A house seems like a horrible investment

jamin wrote:

whateverdude11 wrote:

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

* The amount of money you put into taxes and maintenance was about $(800,000 + 119,000)/2*0.04*20=$367,660, likely more

* If you sell it, you will have to pay about 6% of its value, or $48,000, in various closing costs

* Your capital gain is therefore $265,000 or just over a 100% return in 20 years

* If you invested that $119,000 in the stock market you would have $1,147,908. That's with $0 carrying cost, sales cost, etc., so your return would be 864%. Now it's true that you would have paid rent for those 20 years, but the cost of renting your house probably would add up to only $200,000. That leaves you with $1,147,908-$200,000=$947,908 or a 696% return.

Dude, are you dense? Your wonderful scenario does not account for the fact that - after his $119k market investment - he would be paying 20 years of rent on an asset he didn't own.

Friendly tip. wrote:

Jamin, look at it like this, you've just met the woman of your dreams and you're making a play for her (I'm assuming she'll be mid/late twenties/early thirties), what do you think would win her over best, you owning shares, or owning a nice comfortable house.

Shares make you come across as an unreliable risk taker, no good to a woman looking to settle down and have kiddies, a house on the other hand, is in her mind, as someone with maternal hormones raging, reassurance and something just waiting for a nesting woman looking for security.

OK, so you don't quite come up to scratch in the looks and personality department, we accept that and so will she as the house will be super compensation in her mind.

Friendly tip, keep it in your name.

A wee bit harsh.

A wee bit harsh. wrote:

A wee bit harsh. wrote:

A wee bit harsh.

But on second thoughts, perhaps not:

https://montesrunningcommentary.files.wordpress.com/2015/12/12k_5_jamin.jpg

He doesn't look that bad. He could make improvements. First, grow out your hair and grow a beard. Second, hit the weight room, he needs to add a bit more upper body mass, not much just 10-15 ibs. Chicks don't want a guy with the same upper body mass as them and weak AF. Jamin, your strength goal should be to do 15 strict pull ups and bench your body weight for 5 reps. Third, get TF out of Settle or where ever you live, look how pale he looks. Jamin, move somewhere with plenty of sun. Lastly, eat a meat base diet super high in cholestrol to jack up your testostrone levels, this will make women throw there paines at you. If Jamin follows my suggestions he will look something like this in no time:

And have a hot AF wife in no time

If you rent, you can't make cool modifications and there are always tons of rules against things like loud parties and pet komodo dragons. It ain't your castle that way, you're but a vassal to the liege landlord.

You don’t buy a home for the investment. You buy it to live in it. Hopefully when you retire you own it outright & don’t have a payment.

Like a car. You buy it to drive it. Smart people keep their car 15-20 years so you have at least 10 years no payments. That is what you are investing in.

My grandparents bought their house for $13,000 in the 60’s. Now it’s 2 million. Back then you could be a teacher and in the military & buy a home. Not anymore.

The numbers wrote:

Like a car. You buy it to drive it. Smart people keep their car 15-20 years so you have at least 10 years no payments. That is what you are investing in.

You should NEVER buy a car on payments.

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.

Yes and those stocks can crash leaving you with very little, and nothing to live in.

He is making 12%. Safe to assume he doesnt invest in stocks that crash. He also is renting a 1 million dollar property for 3k/montjh so he is a good neogiator. Of course you sort of wonder with all those skills why he doesnt buy a place that appreciates 8% year with say 4x leverage and make real money?

Fair, but he is also not factoring in the home mortgage interest whateverdude paid. Factoring this in would significantly reduce whateverdude’s gain. Depending on the interest rate, size of down payment and prepayments, the total interest cost over a 30 year mortgage for a $119k house could be over $200k.

My point here is that buying stocks in small increments over time and without leverage avoid the huge funding/interest costs that go along with buying a house.

Only someone very, very young would think it better to have a landlord and be able to dollar cost average a few more dollars every month into your Vanguard accounts.

ddddggggygggvc wrote:

He also is renting a 1 million dollar property for 3k/montjh so he is a good neogiator.

That is easy to do in an overvalued real estate market.

House person wrote:

I pay 618 a month for the mortgage, taxes, and inaurance on my 3 bedroom, 1400 square foot house on half an acre in a great school district that's 6 mins from the interstate and 20 mins from downtown.

What would the comparable rent get me?

A great school district in Nebraska? Yea, maybe relative to other Nebraskan towns.

jamin wrote:

whateverdude11 wrote:

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

* The amount of money you put into taxes and maintenance was about $(800,000 + 119,000)/2*0.04*20=$367,660, likely more

* If you sell it, you will have to pay about 6% of its value, or $48,000, in various closing costs

* Your capital gain is therefore $265,000 or just over a 100% return in 20 years

* If you invested that $119,000 in the stock market you would have $1,147,908. That's with $0 carrying cost, sales cost, etc., so your return would be 864%. Now it's true that you would have paid rent for those 20 years, but the cost of renting your house probably would add up to only $200,000. That leaves you with $1,147,908-$200,000=$947,908 or a 696% return.

Not that there isn’t validity to the rent vs own argument, but this is ridiculous.

Home owners don’t have their entire house’s value plus 20 years worth of maintenance and carrying costs just sitting around when they purchase their first home. You are making the assumption that the 119,000 has been accruing interest since day one.

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.

In what world are you earning 12%?

House can be a horrible investment depending on location, when you bought it, and how long you keep it.

It’s the same as stocks. If you bought Sears 20 years ago vs buying Amazon 20 years ago, it’ll be very different.

One good thing about houses is the high transaction cost so it is harder to buy/sell and panic sell like you can with stocks. With stocks, even if you bought/sold just amazon stocks, and if you bought it at height of dot com bubble, sold it at the bottom, then bought again in 2007 and sold it in 2008 and bought again last summer, you would’ve lost a lot of money.

With houses, if you buy in good location where the city is growing and hold for long term, generally, it turns out to be pretty good investment. So in general, if you buy in coastal cities in good location and can hold for long time, it’s usually okay. Somewhere like Midwest, it could be dicey as the city could totally die in 20 years as there’s not much desirability in the midwest except that it’s affordable. If housing goes up like crazy, it’s not affordable anymore as well as it’s so easy to just sprawl out in the Midwest so it’s easy to build up supplies of houses to balance out the demand if there’s is demand spike. I don’t mean to just pick on the midwest, but it’s true for the south and anywhere it’s easy to sprawl out as well as places where only desirability is that it’s affordable.

whateverdude11 wrote:

You're out of your league kid

But isn't he always ?

How is my math wrong? A house costs around 4% of its value every year in taxes, maintenance, insurance, etc., multiplied by 10 years is 40% of its value. Any houseowner who bothers who keep tally will tell you that's true. Most don't keep tally, so they'll be like the guy in this thread who thinks "I made $700k because I bought for $100k and 20 years later sold for $800k."

Lol great school wrote:

House person wrote:

I pay 618 a month for the mortgage, taxes, and inaurance on my 3 bedroom, 1400 square foot house on half an acre in a great school district that's 6 mins from the interstate and 20 mins from downtown.

What would the comparable rent get me?

A great school district in Nebraska? Yea, maybe relative to other Nebraskan towns.

Nebraska? I live outside Nashville.

Dave Ramsey wrote:

The numbers wrote:

Like a car. You buy it to drive it. Smart people keep their car 15-20 years so you have at least 10 years no payments. That is what you are investing in.

You should NEVER buy a car on payments.

Or a house. Always pay cash.