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Re: Report finds residential real estate underperforms other assets
Old 02-19-2007, 01:15 PM   #41
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Re: Report finds residential real estate underperforms other assets

Originally Posted by Charles
BTW, if we're going to factor in interest on residential real estate returns, then shouldn't we factor in some margin interest on equity returns ...
This would definitely be true if we could get long term fixed rate loans against stocks. But we cannot, so advantage goes to RE on this dimension.


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Re: Report finds residential real estate underperforms other assets
Old 02-19-2007, 03:39 PM   #42
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Re: Report finds residential real estate underperforms other assets

BTW, I believe I saw somewhere an estimate of 1% to 2% annual repair costs.
Our home was purchased for $315K ... that would mean we're supposed to spend between $3,150 and $6,300 per year keeping it up. No way. I can see spending that much on upgrades. Not just repairs and maintenance. Perhaps the 1%/2% was based upon older homes ... not a well built home today, IMHO
I would think that would include longer-term maintenance, like the eventual HVAC, appliances, roofing, etc. replacements. You might not actually "spend" that much each year, just like the full cost of driving your car is not reflected in the price of fuel.
We wrote a piece for The Motley Fool called Cost of Working: where we discussed the cost of home ownership. We cited a current Wall Street Journal article that said "Almost every house, no matter how recently or expertly built, is a money pit."

I suppose in the end it's a matter of priorities and approach.

We have readers who were thrilled with the recent past's uptick in real estate and planned on selling their house to buy another cheaper one in a different state. They went traveling for 6 months, came back home and the market went soft. Now they have a 'ta-hoo-ma' (ta hoom I gonna sell this?) in one state and another home they are upgrading in another. Their (retirement) time is spent driving uhauls from one state to the other and repairing the 'new' place to suit them while they are hoping their other home sells.. meanwhile, the wife went back to work... ?

Again, I suppose in the end it's a matter of one's priorities and approach to housing.

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