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The "investment" part is a crapshoot. I own houses so I can fix up my own space the way I like it, don't have to answer to a landlord and have a fixed mortgage payment (although insurance, maintenance and taxes go up, of course).
I made a killing on two houses I owned, both in a desirable NJ suburb that's commuting distance of NYC. The first one I bought, before those two, was also in NNJ but a less-tony area, and I just about broke even when I sold it 3 years later. When DH and I married and moved to the Midwest, we barely got out of our house what we put into it when we downsized 12 years later. I suspect the one I own now will go the same way but it's not a big % of my assets and I love living here.
So- I continue to own rather than rent. My general principles are NOT to buy the biggest and best house you can afford, not to leverage yourself too much (i.e. low down payment) and not to count on "make a killing when I sell the house" as a retirement plan. You might, you might not.
Disagree with several things, but his general concept I do agree with, in that your primary home is not an investment. It can be an investment, you can make it an investment, it is part of a wealth building strategy,but it is a place you live, a home. Approaching such a thing with an investment only mindset just will not work in most cases. I have yet met anyone, no matter what they say, has approached buying their home the same as their other investments.
But why he used "flat rate" in regards to growth? Because it assisted his argument. Depending on the source, national average of increase is a little over 5% per year, that would have put a large damper on his argument.
This guy is a financial planner? Lol, wow.
I don't really have other investments... except 403B.
Bought my first home to build equity and parlay the equity into the next and repeated every 12 to 18 months.
A single person doesn't need much... but owner occupied fixer doing your own work has been lucrative... even when the market tanked... rents were surprisingly steady.
Last edited by Ultrarunner; 03-27-2019 at 08:07 PM..
Where in the SF Bay Area would a home be AS LOW AS 400k? Modesto? LOL
My first home and many subsequent homes are located in East Oakland California... high crime area where burglar bars were the norm...
In fact... when I bought my home I came home one night and someone had broken in and stole my Water Heater... my gas water heater and the gas valve for my wall furnace...
Plenty of 1910 to 1930's East Oakland single family homes on 25 x 100 lots or 40 x 100 lots... 2 or 3 bedroom with 1 bath with 900 to 1000 square feet...
Below are the pictures I've posted before of my first home the day I bought it... the inside was used as a garbage can is the best way I can describe the condition... the sink had rotted and leaked water for so long the floor was rotted enough to see the dirt in the crawl space.
But at age 22 it was all mine... Bay Area single family home owner with all utilities ON and 600 square feet of 1910 cottage...
Yes, me too. Age 22 in Orange County, CA up in the foothills. But, after cashing out there, the market was bad everywhere else we went. So, it's location-specific. In THIS market, I would be clueless what to do.
I do remember, we got the down-payment together by selling my horse and his Cessna 150. LOL.
Started working at age 12... so 10 years of work history plus I saved a lot of what I earned... even paying folks 33% of what I earned for room and board... every Friday on pay day starting with my first pay check.
Also sold my labor of love... the 1968 Z28 I had restored to show condition... people were always asking to buy it and when I was in contract to buy... I made two phone calls and sold my prized possession... hundreds of hours went into the restoration and it was bone stock... could not have done it without selling my car...
Last edited by Ultrarunner; 03-27-2019 at 08:11 PM..
I don't see how buying a house is any sort of investment unless you have a big down payment or could buy with cash.
I got really into the idea of buying a home for a while but couldn't really justify it after running the numbers. What you spend on interest alone is insane and you'd have to live there a long time to make it worth it.
You could get lucky and have housing prices shoot way up, of course. But looking at the trends and how prices have changed over the last decade, it didn't seem like that was going to happen, and it wasn't really a gamble I wanted to take.
I think having to do the maintenance alone would make it not worth it.
The one major benefit I see is being able to do what you want with the house and grow a garden over the years. But if you're like me and you get bored in one area and want the freedom to go anywhere and everywhere, it's a really bad option.
I'll be inheriting money in the future, so when that time comes (and I pray it's a long way off), I'll reassess my goals.
There are a lot of positives to owning a house but I kind of don't like the idea that it's throwing money away to rent. It's not. You're paying for a place to live and sleep one month at a time. I can understand the "throwing money away" mentality because I've had it myself at times. But it really doesn't make sense. It might make a bit more sense if you have children you can pass these resources down to. But as a single childfree person, my life is just my life. When I'm gone, nothing will matter, really. So I don't really see the point of trying to cultivate all this wealth. I'm more focused on living in the moment and enjoying my life with as little stress as possible, and renting a nice apartment with all the amenities (and emergency maintenance) seems the best for that.
Sounds like you have given it some thought... nothing wrong with making an informed decision and choosing flexibility...
My sister in laws best college friend is a research scientist... she is very good in her specialized field.
