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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.
very good point. the reality is, it's not very often any of us will be cashing out of the "place to live" market. so unless you are selling in a high market and buying in a depressed market, bottom line is....a house is a place to live. it's not a bad investment, per se. it's just a place to live.
If somebody is at the point in their life where they want/ need a SFH (ie: they have children, or are just sick of apartment/ condo living) then to compare a SFH with an apartment / condo in a highrise is comparing apples to oranges.
Admittedly, we all have different needs – emotional and material – and those needs, rather than mere financial tradeoffs, will dictate the buy vs. rent decision. That said, some of us are single, with no dependents, very little material "stuff", hectic schedules and zero interest in domestic chores. Yet the prevailing social pressure is for us to buy houses with lawns and fences and azaleas planted in front. Were this to have made sound financial sense, then perhaps buying would have been a good idea. Did it make financial sense? Please see below….
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Originally Posted by StPaulGal
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.
All true, but let's consider the economy of scale. The property tax of a building with 50 rental units will be vastly lower than the aggregate of property taxes on 50 single-family-houses. The same holds for insurance, maintenance and so forth.
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Originally Posted by thatguydownsouth
The only people I know who attack home ownership are self justifying the fact that for some reason or another they cant own.
My house is fully-paid off, and has been so, for a number of years. I attack house-ownership from the opposite side of the spectrum - the side that could buy 10 houses, but regrets having bought even one.
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Originally Posted by skins_fan82
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.
I bought my house for $XYZ back in 2001. Today it's worth approximately 0.8 x $XYZ. Yes, it has declined 20% in value over 13 years of ownership… and I bought well before the most recent housing bubble. So as they say, your mileage may vary….
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Originally Posted by ScoopLV
1)
I know people from every walk of life in every economic bracket -- from the homeless to the 1%. Every wealthy person I know owns at least one house (usually several) and considers real estate to be a useful investment. Contrasting, most of the renters I know barely have two nickles to rub together.
I would submit that amongst the affluent, the peer-pressure to own a house the most intense. Further, most people seek to indulge in purchases as they become wealthier, and a house "makes sense" as one such purchase. Very few people will continue to subsist on Ramen Noodles when they have a million dollars for every strand of noodle in the package.
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.
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Originally Posted by headingtoDenver
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.
We bought the condo as a second winter residence with the intention of renting it out when we were living in our primary residence in Las Vegas. However, that has since changed and we are no longer considering renting it out. However, due to the rapid price appreciation, we are now seriously considering selling it, pocketing the over quarter million in capital gains, and then perhaps just renting down here, at least on an interim basis. We'll make that decision later once we cross the threshold of not having to pay capital gains taxes on the property.
BTW, I just learned this morning that the unit I mentioned in my post above has also now gone under contract. I had noted in another thread that this unit had originally gone on the market for $565k, but the day after a similar unit sold for $580k, the listing was increased by $35k to $590k. As I said, it too is now under contract. I'm curious to see if the next unit to hit the market meets or exceeds the $600k mark. The RE market for oceanfront property down here is beyond crazy right now.
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.
Fine, but what you probably don't realize is that if you try and repeat that multiple times, it won't work out the way you expect. Housing prices are similar to any financial market in the sense that they are not predictable. So you end up chasing false assumptions based on a lucky one-time win.
Every wealthy person I know owns at least one house (usually several)
Yeah, they buy with cash, they don't take out mortgages. IF you can outright buy a property, that's a good thing to do, it's a good place to put your money. But if you need to take a loan out, then in the long run it's financially no different than renting.
But if you need to take a loan out, then in the long run it's financially no different than renting.
There are advantages and disadvantages to both buying and renting. It comes down to what works for you best. Owning and investing in real estate has worked out very well for me.
Start owning a house at early age of your working career, building up the equity, then sell it at or near your retirement, and retire at a small town with cheap house is ideal for most americans. House is the best investment with leverage and it is something you actually consume, and you cannot beat the rate of a house loan. I would never want to pay off the mortgage. I am satisfied enough to see the equity of my house. Actually if I paid off my loan, I would think of selling and buying a bigger house. I think 50% equity is a healthy leverage of your loan.
But if you need to take a loan out, then in the long run it's financially no different than renting.
Not true at all.
Homeowners get the mortgage interest deduction, renters get nothing.
And at the end of the mortgage, homeowners own a home, renters have nothing.
If you have 500 million, yeah, you shouldn't bother with mortgages, but if you're worth say, 50 million, 5 million or 500k, it would generally be foolish to not take out a mortgage, because you can currently get 3.5% on a 15 year, so stupid to take money out of equities to apply towards purchase price.
Not true at all.
Homeowners get the mortgage interest deduction, renters get nothing.
I included these in my calculations, and financially it turns out to be the same.
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And at the end of the mortgage, homeowners own a home, renters have nothing.
They have a bank account whose value is worth the equity of the homeowners home. As I said before, do the calculations, it turns out to be financially equivalent.
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If you have 500 million, yeah, you shouldn't bother with mortgages, but if you're worth say, 50 million, 5 million or 500k, it would generally be foolish to not take out a mortgage, because you can currently get 3.5% on a 15 year, so stupid to take money out of equities to apply towards purchase price.
Well, I'm not rich, but I've got a friend whose rich - he's an old man who built his money himself and he says he never took a loan out for anything. He always paid cash. He was in the concrete and brick business and later in the hardware store business, and a lot of property too ... He says even when he made big purchases, like for a factory, he paid cash.
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