census.gov/hhes/www/housing/census/historic/values.htmlis a good chart to reflect average increases in appreciation