Homes - are they really an investment??..and my bathroom

[dougfather]

So I have been away from the Grand Prix since April 🙁 . Fast forward to 3 weeks ago when I started an unplanned bathroom project that is becoming a source of frustration (started when a supply hose coupling nut to the toilet broke 430 in the morning...long story). Anyway, pulled up all the carpet (which we wanted to do away with down the road at some point..just not yet), padding, and under layment, all soaked. Then about 2 weeks ago I pulled out the toilet and discovered the wax ring was leaking for some time. So there went 3 floor boards (I removed more so that the new plywood could be anchored down better). So , some new plywood, cross braces, and a repair kit for the cast iron flange with a broke lip. Thankfully we have a basement toilet (although our bedroom is on the second floor).

All of this stuff you hear about "your home is an investment" made me really start to wonder. A 20 year mortgage at 5.25% (59k), property tax (500/yr), building supplies, sweat equity (especially on a 100 year old house), labor (for those jobs I can't do myself, like a roof and siding), would someone enlighten me as to how a home is an investment? If some miracle happens that I sell it for more than we paid for it 8 years ago, wouldn't inflation eat into the profit anyway? I'm just waiting for all the baby boomers to downsize their living situation and a glut of unsold homes to follow.

 

[NY87SS]

I all most own my home and I have to laugh at the investment part that I also have heard.
And I'd be happy if I was just paying $500 a year in taxes.

Paid $72,000 for my house.
Have $40K plus in it since we bought it 15 years ago.
Final price that we will have paid, somewhere near $140K.
Taxes average over the 30 years at $4200 a year.
So thats like $300K and It'll sell somewhere I believe at 30 years of ownership at around $150K.
Now if I had rented something similar I would have saved $150 a month easy, 30 years investing it, well.

But it is yours.
You can pretty much do as you like.
There are pro's and con's to each side, just the money part of the ownership is on the way negative side.
But the cons of renting to some are worth more to some than the con of losing money the other way around.

NO ONE really ever makes money as a investment on a home unless they buy it cheap, refurb it quickly and then turn a quick profit. Sometomes you can if you buy low enough and later on the neighborhood becomes a rarity in location versus land available etc.

 

[rustyroger]

A UK perspective.

I bought my house in 1979, paid off the mortgage in 2004.

It would have cost me at least the same to rent a property as making the mortgage payments, when I bought the place I the monthly payments were a weeks wages, as time went by the payments were much less of my income, by 2000 they were more or less a days wages.

Of course I have had to spend money on repairs and maintenance, however I could put off repairs until I could afford to have them done properly, even so owning was always cheaper then renting long term, and my credit rating was helped by being a homeowner.

The house cost £12000 in 1979, now it's worth £140000, but so are all other similar properties, to show a profit I would have to downsize.

But to rent a place like mine would cost around £5-600 per month and now I don't pay any rent, so I could consider myself better off by that amount each month.

I have no doubt the situation is different in the USA, varying from state to state and location etc, but I think the broad principle still applies.


Roger

 

[axisg]

Unless you are "flipping" houses for profit then you need to look at a house is not as an investment but as a "forced" savings.

Once you are done paying your mortgage / taxes / maint for a number of years you have something of value which you have the opportunity to then sell. I look at my house as part of my retirement package as I will sell it, downsize and move out of the city when the time comes hoping to have a hefty bank account to live off of. Or in the case of my aunt and uncle they did the reverse mortgage where the bank agrees to purchase your house for a specified sum and they receive a monthly cheque for a number of years without ever having to move.

 

[rustyroger]

Or in the case of my aunt and uncle they did the reverse mortgage where the bank agrees to purchase your house for a specified sum and they receive a monthly cheque for a number of years without ever having to move.

I don't know if this an urban myth;
I heard somewhere of a speculator who made such an arrangement with an old couple. Only trouble was they outlived him!
Thet both lived to their late 90s, 25 years after the deal was done, the speculator died after 22 years aged 68.

 

[bill]

The real benefit to home ownership isnt so much the house, but the land it sits on. Better to buy a cheap house on good land, than an expensive house on cheap land, cause the value of the house will likely rise slower than the land, especially in todays market. .02

 

[TexasT]

Of course it is an investment. It just isn't your investment if you are living in it. The lender has made it their investment and makes money on it each time you make a payment. Bottom line, you have to live somewhere, and it cost to live there no matter if you are renting, leasing or "buying". An investment makes money. If it doesn't make money, it is a liability.

A side note on that "i own the property" myth. You might have use of it but stop paying the taxes and you will soon find out just who owns it.

This is not to say one should or shouldn't "buy" a home. Everyone's situation is different, and is constantly changing over time. Security means many things to many people, but the constant of where you keep your do-dads and a place to lay you head at night is very important to some.

 

[Ribbedroof]

They're money pits

Yeah, I (almost) own one.

The BIGGEST benefit, IMO...as long as you are making the payments, nobody can come to you and say "I've sold the property, you'll need to be out at the end of next month".

I also feel stability for my children is a good thing.

My brother rents..always has, always will. Feels there is too much money tied up in buying. Also likes the ability to relocate to a different part of his area if the neighborhood starts to go to hell. He's fortunate that he's in an area where there are a lot of nice rentals available for less than a mortgage payment.

Both arguments have merit.

 

[Ribbedroof]

Or in the case of my aunt and uncle they did the reverse mortgage where the bank agrees to purchase your house for a specified sum and they receive a monthly cheque for a number of years without ever having to move.

Are you quite certain this is the arrangement?...everything I have read says the estate will be responsible for repaying the note upon the death of the last borrower.

Banks don't usually (ever?) want to own property, they just use it as liquidatable collateral in case of default.

 

[rustyroger]

Or in the case of my aunt and uncle they did the reverse mortgage where the bank agrees to purchase your house for a specified sum and they receive a monthly cheque for a number of years without ever having to move.

Are you quite certain this is the arrangement?...everything I have read says the estate will be responsible for repaying the note upon the death of the last borrower.

Banks don't usually (ever?) want to own property, they just use it as liquidatable collateral in case of default.

The house won't be part of the estate if a bank (or any other party) has arranged to buy it.

The banks recently lent money for no hopers to buy property (NINJA mortgages) gambling that prices would keep going up.
When prices started falling the banks went howling to Uncle Sam for a bailout.

Roger.