Is real estate a good investment?

[rubytue]

Originally Posted by mathjak107

i can tell you i bought my house in nyc in 1987 also, for 169,000,,.. sold in the early 2000's for 335,000....

the same amount invested in a nothing special mix of fidelity funds was worth over 1 million.... enough to buy 2 houses even after subtracting out the rent i would have paid....

But you didn't have $169k to invest in the market or a house in 1987. You had, what? $34k (20%). $34k invested in the stock market in was worth about $173k in 2002 ("early 2000's"). So, you'd have a $139k profit vs a $166k profit from real estate. Even taking 6% off your sales price, you still made 145k on your $34k investment.

Yes, those are raw numbers and don't count principle reductions, tax deductions, or trading costs. But they do illustrate the idea of leverage, which you left out.

[rmxcarol]

Maybe adding the addition was an over-improvement for the neighborhood. That is what is very important to consider

[JohnG72]

Originally Posted by mathjak107

think about how many people stall buying for fear they may miss the bottom.

I don't think anyone stalls buying for fear they miss the bottom.

I think people stall buying because they believe that the market is not anywhere close to the bottom.

Realistically, if you buy within 10% of the bottom on either side and intend to hold for 10+ years, its no issue. People talk about the market bottom like its some mythical entitiy that will exist one day and be gone the next. Hogwash.

[mathjak107]

Originally Posted by rubytue

But you didn't have $169k to invest in the market or a house in 1987. You had, what? $34k (20%). $34k invested in the stock market in was worth about $173k in 2002 ("early 2000's"). So, you'd have a $139k profit vs a $166k profit from real estate. Even taking 6% off your sales price, you still made 145k on your $34k investment.

those are raw numbers and don't count principle reductions, tax deductions, or trading costs. But they do illustrate the idea of leverage, which you left out.

i paid cash from the sale of another property... except i did screw up , i looked at the numbers for only 100k in the funds. for 169,000 it would have been around 1.8 million

with a home you buy and pay off there is no leverage eventually as you pay the entire amount off. but none the less you could leverage any investment just the same on margin.

if your going to count leveraging the house for comparison leverage on margin the equivelent amount in the alternate investments ... but it still dosnt matter long term,if you pay off the house there is no leverage.

the tax deductions dont count on the house because those are part of an expense...your paying in about an extra 3 bucks over and above the house price and getting back 1 ...it has no meaning in this comparison.

folks look at these tax deductions like its a good thing.... these are expenses over and above the house cost,...they are no different then anyother expense like your utilites,your insurance,your real estate taxes or anything else the house cost you.. except you get a rebate (maybe)

while tax deductions may lower your expenses they are not a benefit ,it means you pulled 3 bucks out of the ole piggy bank over and above the cost of the house and got back 1 assuming thats your bracket..otherwise you get back less

only good advantage is the house gains are tax free..... but if you dont need to liquidate your portfolio then those gains can pass to heirs tax free too as long as you stay under the estate tax levels..

if its retirement money there are ways to pass alot of that too using different methods but thats not really a discussion for this thread...

bottom line , your home is a consumption item not an investment until the day comes that you no longer need housing..... then total up everything spent on a lifetime of housing costs ,subtract the residual value from the sale of the house, minus the funeral costs for your new home and if everything is still a positive number then thats what your profit is.


its no different then other investments , my portfolio may have had a profit the last 25 years but if i lost 1/2 next year then im not really up as much am i? if i sold my house for a profit before the collapse and bought another and im down 50% now i really dont have that profit do i? no you dont, your costs and gains are all cumulative.


in summary yes real estate can be a good investment- but our homes are not an investment

[mathjak107]

dont forget also if you buy a home and its leveraged until you pay it off when it drops your losses are magnified..its a double edge sword

[tarragon]

Originally Posted by casper324

I actually don't rememeber how much we would have paid in interest on the loan in total but seem to remember in the mid 3's.

Yeah you get the tax deduction of a portion of the interest and real estate taxes, but not the entire amount. I'd be interested in understanding the break even point because right now it looks to me that we would have been better off renting.

BUT at least you didn't have a landlord and you had the benefit of being able to do what you wanted at your home! Eventually the market will pick up again.

[mathjak107]

absolutely ,im all for owning a home... i just dont look at it as an investment....we recently bought one in the pocono mountains of pa which we will retire to,we also rent an apartment in nyc which we will give up.

our plan is to be at the pa house april to november and then rent someplace different in the warmer climates every year for the winter ....