Comments on: Considering Your Primary Home as an Investment

By: Rick

Rick — Wed, 31 Aug 2011 11:46:29 +0000

Anything that has a higher chance of going down in value through usage, and the maintenance costs end up running higher than or close to the investment itself, is not an investment to me. I think most cars would fall into this category. But a house is different in my opinion, as it’s value isn’t really going down any by living in it. I have to think my first home is an investment. If times get tough for me sometime, I would hope I can sell it for a higher amount than I bought it for, taking inflation into account. In desirable places with increasing amount of development and population, this is particularly true as living space is likely to only get less and less.

By: Tim

Tim — Wed, 31 Aug 2011 01:27:48 +0000

The 1979 Challenger, like most cars of that era, were hopeless piles of dung, sought after only by masochists. Speaking of definitions, I went to Dictionary.com, and nowhere under the definition of investment did it mention “buy and DON’T USE”. So who didn’t get the definition correct? Buy a 427 Cobra for $6000. Drive it a few times, on and off, maybe only at the track. Store it in the barn. In the 1980s you might get 100K for that car. Compare to other investments. If I buy a hot dog stand business and eat a hot dog every once in a while, is that no longer an investment?
A computer is a tool for work, and a source of entertainment.

By: Larry H

Larry H — Tue, 30 Aug 2011 16:15:43 +0000

Hmm, by this logic, my car is an investment too. Hear me out…if I buy a used 1979 Dodge Challenger, its value may go up or down over the next several years that I own and drive it as my primary mode of transportation. I may or may not put money into it, that’s irrelevant. I may or may not have a loan on it, that’s irrelevant too. So let’s get our definitions correct. A house or a car that you USE is a LIABILITY. One that you buy and DON’T USE (fix/flip the house, rent it out, collect and show cars, etc.) is in investment – the intention of purchase is the hope that you can resell later for a profit, and you do not use that property (real or personal property) in the meantime.

By: Larry H

Larry H — Tue, 30 Aug 2011 15:58:48 +0000

Unbelievable. Your primary residence is a liability, not an investment, period. It may be less costly over the long term than renting (due to mortgage pay down, appreciation (we all hope), tax advantages, etc.), but that does not make it an investment.

By: david

david — Thu, 25 Aug 2011 20:06:44 +0000

I agree. Since you have to live somewhere, even though you may spend less than if you rent, the house you live in is technically en expense, not an investment.

By: J Smith

J Smith — Sat, 13 Aug 2011 15:45:27 +0000

Consider the time value of money on your $50,000 downpayment. If you had invested it in the market instead, even in risk-free bonds, you would have earned a small return. In our current economic environment, in Oregon, renting is less risky and a better strategy. My house just sold and now I am seeking a rental house.

By: Tim

Tim — Sun, 29 May 2011 18:35:33 +0000

With a 30 year fixed at 4.75 %, I expect to beat inflation at least part of those years. No guarantees but prices sure seem to be rising now, and as the Fed keeps printing money like its going out of style…

By: Nightrider

Nightrider — Tue, 03 May 2011 20:45:35 +0000

Yes, definitely – home is an investment.
Real Estate appreciates approx 2% per year. Present economic condition is unusual. So, this 2% appreciation is an exception. It does not happen this way all the time. I would like to call this – a temporary dip – in the real estate life span.

Your home gives you immense pleasure to live in. You cannot put a dollar value on that.

If you are not good at fixing things around home – LEARN. Plenty of help available. Make use of it. The hardware stores want you to be good at it because there is advantage for them in this as well. It is actually better to fix things yourself. Labour costs are zero. So, you can afford to buy quality (hence high priced) items to fix them yourself.

Painting, landscaping, plumbing, electrical, tile works – on and on…… You will find there is pleasure in it to fix and see the results.

Rent a part of your home. It helps to pay towards the mortgage. Keep the tenant for the next 10 or 15 years.

All along do not worry about whether your investment is growing or not. Yes, it is right before your eyes. Just enjoy yourself. By the time you turn 65 or 70 – rent a condo apartment by taking out the equity from your home. Your home is not sold yet. It is your estate that you can leave for your children or loved ones or to your favorite charity and you are travelling or do something you always wanted to do and just LIVE without worrying about anything. START YOUNG. This is the key to a happy future.

By: collinco

collinco — Sun, 10 Apr 2011 23:28:56 +0000

….be it ever so humble, there’s no place like home. Only variable to think about is time. If you own a house for 5 years probably better to rent. If you are going to stay there the rest of your life (or own it and rent it the rest of your life), you are better off buying.

Trust me, when you retire you will want to own a house — and have the option of a reverse mortgage. Renter nation people will regret it someday.

BUT I’d still wait until home prices bottom out. They have not done that yet.

By: Chris G

Chris G — Wed, 09 Feb 2011 22:47:40 +0000

When you’re doing rent vs. buy analysis of a house, what most people doing the analysis do is not factor in is the simple non-payment of rent on the opposite side and the tax advantages.

Being able to deduct mortgage interest and property taxes from my federal tax return (25% tax bracket, 300K home) saved me from paying $4200 in taxes, this year. Very few other investments are tax deductible, and I’m already at 12% of income going in to my 401k – I do whatever I can to legally reduce my tax bill..

I know my house rents for about $1,500 dollars as, so $1500×12 + $4200 +$100 renters insurance = $22,300 annual “comparable cost avoidance of housing expense” whereas ownership costs me about $20,640 as I put $50k down on a $300k home @ 5.25% considering my property taxes + IPMT + PPMT + Hazard insurance cost = $1720. So annually at this point, i’m cash flow positive by purchasing. Assuming the 1% of value rule per year of house (ie, 1% of house value needs to be invested into the property for maintenance) I should budget $3k annually for maintenance expense, i see owning costs me about $23,640 and renting would cost me $22,300, a difference of $1,000-ish per year.

The sum of my PPMTs per year is more then $1,000 this year, so I would say I’ve come out on top. In the future, my tax deferral will go down, but my PPMT will go up (following the amortization curve) so instead of paying into a “cost” (interest) i’ll be paying into a “gain”, if you will. If the market stays flat, I will continue to have been better off for buying.

OF course, when I go to sell, there are commisions and such to worry about but so do your investment brokerages have those on trades.