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Old 01-27-2018, 09:07 AM
 
Location: Paranoid State
13,047 posts, read 10,442,710 times
Reputation: 15683

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Quote:
Originally Posted by Submariner View Post
For most Americans their home is their largest asset.

But is it really an 'investment'?
Quote:
Originally Posted by NoMoreSnowForMe View Post
You also used to get to write off interest and taxes, etc., although I think the new tax laws took those away.

The economic benefit of home ownership is the same as it ever was. Nothing has changed.

It affords tax-free income in the amount of the fair market rental rate.

Stay with me...

When you own a home & live in it (living in it is the key!), you "pay yourself rent" in the amount of the fair market rental rate. This is, of course, not reported as income on an IRS form 1040, so that income is tax-free.

Stay with me...

Imagine you and I have identical economic situations. We own identical houses right next to each other, have the same jobs for the same company that pay the same salary, we have the same investments, same deductions, etc. Under normal circumstances, we each live in the house we own. Imagine our IRS 1040s: they would be identical, of course, because we have identical incomes, mortgages, expenses, etc.


Stay with me...

Now, let's do a thought experiment. Imagine that you rent your house to me, and I rent my house to you. As a tenant, you pay me rent. As a tenant, I pay you rent. Because they are otherwise identical the dollar amount of those rent payments is identical. They cancel each other out, right?

But not when it comes to income tax time. When calculating our respective tax obligations, each of us has jobs with income, and some interest and dividends and maybe some cap gains, and under this thought experiment, each of us must also report rental income.

Let's say for the sake of argument that the fair market rent is $5000/month. So, each of us pays the other $60,000/year, and each of us receives $60,000/year. At tax time, each of us reports that extra $60,000 in extra income. We also have some landlord expenses associated with that income such as depreciation expense, and various other landlord expenses for repairs, maintenance and the like.

At the end of the day, though, we pay our marginal tax rates on that extra $60,000 in income.


Stay with me...

So, coming back to reality... when we own a home & live in it, we "pay ourselves rent" and that rent is tax-free income. If the fair market rental rate is $5,000 per month, we have tax free income in the amount of $60K/year. Not too bad.

That is the true benefit of owning a home & living in it.
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Old 01-27-2018, 02:50 PM
 
7,352 posts, read 4,453,152 times
Reputation: 9002
Quote:
Originally Posted by fluffythewondercat View Post
We have seen some truly bizarre designs. Many "what were they thinking" moments.

Here's one for your delectation. We drove by; the exterior and grounds are beautifully done. But the inside, oh the inside... You have to see it.

https://www.zillow.com/homedetails/1.../7863714_zpid/

I've always wanted a gilded antelope skull over my bed.
Wow...just wow.
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Old 01-27-2018, 03:22 PM
 
Location: Scottsdale, AZ
7,671 posts, read 4,712,277 times
Reputation: 28108
Quote:
Originally Posted by shokwaverider View Post
Was the offer accepted?
At the absolute last moment, a "mystery buyer" came out of nowhere and presented a full-price all-cash offer. Our agent was going nuts trying to get us to up the ante and spark a bidding war. They counted on us being "in love" with the house. We weren't. We're too old to get emotional about real estate.

And that's all I'm going to say about that.
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Old 01-27-2018, 03:26 PM
 
653 posts, read 335,982 times
Reputation: 892
Quote:
Originally Posted by fluffythewondercat View Post
At the absolute last moment, a "mystery buyer" came out of nowhere and presented a full-price all-cash offer. Our agent was going nuts trying to get us to up the ante and spark a bidding war. They counted on us being "in love" with the house. We weren't. We're too old to get emotional about real estate.

And that's all I'm going to say about that.
When buying anything especially Real Estate and Cars I adopt the philosophy that I do not NEED anything like that, I may want it but I do not need it.

Looking at the homes for sale in that area and the number of Foreclosures, I would also have walked.

However, I am sorry you did not get it.
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Old 01-29-2018, 03:47 PM
 
Location: Gilbert, AZ
3,182 posts, read 1,961,125 times
Reputation: 3321
Quote:
Originally Posted by fluffythewondercat View Post
The other houses all had electric heating (!), several had septic tanks and one actually had to have water hauled in. Wells are not uncommon here either.
The heating demand is so small here that electric heat is actually fine. When we bought it, our home had electric (i.e., resistance) heating and it wasn't a big deal. The biggest electric bill in the winter was far less than the bills in summer.

