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Old 06-11-2007, 04:11 PM   #41
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I thought homes were a good value (not investment) because of the appreciation on their value, taking into account only having to put 20% down. In other words - leverage.
Leverage works both ways. What happens when that house declines in value by 20% and circumstances force a sale ? -- you've just lost your entire down payment (not even counting the real estate commission).
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Old 06-11-2007, 06:35 PM   #42
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its only leverage until you pay for it. then its paying 2 to 3x the purchase price because of mortgage interest.
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Old 06-11-2007, 08:32 PM   #43
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The more all y'all discuss why a house isnt an investment, the more it sounds like an investment!

Gains, appreciation, leverage, avoiding to have to sell at below market prices...

Replace the word 'home' with 'equities' or 'bonds' and you've still got very cohesive statements...
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Old 06-11-2007, 09:05 PM   #44
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The more all y'all discuss why a house isnt an investment, the more it sounds like an investment!

Gains, appreciation, leverage, avoiding to have to sell at below market prices...

Replace the word 'home' with 'equities' or 'bonds' and you've still got very cohesive statements...
Not to me. I'm on my 3rd home now. I lost big time on the first home (Mass). Gained a tiny percentage on my second (Houston). Expect to break even on my current.

Granted, I didn't spend an enormous amount of time searching like you did. But I didn't just buy the first one I saw either. I think you have a skill, and probably a little bit of luck on your side. Yes, I know, you don't believe it was luck.
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Old 06-11-2007, 09:12 PM   #45
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Well, he does have a couple of rabbit's feet...
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Old 06-11-2007, 09:20 PM   #46
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Four of them.

I believe very strongly in luck. But I believe equally in making some of my own good luck.

When i'm looking at a property thats selling for slightly over new construction costs, values have dropped 30% in the last couple of years and the area looks promising, its a good medium term investment.

When i'm looking at a condo in an area thats massively converting apartments to condo's, and condo prices just shot up 250%...bad investment. Bad, bad, bad.

That having been said, I'd have been smart AND lucky if I bought that really nicely updated, well kept, well maintained house that the owner painted mustard yellow and couldnt get a buyer. Two days with a sprayer and a five gallon can of white paint and that'd have been a really good investment. I mean, that sucker was hideous. We pulled up and I almost told the agent to keep driving.
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Old 06-11-2007, 09:23 PM   #47
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Just for grins, I looked up my childhood home on zillow last night. In a close-in suburb of Washington DC (Vienna, VA), this home sold for about $60K in 1972. We lived there until mid-70s. Dad rented it out until about 1982, when it sold in low $100K's. Zillow claims it's worth around $600K. Ten times appreciation, even in 35 years? Six-fold in 25? This is ridiculous, yet is probably a good example of what's happened in many "hot" areas over the decades. And Dad was bitching about the taxes back in the 1970s! (VA has no tax limitations, AFAIK.) Hell, I could probably live well on just what the current owner is paying the County.
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Old 06-11-2007, 09:50 PM   #48
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CFB -

Will you be my real estate advisor? I'll pay your dog food bill for a month.
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Old 06-11-2007, 09:53 PM   #49
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You dont wanna do that. Should I show you pictures of Ted plowing through a $50 bag of food?

pedorrero...funny you mention that...I just looked up my old childhood home on zillow a few days ago. My dad sold that piece of crap in 1971 for $11k and its showing $621k. 200 year old junkpile that was moved to the site and dropped on some old tree trunks for pilings...all of which were eaten up by bugs when I was a kid. I remember 2' of standing water in the basement every spring when the rains hit their peaks.

Thats worth over half a million. Sick.
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Old 06-11-2007, 11:16 PM   #50
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Is there a way to see if it is really the same house, or if it had a massive upgrade and just has the same street address? Maybe a new foundation at least? Otherwise it is a really scary story about overvaluation in Calif real estate...
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Old 06-12-2007, 02:46 AM   #51
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Originally Posted by cute fuzzy bunny View Post
The more all y'all discuss why a house isnt an investment, the more it sounds like an investment!

Gains, appreciation, leverage, avoiding to have to sell at below market prices...

e the word 'home' with 'equities' or 'bonds' and you've still got very cohesive statements...
only thing different is the long term gains. in most cases long term gains are about 1/3 to 1/2 of what equities returned . since tax reform your home has a nice tax advantage but gains still are way below equities.
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Old 06-12-2007, 04:36 AM   #52
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dont forget we are not talking about buying a home as a fixer upper or special situation that allows one to buy way below market , we are talking just seeing a home you like , buying it at fair market and letting it do its thing for 20 years.
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Old 06-12-2007, 06:08 AM   #53
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dont forget we are not talking about buying a home as a fixer upper or special situation that allows one to buy way below market , we are talking just seeing a home you like, buying it at fair market and letting it do its thing for 20 years.
I have been thinking about this in the context of CFB's experience. I have concluded that fixer upper or special situation purchases is comparable to value investing. The difference is that any handyman activity needs to be factored at out fair market value in order to see the real returns as an investment. Similarly FSBO also needs to be excluded, IOW deduct normal realtor fees from the transactions to compare with other equity investments.

Finally special situations in the market like bubbles can be compared to market timing or trading returns rather than buy and hold.
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Old 06-12-2007, 07:42 AM   #54
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Originally Posted by cute fuzzy bunny View Post
The more all y'all discuss why a house isnt an investment, the more it sounds like an investment!

Gains, appreciation, leverage, avoiding to have to sell at below market prices...

