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Viewing home as an asset, home as an investment, purchasing home as investment, home as an investment debate, home is not an investment it is a consumer good
YEP.... In my case my location...... but just statistacally based on case schillers studies it would pretty much work out the same assuming similiar investments in alot of areas .... key to the whole thing is what the renter does with the down payment money and the additionl savings each month compared to the buyer.....
most small investors are pretty poor at investing choosing to time the markets instead of spending time in the markets with an assortment of diversified index funds. ... for those people the home will probley be the better deal.
I agree to some extent with the point made by the poster below, saying that a home is an investment.
The only contention on my part? Not all home buyers purchase through leverage. Some pay cash.
And I am consistent across the forums, that in my view a home purchase is an investment. Wise, unwise, profitable or not profitable, 100% cash, or leveraged to some extent or 100%, home purchase is an investment.
There is no inconsistency.
The context of the other post was different. If you sell in a relatively short time, then you will have a large capital gain or a loss (even if it's not your purpose to realise capital gains/losses, you'd better be aware that it's a likely consequence of your decision to buy)
My primary objection was to the notion that "not having to pay rent" is a "dividend". If you buy with the intention of never selling, then it doesn't produce income, so it's not an investment.
I would agree that speculative buying for the purpose of realizing a capital gain is an investment (though not a very good one)
Do you own a home? And why? If it's ONLY for shelter.. why own when you can rent? Less responsibility.... more flexibility... no maintenance, etc. etc. The benefits of renting far outweighs owning if it wasn't for this FACT:
Because with a rental you don't have control over how long you live there. A landlord can find an excuse to put you out if they want to. A landlord can be lax on the maintenance, making it unpleasant to live in his or her property, and forcing a move. There are many reasons to own. This is only one of them.
Because with a rental you don't have control over how long you live there. A landlord can find an excuse to put you out if they want to. A landlord can be lax on the maintenance, making it unpleasant to live in his or her property, and forcing a move. There are many reasons to own. This is only one of them.
you may not have complete control with owning either (e.g. need to move because of work)
The difference is, it's cheaper to move if you rent.
btw, you get what you pay for -- very low rent means less well maintained property. If you rent a place in a managed building which has owner occupants as well as renters, and the place will be better maintained than a slumlord apartment.
I have always chosen home ownership over renting not because of the investment potential but because I wanted to control where I lived and what I was able to do to my environment. When I looked at housing options and what I wanted to afford, I could always find a better location and better quality of property if I purchased. The cost of shelter was the same (I have always used one weeks income as my guide to the cost of shelter) so the argument that I could have rented for less is mute.
As a result of government tax incentives and the fact that I've always been able to sell the property for more than I paid, each time I moved, I had in fact, lived in my home for free. I see my housing choices in hindsight as good investments just as I look at the time and money spent on education a good investment, but in both cases I wasn't looking at my choices as investing. I was just trying to make good decisions.
I think real estate investing should be the domain of those entrepreneurs that have money they are willing to lose. People willing to take a risk for the potential of reward. A good real estate investor will cash flow a property and with conservative parameters see that they should be in the black. A good real estate investor will add value to a property, not just hope for appreciation.
When I see people citing macro statistics to make a case for or against real estate investing I cringe, successful investing is done by paying attention to the details. In real estate just a few blocks can define a market, the style of a home is a neighborhood can make all the difference in sales/profit potential.
When the average person looks at housing as an investment in stead of a place to live and raise a family the "American Dream" becomes perverted.
Your definition of Investment is exactly what is the problem with America today; Americans wants to enjoy the upside of capital investment, i.e;. capital gains (and I am referencing a verb not a noun here) but no one wants to acknowledge that gains don't come without risk and in terms of risk; purchasing a home is in fact the riskiest investment a person can ever make in their life.
This is because real estate is local and its value is most affected by what is happening to your next door neighbor. For example if your neighbor set's up a meth lab, it might affect your value, if he loses his home to foreclosure, it might affect your value, if a native American burial ground is discovered, it too might impact your value.