Hauling water?? No, no, no!
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Old 01-30-2018, 02:11 AM
 
Location: Western Asia
3,187 posts, read 1,444,420 times
Reputation: 2524
Quote:
Originally Posted by fluffythewondercat View Post
At the absolute last moment, a "mystery buyer" came out of nowhere and presented a full-price all-cash offer. Our agent was going nuts trying to get us to up the ante and spark a bidding war. They counted on us being "in love" with the house. We weren't. We're too old to get emotional about real estate.

And that's all I'm going to say about that.
Good move, as I tell the younger men that lose the girl they were "in love with," there's plenty fish in the sea.


I was researching Lake Las Vegas and saw you posted something from there. I mentioned that I was looking at Scottsdale to buy a condo for winter use but I also am looking at LLV also though I've never been there. The condos look vey upscale at low cost....what was your impression of LLV as a winter location versus Scottsdale? Just wondering what type of appreciation potential there is there considering the value currently.
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Old 01-30-2018, 08:31 AM
 
Location: Scottsdale, AZ
7,671 posts, read 4,712,277 times
Reputation: 28108
Quote:
Originally Posted by American Expat View Post
I was researching Lake Las Vegas and saw you posted something from there. I mentioned that I was looking at Scottsdale to buy a condo for winter use but I also am looking at LLV also though I've never been there. The condos look vey upscale at low cost....what was your impression of LLV as a winter location versus Scottsdale? Just wondering what type of appreciation potential there is there considering the value currently.
Lake Las Vegas is gorgeous but it is so out of the way (IMHO) that many people don't know about it. If you read that thread, it might have also been mentioned that HOA fees are quite high. I don't know how much -- we didn't tour homes there. Trying to remember what month we were there...September? Yeah. Hot but not awful.

Versus Scottsdale? It's pretty much apples-and-oranges. The Scottsdale house we made an offer on was 15 minutes from massive amounts of shopping and restaurants. It took us about 45 minutes to get to LLV from the Strip and I didn't see very much in the way of shopping OR places to eat. There's a little grocery and a cafe in the LLV village but there are a lot of empty storefronts, which always gives me pause.

We didn't go into either of the hotels. There may be more facilities there.

I would love to have a home on LLV and stock up at Costco every two weeks. But I think our heirs -- which are imaginary since we have none -- would most likely be the ones to benefit from appreciation.
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Old 01-30-2018, 08:36 AM
 
Location: Scottsdale, AZ
7,671 posts, read 4,712,277 times
Reputation: 28108
Quote:
Originally Posted by hikernut View Post
The heating demand is so small here that electric heat is actually fine. When we bought it, our home had electric (i.e., resistance) heating and it wasn't a big deal. The biggest electric bill in the winter was far less than the bills in summer.
Interesting. Thanks for the info.

Quote:
Hauling water?? No, no, no!
My reaction precisely. The house with the enormous water tank was intriguing, but...
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Old 01-30-2018, 11:54 AM
 
Location: Raleigh
8,047 posts, read 5,895,364 times
Reputation: 9785
Just reacting to your title: What effect would appreciation have on a retirement home value since at the end of your time in retirement you will, presumably, be dead?
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Old 01-30-2018, 03:17 PM
 
Location: Central Mexico and Central Florida
7,108 posts, read 3,463,006 times
Reputation: 10178
Quote:
Originally Posted by Crashj007 View Post
Just reacting to your title: What effect would appreciation have on a retirement home value since at the end of your time in retirement you will, presumably, be dead?
Things change...s*** happens. You end up moving because:

Your parents need you in another state
Your kids need you in another state
You fall down and break your neck and end up in a nursing home
Your spouse falls down and breaks their neck and ends up in a nursing home
Your spouse of 40+ years decides to divorce you
The local climate/altitude that you loved is now hazardous to your health
The company you worked for goes belly up and your pension disappears
Your spouse dies and you discover s/he spent all the money you thought was in savings
You get new neighbors and they are awful
Your broker runs off with your money
You go on vacation, look around and say, THIS is where I really want to live
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