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My thought is if you were to sell your house, and try to buy another house right away. All the houses out there with your same specs are now going to be 315K. It would be a wash for you to sell.
I think the only way it would be an investment is if you sold your house for 315 and then move to say Houston where the housing market is significantly cheaper.
Excellent post! I believe that is why inventory is so low. If you sell, where are you going to go? Has your income increased so much that you can upgrade?
How many of you retirees still live in your first home?
Is it paid off?
If not, do you anticipate the home will be paid off in your lifetime?
How many retired in a home that is not your first?
How many made a sizable profit when they sold their home and decided to rent for a while?
A. Did you eventually buy a home with the proceeds?
B. Did you invest proceeds and continued to rent?
C. Did you do both?
I built my house in Douglas County, Colorado (southern suburb of Denver) for $259k in October 2009. Now, 30 months later, Zillow lists it worth at $315k, and I've had multiple e-mails in the last week (literally, 4 e-mails in 7 days) about people wanting to see our house if its for sale.
So you were saying?
?????
Quote:
Originally Posted by rburnett
So, let's just say you were able to sell that house for $315k and you never spend a dime on any upgrades or maintenance (because nobody ever does that). You basically "earned" 4.3%/yr for 5 years in a really good market.
I just sold a pile of Apple stock which had jumped almost 70% since I bought it. That roughly equates to ~22%/yr with zero maintenance and upkeep.
Ah, not so fast, my friend. If we assume that the poster in question put down $52k (20%), then he's made $58k on that $52k "investment" in 4 1/2 years. Sure there are costs involved, but still, that's quite a bit more than 4.3%/yr.
But I'll give you a better example. I bought an oceanfront condo when prices were still depressed in Miami Beach in 2012 for a little over $300k. Including money spent upgrading a powder room, I have about $70k invested in it. By the end of 2013, identical units in my building were selling for $450k - $480k. Two weeks ago, a unit that was on the market at $580k went under contract. (I don't know the exact selling price yet.) A similar unit is now listed for $590k.
Ah, not so fast, my friend. If we assume that the poster in question put down $52k (20%), then he's made $58k on that $52k "investment" in 4 1/2 years. Sure there are costs involved, but still, that's quite a bit more than 4.3%/yr.
But I'll give you a better example. I bought an oceanfront condo when prices were still depressed in Miami Beach in 2012 for a little over $300k. Including money spent upgrading a powder room, I have about $70k invested in it. By the end of 2013, identical units in my building were selling for $450k - $480k. Two weeks ago, a unit that was on the market at $580k went under contract. (I don't know the exact selling price yet.) A similar unit is now listed for $590k.
How am I doing on my non-investment.
For me, real estate is only an investment if multiple properties are brought into the mix. If you uprooted your family for your beachfront condo and now sold for 500K, yes, you would have a huge profit. Now, if you buy another beachfront condo, you will dump that 500K into it and be right back where you started. You could be on the uptick if you now decide to buy further inland because chances are, those home values haven't increased as much as the beachfront residence.
My thought is if you had bought the unit with no intentions of living in it, then you have made a wise investment choice. Especially if you rent it out for market value. You could sell it and use the profit to pay off your primary residence.
For the average American, they only own 1 home and don't have the luxury to just uproot and move to a different area of the country.
I have to quibble with the bolded statement above. Wherever you live, you are paying the property tax. Period. Whether that be through a direct payment to the local government or through in intermediary via your landlord, you are paying it. Landlords are not in the business of subsidizing your costs of living--they rent out property because the payout exceeds the input costs.
right. i love the assumption that a landlord is renting out their property for less than their carrying costs. it's possible, and depends on the local rental market, but you're paying property taxes in some form.
My thought is if you were to sell your house, and try to buy another house right away. All the houses out there with your same specs are now going to be 315K. It would be a wash for you to sell.
I think the only way it would be an investment is if you sold your house for 315 and then move to say Houston where the housing market is significantly cheaper.
Yep! That's exactly why we never moved. We bought this house with the idea to upgrade in a few years. Well, in a few years it would have cost a lot more just for a LATERAL move in the same area, and we wanted to stay in the area because the kids were in school. In retrospect, it would have been better to buy a bigger, more expensive house to begin with. But we have survived in this house and have an empty nest now - so we have plenty of room, and now it's paid off. So unless/until we get a great offer that would allow us to move into something we like better, we will stay.
The only home people will ever own is a casket. Today people are looking at 20-30 year obligations with day to day employment guarantees. Cash and mobility is king. I say save big time for about 10 years and them buy with cash or a huge down payment in a city with good job opportunities.
Many people went the conventional route of got the job and got the house and then lost the job and then the house and to top it off maybe the family. All that time and money gone. Today you have to plan for stability as best as you can.
How many of you retirees still live in your first home?
Is it paid off?
If not, do you anticipate the home will be paid off in your lifetime?
How many retired in a home that is not your first?
How many made a sizable profit when they sold their home and decided to rent for a while?
A. Did you eventually buy a home with the proceeds?
B. Did you invest proceeds and continued to rent?
C. Did you do both?
Goodlife may or may not be alluding to a point that opens up the following discussion but I want to add that it should almost always make sense to own a home vs rent IF YOU FOLLOW this principal that unfortunately a lot of people do not.
Lets say you buy your first home sometime between the ages of 25 - 35. Then and only then should you even think about taking out a 30 year mortgage (and you should favor a 15-20 year mortgage). So lets say you are 30 years old when you purchase your first home. Then 8 years later at 38 you are doing well and want to "upgrade" your home or simply move. You SHOULD NOT take out a 30 year loan but only a loan of 22 years or less (maybe a 20 year loan). Now at lets say 47 years old you decide to move or upgrade your house again. At that point you should only take out a loan with a term 10 years or less.
In other words the mistake people make is not worrying about the amount of years you are tied to a mortgage. If you do that then you will be consistently buying down interest and buying up principal and will own a home in your 50s or early 60s.
The mortgage brokers and realtors are all wanting you to purchase the most expensive home you can afford at the time and want to use a 30 year mortgage because they want you to focus on the monthly payment versus a smaller term loan that you can pay off at a reasonable age and receive the benefits of a zero mortgage living situation.
Goodlife may or may not be alluding to a point that opens up the following discussion but I want to add that it should almost always make sense to own a home vs rent IF YOU FOLLOW this principal that unfortunately a lot of people do not.
Lets say you buy your first home sometime between the ages of 25 - 35. Then and only then should you even think about taking out a 30 year mortgage (and you should favor a 15-20 year mortgage). So lets say you are 30 years old when you purchase your first home. Then 8 years later at 38 you are doing well and want to "upgrade" your home or simply move. You SHOULD NOT take out a 30 year loan but only a loan of 22 years or less (maybe a 20 year loan). Now at lets say 47 years old you decide to move or upgrade your house again. At that point you should only take out a loan with a term 10 years or less.
In other words the mistake people make is not worrying about the amount of years you are tied to a mortgage. If you do that then you will be consistently buying down interest and buying up principal and will own a home in your 50s or early 60s.
The mortgage brokers and realtors are all wanting you to purchase the most expensive home you can afford at the time and want to use a 30 year mortgage because they want you to focus on the monthly payment versus a smaller term loan that you can pay off at a reasonable age and receive the benefits of a zero mortgage living situation.
The shorter the loan, the bigger the payment.
I think low payments are an important part of retirement. However, there are other factors such as neighborhood. A lot can happen in 30 years. I hope people respond to my questions. I want to know what people are doing. It would help me a lot.
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