Investment is not without risk, if you are risk averse then you should rent.
I just don't get how any of this is justified since you are ALL talking about apples to oranges. Better yet, make that apples to a big fillet steak! Until this RE mess, you couldn't RENT a nice home that came close to comparing what you bought one for. Even now, monthly rents on these places are anywhere from 3000-over 10000 per mo (nationally speaking). Just LOOK at rentals available in SFH. Next, since the usual "rent vs. own" scenario is not EVEN comparable, you're talking about a home (purchase of 3-4 bd., 2 bth) compared to a 2bd, 2 bth APARTMENT in a BUILDING where you MIGHT have a balcony and NO garage. How can you people continue to post as if these are the same things. They are not. In addition, you all post of how "expensive" it is to maintain a home, as if you are repairing something each month. In the amount of years a home is owned, you MIGHT take on one or 2 bigger expenses (roof, furnace, AC, etc.) but not necessarily. We've owned 5 homes in 21 years and I can tell you we NEVER replaced (or had to) any of these items except for ONE time and it was a new furnace. As for lawn maintenance and all those other "petty" excuses one uses as a homeowners expense- that's really stretching it, for sure. Most buy a mower and keep their own lawns as beautiful (or not) as they want. Some spend a fortune on beautiful landscaping, both hard and soft, with sprinkler systems, and pay a lawn service to keep it up. Others don't. The point here- it's not a REQUIREMENT to take on this expense for the higher end. It's a choice! I will forever be shaking my head as to why or how anyone could claim that renting is "cheaper" than owning, based on these silly, unrelated comparisons. Additionally, while there are now nicer homes to "rent", none of them are for the long term, but rather a means to bring in income because they can't currently sell. It is always the goal to sell these, eventually, so your "enjoyment" of living in luxury is short lived from a rental perspective. And again, this is NOT the $1,500/mo one bed, one bth. That's what a typical nicer apt. complex rents for in the Chicago land. You live in luxury, you still pay for it- as mentioned by the figures above for what a nice home rents for. The truth of the matter is, most who are renting, are NOT doing so because they think it's more economical than buying. It's because they are not in a position to buy, at least not what they want, for the same low rent they are paying for much less of a "home".
A home, is, undoubtedly, an investment. It is an appreciable asset, and WILL sell for more than you paid, historically speaking! I'm not talking about flipping, HELOC over values, or any other scenario we have all debated on this forum. But overall, homes appreciate in the long term and you WILL sell it for more than you paid. And you will get the money you have put in it, via down payment or paying down principle, etc. and likely "reinvest" it in the next home. I don't think many are running to the nearest apartment complex after selling their homes and deciding to put their money in their 401ks instead. And most would think it foolish to start "throwing away their savings" by renting something on a monthly basis vs. paying for something they own on a monthly basis. I understand "temporary" rental situations when relocating, wanting to research the area you want to settle in before buying, but for long term? Most understand that unless you have no choice, you'll eventually want what you are paying monthly for a "shelter" would better suit you to go toward owning it than renting it and moving again. And lastly, all that "money" you think is wasteful by mortgage and taxes, etc., let us remember that either you eventually sell and get that back, or you rent, and get NONE of that back. If you're going to compare rent vs. buy stats, for goodness sake, compare APPLES TO APPLES!
