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Your home a bad investment?
Old 06-03-2007, 06:27 AM   #1
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Your home a bad investment?

The Worst Investment Ever: Financial News - Yahoo! Finance

Interesting article. Makes some sense. As I plug in my past situations. Except for my last home in NJ situation where I made 125% on my money over a 10 year period after taxes and fees!!
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Old 06-03-2007, 06:39 AM   #2
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I don't think of my house as an investment, although it is an asset.
As the article stated, a house isn't an investment, it is a place to live.
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Old 06-03-2007, 08:15 AM   #3
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A real-estate property can be all of these things: place to live, place to rent, an investment (esp if you had purchased before the boom in places such as California, Florida, Las Vegas, etc), an asset.
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Old 06-03-2007, 09:21 AM   #4
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I think of my house(s) as bad investments necessary for the ownership
of dogs (currently 3 - 50, 70, 120 lbs). My first house went from 83k to 99k
in 7 years, about a 2.5% appreciation rate. My current house has gone from
154k to about 500k in 19 years, about a 5.5% appreciation rate. Both are
in the Los Angeles area. If I were not a dog person, I never would have
bought a house.
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Old 06-03-2007, 09:55 AM   #5
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Originally Posted by CyclingInvestor View Post
I think of my house(s) as bad investments necessary for the ownership
of dogs (currently 3 - 50, 70, 120 lbs). My first house went from 83k to 99k
in 7 years, about a 2.5% appreciation rate. My current house has gone from
154k to about 500k in 19 years, about a 5.5% appreciation rate. Both are
in the Los Angeles area. If I were not a dog person, I never would have
bought a house.
It's all about timing. A friend of mine purchased a house in Capistrono, CA (orange county) for about $500K 10 years ago. The house is valued over $2 million now. His property tax remains low because of prop 13.
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Old 06-03-2007, 10:39 AM   #6
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Yabbut the DJIA has a CAGR of 11+% for the last 25 years without taxes, maintenance and 6% trading fees. Except for forced savings and/or market timing, a home is an expense item best treated as such.

Now how expensive are those dogs?
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Leverage can make it a wonderful investment
Old 06-03-2007, 02:47 PM   #7
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Leverage can make it a wonderful investment

No margin calls to worry about and the interest rates are low for those with good credit. Local growth rates and high marginal tax rates are key factors though. The more expensive the area, the better the investment. (I am sure the dogs are very grateful.)
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Old 06-03-2007, 02:52 PM   #8
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I've made just about as much money on reselling my primary residence as I've made through traditional investing. I never had to paint any of my stock certificates or do any plumbing on a mutual fund though.

Other than that, if its overvalued, it gets sold and I move somewhere where I can get a better value.

Absolutely no special "its my home...I cant possibly consider it as an asset or an investment" bias here. I like to keep my 'sentimental value" items to things way lower than six figures in value.

But I guess its a losers bet if you live in the wrong part of the country, or buy the wrong kinds of properties. Which is why I dont live in those areas or buy those kinds of properties
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Old 06-03-2007, 03:14 PM   #9
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I agree with the article. We've owned 5 houses and apart from the first one which we sold after only 18 months for a 40% profit (all fees and moving costs paid 'cos of a company move) none of the others would have been classed as a good investment but we have loved owning houses for all the none-financial reasons. - lots of room for cats, dogs, kids, forced exercise with yard work, painting etc to keep us fit.

Kids, cats, dogs etc now all gone, along with the desire to work in the yard, paint, fix things etc. We have been renting now for over 3 years and don't expect to go back to owning.
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Old 06-03-2007, 04:12 PM   #10
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Quote:

Over the 50 years of data compiled, Pfizer and Altria returned 16.0% and 19.8% respectively.
For any time period longer than the past few years, residential housing prices fall far behind these returns. Perhaps the best measure of housing-market appreciation is the S&P National Home Price Index.
Yeah ... let's compare a national average to a couple specific over performers. To make this apples to apples ... I have over a decade of data that shows my specific properties have returned on average 19% per year. Individual property compared to individual stock ... now it's apples to apples.

