quote:

Originally posted by james_1234:
According to the book "Rich Dad Poor Dad" no ones hone is an investment. The writer brings up some very interestingly info.

James beat me to it. Robert Kyosaki, the author, defines things in terms of assets or liabilities. An asset is something that puts money in your pocket - right now, not hopefully in the future. Based on that definition, the home you live in is not an asset. That's not to say don't buy a home, you still need somewhere to live, but don't count on windfall equity gains. If things go well, your house appreciates and you make money when you sell, so it would be an asset at that point.

Being retired Air Force, I moved around and was able to buy and then rent, so I turned liabilities (when I lived in the house) to assets when I rented them out. There were years when I broke even, but rents continue to rise so I now have assets.

No it is a place for my wife and I to store all the junk we have accumulated over the years and a place to live
We paid cash for our house 19 years ago from the profit from the house we sold in New Jersey.
Our house is worth more than we paid for it plus we did not have to pay a bank thousands of dollars in interest on loans.
I don't look at it as an investment or an asset till I sell it some day.

quote:

Originally posted by james_1234:
According to the book "Rich Dad Poor Dad" no ones hone is an investment. The writer brings up some very interestingly info.

I read that book. He's right as long as interest is being paid. When a home value gives return is after the loan is satisfied and after the increase in value supplants the overall costs. For most, that value escapes them for various reasons. There are those win the real estate lottery, but most by far are under the lien holder's thumb.

It is a box to put my shit in and keeps the Wife happy. Nothing more. If I get more than what I bought for it when I sell it than that is a plus.

My thought, one hand you have a house that mortgage, interest,taxes and insurance costs $1000 a month. On the other hand you have an apartment or house that rents for the same amount.

Once you pay off that mortgage, for example $700 per month. Your monthly expenses have now dropped to $300. I'll bet that rental will never drop, instead it will probably rise each year.

How much money would have to be invested to realize an extra $700 per month income?

Sure the case can be made "What about repairs/maintenance?" But at least these factors are somewhat under your control.
That gets me to another thing. Condos. There would have to be some drastic life change for me to consider one. The monthly association fee covers strict specific costs. Not "special assessments" like my late F-I-L got hit for. He was in his seven year old condo when some of the earlier constructed units developed roof leaks. Well, the management company decided that ALL units had to be re-roofed at that time. Keep them all appearing the same you know. Yep, $3500 out of pocket for each condo.......

I bought my place as something to live in. It made more sense to buy than rent. Loan interest is tax deductable and if I can get more than I have put into it when ready to sell, then it is a good investment. Otherwise I didn't buy as a certified investment.

Absolutely! It is a big investment. You may plunk down a lot of money to buy it (or a bit and a large mortgage), or someone else may make the investment and have you pay rent to them.

It may be a good investment, it may be a bad investment, but it is an investment. For many folks, it is the most expensive thing they buy.

A house depreciates less than a van down by the river does.

From where I stand, it's not a good investment. Paid $61,500 in 1978, comparable houses in my neighborhood are selling for about $400,000. Compound annual growth rate over 40 years is about 4.8%. All that ignores the cost of financing (we paid ours off early a long time ago), taxes, maintenance, etc. I would like to sell our current two story house and buy a single level place - we're both in our 70s - but I suspect it would cost more than we're willing to pay.

I guess the way that i view the equation is in two parts: (1) In the present, is it cheaper to rent or buy? Here in Arkansas, it is almost always cheaper to buy than rent an equivilent house. (2) In the future, am I going to experience a higher return by paying extra towards my home, or investing those funds in some other manner? When i ask myself that question, the answer is almost never the house.

If you're renting, you're paying all the same expenses for the owner that you would pay if you owned the property, plus likely a profit to him, and not getting any of the tax deductions, which are still substantial. In addition, or in this case maybe subtraction, you're not getting any of the equity appreciation, or mortgage balance reduction. On the flip side, you don't have to come up with and tie up the down payment money.

No, but I buy every house with the intent of selling it since my employer moves me every few years. I buy a house that fits the market place and should be easy to sell (e.g. I don't need this big of house, but it's the average size for this area; I buy in a great school district even though I don't have school aged children; etc.). I don't make stupid upgrades and turn my house into the most expensive house on the block.

It's served me well so far (knock on wood).

It is a better option than renting. Decades ago a friend of mine told me how foolish I was for buying a house with a mortgage. He told me how much interest I'd have to pay and about all of the expenses and liabilities blah, blah, blah.

Well all of these years later we at least have the value of our house. He has nothing and in his late sixties is facing having to move again. He is still paying that rent every month. We just pay our property taxes and some minor maintenance.

I think about a few things in this question. I paid 445k in spring 08 close the bottom of the RE crash with 5% down. I refinaced at the bottom of the rate market at 3.1% for 30 years fixed so my PITI is about 2300$ a month, tax favored so post tax my real cost is maybe 1900 a month. I could not rent a comparable property anywhere in the Bay Area for 2300 let alone 1900 a month. As far as investment, the Bay Area market is so hot icould call my realtor tonight and be in contract by next weekend or sooner I could sell it for 800k in a minute maybe more if I fixed a few things. So that’s 350k gross profit on a real cash investment of ~25k. So the real cash on cash rate of return is pretty good. The goal is to keep paying down the loan and move to a free state when the kids are done with high school and pay cash for a comparable house and have a few hundred $k left over. that’s in 10 years for my youngest to finish high school

Every home I have ever owned and then sold made me a lot of money. Maybe that is not an "investment" but whatever it is called...I liked it.

It's tripled in value from what I paid for it in 1986...but so has any property in my area that I would consider buying as a replacement if I chose to sell and purchase something comparable...

That being said...my property taxes, insurance plus various and sundry maintenance items (I do pretty much my own) costs may average $200 per month...the house across the street rents for $1350 per month...

So yep...those $536 monthly payments with a 20 year mortgage (last payment was made early in 2006) was a good investment paying dividends down the road (I plan on staying put )...

Better than any vehicle I have purchased in my lifetime...and will buy in the future.

It either appreciates in value or it doesn't. The value increases more per year than expenses/taxes/interest or it doesn't.

The mental gymnastics you perform or feelings you have can cloud your financial judgement more so on your home than just about anything else.

We bought our house about 19 years ago. It's the third house we've bought since married in '85. Each bigger than the last.
The current value is almost (but not quite) 3 times more than we paid for it. My wife wanted to sell last year (downsizing and all that crap). I said no, because, among other things, I like our house, it's somewhat separated from neighbors on either side, it's convenient to many things, and I still enjoy cutting the 2+ acres of grass we have. Plus, we paid it off about six years ago.
Another reason for staying in it is that we live in Nashville, so everything costs almost three times more than it did twenty years ago....I plan to move to Chattanooga when I retire in 10 years or less. Sell the house and go (we have a smaller house in Chattanooga we bought about 8 years ago. Paid off about six years ago. 3rd kid living in it now while going to college--1st & 2nd lived in it a few years while 1st was beginning work after college & 2nd finishing college---so Chatt. house definitely an investment...in my future).

Yes.

I buy property with the understanding that, on a long enough timeline, real estate tends to appreciate in value.

It's not my first house. Hopefully, it won't be my last.

As it pertains to net worth, it most certainly is an investment.

I have no intention, at this point, of leaving this home at anything above room temperature. My plan is to die here, mostly because I can't even imagine moving all of the shit I have...again.