A house seems like a horrible investment

buy a house

why sister in law bought house in 1999 for 465,000 sold 7 years later for 1.2 million.

brother in law bought house in 1996 for 167,000 sold in 2001 for 400,000

just sayin

asdasdljklj wrote:

Truth is, stocks are a relatively poor investment. Houses are not great either, but you need somewhere to live .

Indeed.

And in the long term, property is almost always a good investment. The population will continue to grow, but as the saying goes, they’re not making more land.

The real money is not investing in stocks it’s being the seller and buyer. Everyone there’s a trade I get paid. You do well I get paid. Your investment tanks, I get paid.

This is all pretend numbers made up by humans. There’s no real value to humanity here but I’ve gotten very, very rich off the fees of your 401k. Thanks guys, please keep investing!!

Runningart2004 wrote:

Here is a crazy thought....how about put down some roots and buy a “forever home”? Remember that old concept? You buy a house and keep it through the end. Is that now not a thing? My grandparents lived in the same house for well over 50yrs.

Alan

Oh no, we can’t do that. How would we create the next bubble without treating houses as investments and creating a Ponzi scheme out of the financial instruments that ensues.

Alan Greenspan

Case Shiller wrote:

Bullet_Proof wrote:

+1. Awesome post and response to a silly OP thread.

It's only worth $800,000 if somebody buys it and you move to a trailer park in the Mojave Desert. Right now it's just a number which makes you happy.

Great point. Yea, sell your house then house equivalent to your house would be the same. Or, you want to upgrade then you’ll buy something more expensive.

I have owned two houses and now rent. Whether or not owning or renting makes more sense depends on a lot of things, but it often isn't a slam dunk either way and merits thinking it through.

I am in an area where houses barely appreciate. I think renting makes more sense here, except that there aren't really all that many houses to choose from.

What people in my area fail to think about when buying a house include:

- Taxes. I was paying $11,000 per year in taxes.

- Opportunity cost of the money in the home. I had $300K in home equity at one point which was appreciating at maybe 1% per year. I definitely would have made a lot of rent money by having it in an index fund instead.

- Maintenance. It costs more that most people think and sucks up a lot of time better spent doing other things.

- Closing costs. Kiss 6% of your equity goodbye when you do choose to sell.

I had my $300K house for about 10 years and when I sold it I did the calculations and there is no doubt I was worse off than if I had rented a comparable home.

I think in markets where houses appreciate a lot and there isn't a lot of housing available for rent, it might make sense to buy if you expect to live in the area for say, 10 years or more.

Land o' Jamin wrote:

Earth to Jamin:

1. A girlfriend is a horrible investment.

2. A wife is a horrible investment.

3. A house is a horrible investment.

You jumped to #3 after bigly failing #1.

Depends where you buy a house. Seattle's market is starting to slow as the prices are so sky-high and property taxes just keep going up. But if you bought a house in Redmond, near Microsoft, in the 90s for like 150-300k you could sell for like 800-900k

A girlfriend isn't a horrible investment, but a wife is. Unless she is rich. Although, I would take all three of the above over being a runner.

Thought $800,000 was a lot to pay 15 years ago for a small house built in the 50s. Now the home could sell for $2,800,000. Thank you for the continual tech stock gains in Silicon Valley.

In 2003 I bought a house in Phoenix for $168,000 ($9,000 down). I sold it in 2005 for $300,000 and cleared $128,000.

Terrible investment.

Actually, the smart person has both an affordable mortgage AND invests in the stock market

via mutual funds. Dummies go only one of the two routes.

9yh wrote:

Actually, the smart person has both an affordable mortgage AND invests in the stock market

via mutual funds. Dummies go only one of the two routes.

+1

never put all your eggs in one basket

whateverdude11 wrote:

Twenty years ago I bought my house for 119,000. Today it is worth 800,000. Horrible investment

People usually forget that they didn't put 119k down cash. They put 5 k down or some such nominal number, then paid off a mortgage which is often lower than rent. Yes there is maintenance cost, and yes there is a tax right off.

The greatest boon of house ownership is not having a landlord. Being able to paint it what ever color you want, and having any pets you want.