About 8 years ago she was lamenting being 35 and still renting... my brother showed her some homes in Oakland and she ended up buying one...
She ended up owning it for about 2 years...
Ownership was stressful for her... she had the water heater go out... a tree fell and clipped the roof plus the general maintenance.
She felt tied down and unable to trek to far off corners of the world like she had been doing...
Now here is the flip side... she ended up selling and cleared enough to pay off her remaining student loans and her car... for the first time in her life she was debt free and still banked another 60k after taxes...
It turned out very well for her... and she did say she might try it again but now enjoys the single life without ownership...
One of her friends accepted a 1 year professorship overseas.. so she moved in to house sit for a year just paying all the utilities and Gardner...
I said isn't this like owning... she paused and said kind of but with limited responsibility....
Buying my first home at 22 in 2013 was one of the best decisions I've ever made. I went from 20% equity to now almost 50%, I turned it into a rental last year and bought a nicer home. Rent covers all expenses with a tiny bit of positive cash flow left over. The very low rate 30 year mortgage is a nice help too.
I don't see how buying a house is any sort of investment unless you have a big down payment or could buy with cash.
I got really into the idea of buying a home for a while but couldn't really justify it after running the numbers. What you spend on interest alone is insane and you'd have to live there a long time to make it worth it.
You could get lucky and have housing prices shoot way up, of course. But looking at the trends and how prices have changed over the last decade, it didn't seem like that was going to happen, and it wasn't really a gamble I wanted to take.
I think having to do the maintenance alone would make it not worth it.
The one major benefit I see is being able to do what you want with the house and grow a garden over the years. But if you're like me and you get bored in one area and want the freedom to go anywhere and everywhere, it's a really bad option.
I'll be inheriting money in the future, so when that time comes (and I pray it's a long way off), I'll reassess my goals.
There are a lot of positives to owning a house but I kind of don't like the idea that it's throwing money away to rent. It's not. You're paying for a place to live and sleep one month at a time. I can understand the "throwing money away" mentality because I've had it myself at times. But it really doesn't make sense. It might make a bit more sense if you have children you can pass these resources down to. But as a single childfree person, my life is just my life. When I'm gone, nothing will matter, really. So I don't really see the point of trying to cultivate all this wealth. I'm more focused on living in the moment and enjoying my life with as little stress as possible, and renting a nice apartment with all the amenities (and emergency maintenance) seems the best for that.
you have to divide ownership in to two distinct parts ..
first there is the cost of housing ... owning may or may not be cheaper .. we rarely rent what we would buy in most urban areas .. homes start at 1 million in our area ,, but we can rent in an apartment building for a fraction of the cost of ownership and we do our investing elsewhere. ...
the couple who rented a 3 bedroom house and after the kids are out move in to a 1 bedroom apartment in a building can see a far better pick up in cash flow then someone still trying to support a big ole house with 5 digits in taxes , maintenance, etc ..
so cost of housing is one issue , which is cheaper is never a lock .
then there is the investment side ... over time the house may appreciate and if you sell it you can make money ... but resi real estate is very localized and deal sensitive . it has also overall lagged behind equities over time as an investment and by a lot .
so a renter with the resources to buy and plunk down cash has choices .. in our case renting and investing elsewhere has blown away any appreciation in our area over the years and left us in a position where we can subtract out all the rent for decades and buy multiple homes today compared to if we kept our house , did not rent and just had the home appreciation instead .
even today we rent ... we can buy an equal co-op for 375k and on the surface it looks like we would save 6k a year ...well that is until you see the income we earn on that 375k is a min of 18k a year ...so cash flow would take a min of a 12k hit
the fact we would shift 375k in to equity does not help us pay bills since i can't spend the living room and we are retired . so cash flow is king and buying would leave us with a lot smaller budget so for now its off the table .
but for someone without the resource to have a choice yet , buying early on is a great way to at least get something going for yourself . it was our buying a co-op early on as an insider back in the 1980's that gave us our start to developing our net worth
Last edited by mathjak107; 03-28-2019 at 03:16 AM..
What's conspicuous in its absence in the opinion expressed by the "financial planner" is a number like this one: $252,000.
That's how much a renter would have paid to a landlord at the very conservative rate of $3,000 a month for that same $600k house all the time while sacrificing the ability to adapt it to make it his or her own ideal place to live.
however someone with a fair amount of cash built up in later stages certainly has an option ...they can buy that house and potentially tie up hundreds of thousands in the house or they can likely rent something way cheaper and dump all that money in to alternative investments ...
this is why i always say you have to split owning into two separate components . what your cost of housing runs and the lifestyle benefits and what the appreciation aspect sees and it is the two together that comprise how you do ..
we pay more for housing renting , but that money not sitting in the house has generated far superior returns so the over all deal is better for us renting .
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