Is a house really an investment?

[Mr Nice]

Originally Posted By: JHZR2
I've never considered my primary home an investment. I have to live someplace, it has costs,mincluding mortgage interest,,property tax, and upkeep. Yes, I can get 30c on the dollar for tax and interesting my income tax. No thanks, I'd rather have $1 of that $1.

Someplace I read that after taxes, upkeep, interest, realtor fees, upgrades, etc were accounted for, the typical appreciation was very modest over the long run, like 1.5% pa.

An investment home which generates rental income certainly is an investment, but it's a different beast.


Pretty spot on what I'm thinking. But it doesn't pay to rent unless you have a great paying job and have to constantly move due to promotions at work.

 

[Pop_Rivit]

Originally Posted By: double vanos
The whole time the debate rages on about whether or not a house is a good investment, don't forget that you lived in that house while you paid for it. You still need a place to hang your hat. If you're a hobbyist and your house has a big garage that's even better. Living in, and paying, for a house that suits your lifestyle has its advantages that payments buy for you.


Agreed, and that's one big point that the original poster is purposefully omitting. Assuming someone has made a smart selection when they chose their home, not only does it provide a place to live, but over the course of a few years the value should increase. There are always exceptions-some areas won't see much of a value increase because of desirability, or a homeowner that doesn't bother to keep a home maintained. In addition, it's provided a much better lifestyle than living in an apartment. Each has value because it's a place to live, but when it's time to move on a home will return all if not more than it's original purchase price, where an apartment will only return that original rent deposit (if you're lucky).

Originally Posted By: motor_oil_madman
Here in Texas we have property taxes, so imo that kind of cancels out any appreciation the house may develop over the years,


You also pay property taxes when you live in an apartment. It's lumped into the monthly rent check that your landlord collects every month.

Originally Posted By: motor_oil_madman
then if you mortgage it you end up paying like 250,000 for a 150,000 house after thirty years. Everyone always says you're throwing away money living in an apartment, to me it's all the same.


If you live for 30 years in an apartment and decide to move out, you'll be lucky to get your rental deposit back. After I've lived in my home for 30 years, I'll be able to sell it for significantly more than the original purchase price. So even if someone was foolish enough to take out a 30 year mortgage, they'll still come out ahead of you and your apartment. Assuming the rent and the house payment are roughly the same, the homeowner comes out on top every time.

 

[BigCahuna]

You will only know if it was a good investment, is when you sell it after 30 years. In 30 years you will spend money on it. Alot of money. The house probably won't look like it did when you bought it. Roofs, repairs, renovations, upgrades, painting, plumbing, electrical, landscaping work all gets done after spending money. Even if you do it yourself, you will loose tract of the nickel and dime s spent on the house. There's just too many things to record in 30 or more years.I've redone the kitchen once and a bathroom twice. Sure they make the place look better, but it costs. So if you decide to finally sell the house, figure out what was the price of the house you paid, 30 years worth of mortgage payments, cost of repairs and updates. If the location justifies a a good bump in value that's always good. Comps of other houses that have sold recently in your area will give you an idea of what your will sell for. I'd bet you will be in the negative category if you were there for 30 years. More money can be made in a shorter term flip situation if that's what you want to do.,,

 

[aquariuscsm]

Originally Posted By: Panzerman
Anything with a title loses you money anything with a deed makes you money.
Really you are all looking this wrong. My house will be paid for by the end of the month, I will now live in my house two miles from the beach for the cost of Taxes and insurance about $220 a month not to mention I have a $250,000 house. Location, location, location. That's what the Realtors tell you because it's true. If you think you are going to buy a $20,000 house in a bad part of town and double your value you won't, if you buy a nice house next to sought schools and natural landmarks you may pay $100,000 but it will double.
Yes it's a investment but you got to know what to buy.


This.

 

[Astro14]

If owning property is a money-loser, then why is your landlord still in business?

 

[NormanBuntz]

I stopped viewing a home as an investment a long time ago. Even before the housing bubble in 2007. And I have three. If my other investments appreciated as slowly as my homes over the years, I would still be working.

 

[IndyIan]

In an area where housing prices are stagnant and rent is pretty cheap, perhaps a house isn't a good investment. Also I suspect many houses these days aren't built that well, so maintenance isn't cheap over 10-20-30 years either.
You have to do the math for your area anyways. High property taxes and low appreciation rates may make it a break even proposition at best.
Here in Ontario near Toronto, if people actually sell now near the peak, owning a house has been like printing money for 10 years now. If someone sells now, it was a good strategy to buy the most expensive house they could at low mortgage rates.