I just don't get how any of this is justified since you are ALL talking about apples to oranges. Better yet, make that apples to a big fillet steak! Until this RE mess, you couldn't RENT a nice home that came close to comparing what you bought one for. Even now, monthly rents on these places are anywhere from 3000-over 10000 per mo (nationally speaking). Just LOOK at rentals available in SFH. Next, since the usual "rent vs. own" scenario is not EVEN comparable, you're talking about a home (purchase of 3-4 bd., 2 bth) compared to a 2bd, 2 bth APARTMENT in a BUILDING where you MIGHT have a balcony and NO garage. How can you people continue to post as if these are the same things. They are not. In addition, you all post of how "expensive" it is to maintain a home, as if you are repairing something each month. In the amount of years a home is owned, you MIGHT take on one or 2 bigger expenses (roof, furnace, AC, etc.) but not necessarily. We've owned 5 homes in 21 years and I can tell you we NEVER replaced (or had to) any of these items except for ONE time and it was a new furnace. As for lawn maintenance and all those other "petty" excuses one uses as a homeowners expense- that's really stretching it, for sure. Most buy a mower and keep their own lawns as beautiful (or not) as they want. Some spend a fortune on beautiful landscaping, both hard and soft, with sprinkler systems, and pay a lawn service to keep it up. Others don't. The point here- it's not a REQUIREMENT to take on this expense for the higher end. It's a choice! I will forever be shaking my head as to why or how anyone could claim that renting is "cheaper" than owning, based on these silly, unrelated comparisons. Additionally, while there are now nicer homes to "rent", none of them are for the long term, but rather a means to bring in income because they can't currently sell. It is always the goal to sell these, eventually, so your "enjoyment" of living in luxury is short lived from a rental perspective. And again, this is NOT the $1,500/mo one bed, one bth. That's what a typical nicer apt. complex rents for in the Chicago land. You live in luxury, you still pay for it- as mentioned by the figures above for what a nice home rents for. The truth of the matter is, most who are renting, are NOT doing so because they think it's more economical than buying. It's because they are not in a position to buy, at least not what they want, for the same low rent they are paying for much less of a "home".
A home, is, undoubtedly, an investment. It is an appreciable asset, and WILL sell for more than you paid, historically speaking! I'm not talking about flipping, HELOC over values, or any other scenario we have all debated on this forum. But overall, homes appreciate in the long term and you WILL sell it for more than you paid. And you will get the money you have put in it, via down payment or paying down principle, etc. and likely "reinvest" it in the next home. I don't think many are running to the nearest apartment complex after selling their homes and deciding to put their money in their 401ks instead. And most would think it foolish to start "throwing away their savings" by renting something on a monthly basis vs. paying for something they own on a monthly basis. I understand "temporary" rental situations when relocating, wanting to research the area you want to settle in before buying, but for long term? Most understand that unless you have no choice, you'll eventually want what you are paying monthly for a "shelter" would better suit you to go toward owning it than renting it and moving again. And lastly, all that "money" you think is wasteful by mortgage and taxes, etc., let us remember that either you eventually sell and get that back, or you rent, and get NONE of that back. If you're going to compare rent vs. buy stats, for goodness sake, compare APPLES TO APPLES!
Just a bit of advice. You may want to break up your longer posts in a way to make them easier to read. For some reason when you lump several sentences together it makes it tough to read compared to a few setences with a blank line in between. Just a suggestion.
And I disagree with you on Rent vs Buy. I rent a 2bd house. The house would sell for maybe $180k. $180k mortgage + taxes + insurance (which is higher than renters) will SURELY be higher than my rent. Also factor in closing costs, 6% realtor fees upon sale, upkeep if needed, etc... No brainer. Sure there are SOME scenarios that fall on the other side where buying is cheaper than renting. But after you factor in everything and with house prices still being inflated (in NJ) and property taxes rising like crazy, renting is the better bet in many cases.