Replace the word 'home' with 'equities' or 'bonds' and you've still got very cohesive statements...
Thankfully, my stocks don't have termites, and my bonds don't need painted...
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Old 06-12-2007, 08:04 AM   #55
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Thankfully my rentals are paying 4-5% dividends (via rents).

Just ask me about liquidity.
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Old 06-12-2007, 08:54 AM   #56
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Is there a way to see if it is really the same house, or if it had a massive upgrade and just has the same street address? Maybe a new foundation at least? Otherwise it is a really scary story about overvaluation in Calif real estate...
I was looking at it with the zillow 'birds eye view' satellite imagery, which is pretty darn good. Looks like its had a little work done, and i'm sure its had many layers of remodeling. Bottom line is that it seems to have returned 3x what the same amount invested in traditional investments would have produced. That leaves some room to do a few upgrades.

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Thankfully, my stocks don't have termites, and my bonds don't need painted...
But you cant live in 'em. And "Hey, theres a big party over at my stock certificate tonight!!!" just doesnt cut it.

By the way, as is fairly common when we have these discussions...it seems that theres an urgent need to wrap it all up in technicalities, special rules, and dire parameters...probably to force the point we feel we desperately need to make. And this ones got a couple of emotional hairballs wrapped around it.

I'm not a flipper. I'm not calculating annualized gains going forward 10 years and calculating net present value of improvements, cash flows or any of this completely unnecessary hoo-hah.

I buy a house to live in. I look hard to find something I really like thats priced reasonably against the area and any work I want to do to it or that needs work. I buy in an area thats usually had a little excessive sales slide.

When I decide on a property, I show up with a ladder and a bag of tools do my own inspection for major problem areas and along with my offer I include a 4 page letter outlining how the property would be catching fire and exploding if it werent for all the leaks.

When I do improvements, I do so with an eye towards eventual resale value and use sweat equity, contractor relatives, cheap labor, 10% off coupons, one year no interest/no payment deals, and anything else I can use to slice into the price.

If and when the value has risen, four, seven, fifteen years later, i'm tired of living there or my circumstances call for a different kind of property...I sell at the highest price I can get, minimize my sales costs, and take the profit.

No profit and no big motivator to sell? Then I'd wait a while until there is. It still has the value of being a residence as well as an investment.

While this strategy has limitations for a working stiff that also has to deal with employability, an ER has no such limitations.

Pick an area that you'd like to live in, one that has upside potential (aka the "value investment"), find a property with funny paint or that is priced well below market but needs a little work, live in it and do a little of this and that as you go, and if and when you want to move and the prices have come up...sell it and make your profit.

But lets not make a stupid discussion out of this. I'm not running a spreadsheet every morning to see if today is the day we sell and run like mad animals down the street with our belongings strapped to our backs.

If you choose to live in a non-appreciating area, to not spend a little time and money optimizing the value and livability of your home, to not take a little time to figure out how to do those improvements at low cost, or the home has to be placed in an emotional lockbox...then its just not for you! Some people dont like equities, bonds, gold, or beeever cheeeese.

However, that has little bearing on whether something is an investment or not.

We all talk about excruciating analysis of investments, carving into expense ratios, twiddling and slicing allocations, deep 100 year analysis of historical returns, construct complex simulators and run them ad nausem.

But jeez louise...spend some time on a half million dollar item with half an eye towards making money on it when you eventually sell? Inconceivable!
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Old 06-12-2007, 09:55 AM   #57
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Zillow claims it's worth around $600K. Ten times appreciation, even in 35 years? Six-fold in 25? This is ridiculous
With the caveat that Zillow seems to be off by a factor of two as often as it is close to correct . . .

Over 35 years that is 6.8%. Over the 25 period that is 7.4%. Probably less that you could have made by passively investing in the stock market. And that's before you consider any of the costs of taxes, maintenance, labor, etc. And I dare say (in the Midwest at least) that would be a phenomenal example of price appreciation and most would be far, far lower.
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Old 06-12-2007, 11:25 PM   #58
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I'm surprised by the number of posts that seem to be claiming that real estate (or stocks) are the better investment because the poster's experience has been so great. I guess I shouldn't be all that surprised since this seems to be a recurring theme on the board.

Whether it's 3 years or 30 years, we all know what past performance doesn't predict. Don't get me wrong - I own both property and stocks and and am happy with the performance of both - but I wouldn't trust anyone that claims one is better than the other because they've had a string of good historical returns on one vs. the other. Surely if someone could predict such things consistently, they would be ridiculously rich and wouldn't bother wasting their time on this board.

I think both are good investments, and both have their pros/cons. My experience has been that they both had good returns relative to their respective investment risk. No sense in trying to claim one's better than the other...
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Old 06-13-2007, 07:53 AM   #59
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Yeah, bottom line is if one does his homework before making the commitment (to real estate OR stocks) he'll do well ... if not, it's up to lady luck -hit or miss, it's not to your credit.

To each his own.
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Old 06-13-2007, 10:34 AM   #60
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Hmm...didnt see anyone claiming one was better than the other.

Certainly any opinion I've offered is that it seems a waste to pretend your house isnt there when you're planning your investments and that its possible to make a profit on your primary residence.

But folks who live in the middle of one of the low appreciation square states, either because they want to or have to, or willingly buy homes that they wont be able to make any money on...wont be able to take advantage of this.

Seems pretty straightforward to me. Buy a house you like thats a good value in an area likely to appreciate. Enjoy your house and fix it up. When its worth a bunch more, you feel like moving, and you can find a good value to move into...do it and bank your tax free profits.
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