 

[4WD]

That's the point you can't always predict. Had two family member houses that got hit hard during all this sub prime mess. Folks that don't qualify getting loans/assistance. Middle class neighborhoods that filled with drugs and subwoofers- one had just done major upgrades when it started downhill - and you know the best recovery is to go to a higher market and work a longer portion of your life ...

 

[opus1]

Many years ago I heard some financial guru on the radio say that you should by a house because you want it, it's in an area you like, close to work, etc, but it is not an investment. If you happen to make money when you sell it, great, but first and foremost, it a place to live.

Never heard anyone else repeat that, but it's been my mantra.

 

[oilpsi2high]

A primary residence is a place to live, not an investment. You shouldn't buy something as an investment that historically barely keeps up with the inflation rate and has high expense ratios on top of that.

Now, a house you bought with cash to rent out and earn money is an investment. You're gaining real income from the property (a dividend) and also have the equity factor at play.

 

[oilpsi2high]

Originally Posted By: Wolf359
You forget the mortgage interest deduction. Ever wonder why the net worth of people who own homes are much higher than those who rent? The average net worth of a home owner is 195k whereas the net worth of a renter is about 5k. Rents tend to go up over the years, if you own, the mortgage stays the same.

https://www.nytimes.com/2017/05/09/magaz...inequality.html


Paying 4,000 in interest to save $ 1,000 on taxes is not something smart people do to boost their net worth. People who own houses have a higher net worth than renters because they bought those houses 20 years ago and now have the equity to show for it.

 

[tgrudzin]

When you start to get equity into your house, you can use that to get lower loans for other things in life. These loans are usually have lower interest rates and are tax deductible. Renters end up paying more for loans and can't deduct the interest. Unfortunately, often these loans are created to repair or update something in the house, which would be done by the landlord if you were renting. Which kind of brings you back to the same question. As a primary residence, I'd rather own. For a vacation or getaway place, I'm all for renting.

 

[opus1]

Originally Posted By: oilpsi2high
Paying 4,000 in interest to save $ 1,000 on taxes is not something smart people do to boost their net worth. People who own houses have a higher net worth than renters because they bought those houses 20 years ago and now have the equity to show for it.

Thank you. This has always been an irritant to me as well and I've pointedly asked people who say this that whether you give the money to the government or you give it to the bank to save on what you give to the government, you still don't have that money. And with all the "banks are evil" talk going around, I'm surprised that people would want to give more money to them.

 

[Schmoe]

I only have one child. I looked at buying my house as a gift to her when the wife and I are gone. She can live there or sell it, anyway, it's money for her and a place to fall back on while she's figuring out what to do. Another thing about buying....it's yours. YOURS. You can do what you want with it. Also, no freakin' noisy and nosey neighbors up against your walls if you're are thinking apartment living. You feel a sense of pride when your yard looks good....everytime you pull into the driveway.....you feel good. It's home. Your home. The memories and history you will create there will always stay with you. Sometimes it's not always about dollars and cents. Heck, you got to live. Sometimes people get to bogged down with insurances/interest/taxes/upkeep...etc. etc. Don't think those costs won't be passed on to you when you're renting.....landlords are going to lose money. My house will be paid off this time next year. Property taxes/insurance will run about 275 a month.....you think I can rent a 3 bedroom/2 car garage with storm shelter/hot tub/fire pit, in a good neighborhood for that amount? No way in H-E double hockey sticks.

 

[Fattylocks]

Originally Posted By: 69GTX
No one can assume what tax and insurance rates will be in 10 to 20 years. You could see your payments go from $5K to $10K per year. And that's the last thing you need to have to worry about when you're retired. But things seem to be headed in that direction as baby boomers move on and many towns search for revenue sources. My mil rate has doubled in 20 yrs. It will probably double again in another 20 yrs.

There are ideal periods to own a home....like 1970 to 1988. The next good period was 1996 to 2007. You certainly want to be in during those moves if you can afford it. The 2012 to 2017 period was a nice bounce back. I suspect that 2018 to 2021 will be a lot tougher.


One thing is for sure is taxes are never going to go down. At least not in broke and broken state.