I just don't get how any of this is justified since you are ALL talking about apples to oranges. Better yet, make that apples to a big fillet steak! Until this RE mess, you couldn't RENT a nice home that came close to comparing what you bought one for. Even now, monthly rents on these places are anywhere from 3000-over 10000 per mo (nationally speaking). Just LOOK at rentals available in SFH. Next, since the usual "rent vs. own" scenario is not EVEN comparable, you're talking about a home (purchase of 3-4 bd., 2 bth) compared to a 2bd, 2 bth APARTMENT in a BUILDING where you MIGHT have a balcony and NO garage. How can you people continue to post as if these are the same things. They are not. In addition, you all post of how "expensive" it is to maintain a home, as if you are repairing something each month. In the amount of years a home is owned, you MIGHT take on one or 2 bigger expenses (roof, furnace, AC, etc.) but not necessarily. We've owned 5 homes in 21 years and I can tell you we NEVER replaced (or had to) any of these items except for ONE time and it was a new furnace. As for lawn maintenance and all those other "petty" excuses one uses as a homeowners expense- that's really stretching it, for sure. Most buy a mower and keep their own lawns as beautiful (or not) as they want. Some spend a fortune on beautiful landscaping, both hard and soft, with sprinkler systems, and pay a lawn service to keep it up. Others don't. The point here- it's not a REQUIREMENT to take on this expense for the higher end. It's a choice! I will forever be shaking my head as to why or how anyone could claim that renting is "cheaper" than owning, based on these silly, unrelated comparisons. Additionally, while there are now nicer homes to "rent", none of them are for the long term, but rather a means to bring in income because they can't currently sell. It is always the goal to sell these, eventually, so your "enjoyment" of living in luxury is short lived from a rental perspective. And again, this is NOT the $1,500/mo one bed, one bth. That's what a typical nicer apt. complex rents for in the Chicago land. You live in luxury, you still pay for it- as mentioned by the figures above for what a nice home rents for. The truth of the matter is, most who are renting, are NOT doing so because they think it's more economical than buying. It's because they are not in a position to buy, at least not what they want, for the same low rent they are paying for much less of a "home".
A home, is, undoubtedly, an investment. It is an appreciable asset, and WILL sell for more than you paid, historically speaking! I'm not talking about flipping, HELOC over values, or any other scenario we have all debated on this forum. But overall, homes appreciate in the long term and you WILL sell it for more than you paid. And you will get the money you have put in it, via down payment or paying down principle, etc. and likely "reinvest" it in the next home. I don't think many are running to the nearest apartment complex after selling their homes and deciding to put their money in their 401ks instead. And most would think it foolish to start "throwing away their savings" by renting something on a monthly basis vs. paying for something they own on a monthly basis. I understand "temporary" rental situations when relocating, wanting to research the area you want to settle in before buying, but for long term? Most understand that unless you have no choice, you'll eventually want what you are paying monthly for a "shelter" would better suit you to go toward owning it than renting it and moving again. And lastly, all that "money" you think is wasteful by mortgage and taxes, etc., let us remember that either you eventually sell and get that back, or you rent, and get NONE of that back. If you're going to compare rent vs. buy stats, for goodness sake, compare APPLES TO APPLES!
Great post! ... and I could care less that it all came in one large paragraph.
One thing that everyone that promotes renting as a better alternative solution to owning seems to forget is that someone owns the property that you rent.
I the landlord isn't making money on the rental, well they will eventually lose the property, or raise the rent.
All property requires that someone pay the maintenance, insurance, and taxes, if the landlord is responsible, then the costs are in the rent. If not, then the property will not be on the rental market for long.
The rate of home ownership has probably gotten a bit on the high side, reaching nearly 70%. During this correction we will see the level drop off to around 60%. The difference will be absorbed over time by investors that will see an opportunity to purchase property at levels that will allow them to rent the homes and have positive cash flow.
The savvy investor is buying a property, paying insurance, maintenance, and taxes and still renting with positive cash flow. If this isn't the case then the renter will be shocked when the sheriff knocks on the door, with a eviction notice because the landlord hasn't been paying the bills with the rent money.
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Because with a rental you don't have control over how long you live there. A landlord can find an excuse to put you out if they want to. A landlord can be lax on the maintenance, making it unpleasant to live in his or her property, and forcing a move. There are many reasons to own. This is only one of them.
Where is the Risk?
I rent a 2bd house. The house would sell for maybe $180k. $180k mortgage + taxes + insurance (which is higher than renters) will SURELY be higher than my rent. Also factor in closing costs, 6% realtor fees upon sale, upkeep if needed, etc... No brainer. Sure there are SOME scenarios that fall on the other side where buying is cheaper than renting. But after you factor in everything and with house prices still being inflated (in NJ) and property taxes rising like crazy, renting is the better bet in many cases.