And of course, no knocks on the door to inspect, and no eviction - unless you fail to pay the loan

Houses can be a great deal of work, particularly in the south, where everything grows like crazy outside. There are a lot of expenses for constantly fixing stuff. Property taxes in the north and west are high (worth it for the services and affluence but this is just a question of money spent on the house). Insurance is 50% higher than property taxes down here in hurricane, flood, and tornado country. But if you buy in the right place at the right time, you can have very high returns. Our house has risen by 2/3 in value well under ten years and after paying it back in five years with double payments, most of that is profit, relative to renting. I assume many others have the same experience since the recession, but if you bought before, you might just be breaking even on the housing price/sale alone now, so it really depends. And if we hold on to the house for the next five years, prices might crash again before slowly recovering.

I feel like everyone here is repeating the same mantras and never understood my original points.

* The debate isn't whether $X towards rent yields more return than $X towards a mortgage. Obviously $X towards rent yields nothing. Because a mortgage plus taxes, maintenance, insurance, etc. is about $2X for a comparable house or apartment, the debate is whether $X towards rent plus $X in the market is better than $2X towards the total cost of a house.

* When an asset has a carrying cost, just because it increased in value doesn't mean you made any money. Maybe you bought a Shelby Cobra in 1950-whatever for $X and it's worth $20X today, but you have to subtract the cost of repairs, gasoline, replacing tires, renewing tabs (which in WA state you will be taxed $1k for a car like that), the storage unit or garage you keep it in, etc. that were accrued over the decades.

jamin wrote:

Just using common sense. A house comes with a carrying cost of 1-2% property taxes and 1-2% maintenance. So if you own your house outright it needs to appreciate 2-4% per year just for you to break even. There are very few zip codes where a house worth $1,000,000 can be rented out for more than $40k/yr. So it is almost impossible to generate income by renting a house that you own outright. And very few people ever own a house outright. If you have an outstanding mortgage then you simply cannot rent a profit.

If you have $1,000,00 you can put it in the stock market and get a return of $120,000/yr. With that income you can rent a million-dollar house for $30k/yr and reinvest the other $90k/yr.

The idea that you profit via capital appreciation by buying a house is obviously a fallacy if for no other reason than this: to take profits, you need to downsize or switch to renting.

Having stated that, there are some flaws with your post. First, I have seen houses in the ~600k range rent for close to 40k. Second, if you own an investment property, paying down the mortgage ultimately builds equity (which can be realized as profit you can capture later on

because unlike a primary residence you can sell an investment property without it affecting your lifestyle). So even if you don't have positive cashflow, paying down a mortgage on investment property with zero net cashflow is making a profit. Third, there's no investment that is guaranteed to return 12%. Stocks might return 12%, they might not generate positive return. Risk free 5 year investments are in low single digits.

Having stated all that, if you can rent a million dollar house for 2500/month, that's a great deal -- by all means just rent if you can get this deal. The main reason to buy is that it usually saves you money if you stay in the property long enough to make up for the transaction costs (RE commissions, and other closing costs)

It's a great investment. If you put down 20%, 80% of the appreciation value is on the bank's money and you get all of it. Mortage/insurance/property tax vs rent is a wash but you build up equity with a mortgage and you don't have a landlord in charge. Plus the tax write-offs related to owning.

The first 250k profit on your primary residence is non taxable. Stock sales can be taxed as ordinary income or capital gains (depending on the holding period). I paid cash for my house. The more you put down, the lower your interest costs. I wouldn't buy in this over valued market. Wait a year. The economy might be in a real mess and property values might plummet. Then you will have your opportunity.

1%? No.

3-4% is right range. You obviously forgot all the little things that add up. Most people just remember the large number expenses.

Owning is hands down a better decision provided:

1) You aren’t going to move soon. Transaction costs are brutal.

2) You buy what you would otherwise rent. Too many people buy more home than they would ever rent. If you buy a big house, you aren’t investing in that extra space. You are consuming. What makes a home a good investment isn’t that it appreciates. (Accounting for maintenance, homes don’t gain much value at all.) Homes are good investments because the pay a big dividend in the form of a place to live. Buy a small house or condo.