 

[Dyusik]

I would pay 1600 in rent for my place, where I am only 990 in it every month, taxes and all. Plus I get to keep a portion of of in equity, no matter how small, it is still there. So looking at it from this simple angle, yes rent is money down the drain.

 

[oilpsi2high]

Originally Posted By: tgrudzin
When you start to get equity into your house, you can use that to get lower loans for other things in life. These loans are usually have lower interest rates and are tax deductible. Renters end up paying more for loans and can't deduct the interest. Unfortunately, often these loans are created to repair or update something in the house, which would be done by the landlord if you were renting. Which kind of brings you back to the same question. As a primary residence, I'd rather own. For a vacation or getaway place, I'm all for renting.


This is the most idiotic statement in the entire thread.

Loans for what? Ever hear of paying cash for repairs and updates? Anyone who pays interest on an expense and then touts the "interest deduction" as an excuse for not having an emergency fund is an idiot.

 

[555]

As was mentioned, location is the number one factor. Most New Yorkers that live in Manhattan are renters because owning is much more expensive. That is a unique example.
If you can live where your renting for at least 5 years and can afford a house that makes you happy then consider owning.
There are so many variables from state to state and county to county that you need to investigate for your town before you can make the right decision.
You could buy a condo and rent it and have someone else(renter) paying the mortgage but make sure you look into HOA fees, insurance etc. How much will be left over after those obligations are paid. If it works out, you could buy another one and keep renting them out. I know a few people that have done this successfully and that income is part of their retirement plan. If they need a large sum of money they can sell a condo.
I'm still searching for a twelve car garage with 4 lifts and attached kitchenette.

 

[doitmyself]

Originally Posted By: Schmoe
I only have one child. I looked at buying my house as a gift to her when the wife and I are gone. She can live there or sell it, anyway, it's money for her and a place to fall back on while she's figuring out what to do. Another thing about buying....it's yours. YOURS. You can do what you want with it. Also, no freakin' noisy and nosey neighbors up against your walls if you're are thinking apartment living. You feel a sense of pride when your yard looks good....everytime you pull into the driveway.....you feel good. It's home. Your home. The memories and history you will create there will always stay with you. Sometimes it's not always about dollars and cents. Heck, you got to live. Sometimes people get to bogged down with insurances/interest/taxes/upkeep...etc. etc. Don't think those costs won't be passed on to you when you're renting.....landlords are going to lose money. My house will be paid off this time next year. Property taxes/insurance will run about 275 a month.....you think I can rent a 3 bedroom/2 car garage with storm shelter/hot tub/fire pit, in a good neighborhood for that amount? No way in H-E double hockey sticks.


Exactly why some people choose NOT to pursue the stereotype American Dream. "The mass of men lead lives of quiet desperation, and go to the grave with the song still in them."

Some have no interest in leaving their fortunes to others after they die. They have no interest in accumulating wealth and material possessions. They prefer to live the "now" in satisfaction instead of leading a miserable life of many decades pursuing that magic retirement concept. They have no need to affirm their lifestyle choice to others.

I like Opus1's mantra:
Quote:
Many years ago I heard some financial guru on the radio say that you should by a house because you want it, it's in an area you like, close to work, etc, but it is not an investment. If you happen to make money when you sell it, great, but first and foremost, it a place to live.


It's nice to see viewpoints in this thread beyond the typical bigotry that is so pervasive here at times.

 

[Patman]

It definitely can be an investment, but luck, location and timing also play big roles too. As mentioned in another thread on here, my townhouse has gone up in value from $529,000 in the summer of 2011 to 1.1 million today. A year ago we bought a new home that won't be built for another year, but it has also gone up in value, we bought it for $1,059,000 and that exact same model of home from the same builder is now going to be 1.7 million when they start selling the next phase in a few weeks time. We're hoping our townhouse sells for 1.2 or 1.3 million by the time we are ready to move into the new place next year. We'll have the same (or smaller) mortgage with a more valuable (and much bigger) home.

In five years time my wife and I are going to retire, and we'll have a pretty big nest egg from selling our new home (hopefully for over 2 million) and then we'll downsize and move further away (and most likely build a small bungalow, probably costing us about $500,000 including the land) Even if home values go down by 15-20% in the next few years though, we're still going to be in great shape.

So when all is said and done, our current home and our next home are definitely good investments for our future. But the timing of our purchases and the massive increase in value of homes in the Toronto area is helping us out big time. YMMV