It all happens on the BUY side ... over pay and you get screwed. Stocks or houses doesn't matter.
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Old 06-03-2007, 05:09 PM   #11
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We are in our 8th house in 32 years. The original cost of the first house has been continually rolled in to the next one without adding much more $$ to the pot. Original home was $37K last one was $345. I do not look at the home as an asset to be added to net worth after all you will always have to have a place to live. Someone will sell the last one (and get the money) when I head out to Arlington National Cemetery for the final one (which is no cost, BTW).
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Old 06-03-2007, 11:07 PM   #12
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I just finished the book "Everybody Wants Your Money" by (sorry, short term memory loss due to all that pot I smoked years ago I guess...) where Author makes the case that a house isn't such a great investment. He is especially down on second or vacation homes. I think "Rich Dad" author Kiyosaki, Kemosabe or whatever the hell his name was also made the case against homes. On the other hand, you do have to live somewhere!!! Whether it really has to be 8000 square feet with three car garage (so the Jag and Boxster don't get rained on), a Jacuzzi, a swimming pool (indoor and outdoor), tanning salon, etc. etc. is really necessary is a matter of personal taste. I feel that retirement hero (er...) Terhorst made the best (tongue in cheek) case against the mini-palace in his excellent (and hard to find) E.R. book. Personally, I think my home(s) have made me money...I own mine free & clear and admittedly a lot of it was paid by home price inflation (earlier homes) as well as inherited money! I figure my "rent equivalent" is around $500/mo.; not bad for a home that would rent for closer to a grand in my area. Yeah, owning can be a pain in the ass (did I mention FL insurance rates or tax hikes? Yikes!) But as a wise man, or at least his ass, once said "You gotta live somewhere."
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Old 06-04-2007, 06:57 AM   #13
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When we sold our paid-off house in August of 2005, I put the proceeds in mutual funds separate from our other retirement investments. This was with the idea of segregating the funds to one day to buy another house. But it was perhaps even more motivated by the curiosity just to see how the investment performed against housing prices over the next decade.

In 2005 a lot of people thought it was crazy to sell your house even if you did not live in it, because "houses appreciate so much!".

In 21 months, the "house fund" is up 21%. Not too shabby. It was up 16% at the beginning of April, so 5% of that appreciation occurred in just two months! Of course I expect it to "fluctuate".

The house fund is mostly OAKBX, with a smidgeon of TAREX. I averaged into OAKBX over a year so that dragged the performance somewhat.

We'll see what we end up with.

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Old 06-04-2007, 09:01 AM   #14
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There's a recurring theme in this thread:

"one time, I made a nice profit on a house, so its not a bad investment"


Folks, one time I went to a casino and placed a bet on the Roulette wheel and won. Trippled my money!

It was still a terrible investment.
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Old 06-04-2007, 09:23 AM   #15
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Hmm...five out of five times I made a hell of a profit on a house. About to make it six out of six.
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Old 06-04-2007, 09:29 AM   #16
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Weelll I think it helps to seperate investment (rental) property from primary residences. Too many people pay top dollar to live exactly where they want THEN over improve the place and want/expect the palace to be an investment. NOT GONNA HAPPEN.

One can under pay then rent for a reasonable return AND the appreciation is the icing on the cake. At the risk of repeating myself .... a decade of data on several houses over 19% annualized return. NW went from ~160k to over 2m in 11 years and it was all real estate.
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Old 06-04-2007, 10:04 AM   #17
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I think you have made this point before Tryan.....and makes sense, most people put considerable money on upgrades on their primary residence vs. rentals.....
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Old 06-07-2007, 12:43 PM   #18
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Quote:
Originally Posted by cute fuzzy bunny View Post
Hmm...five out of five times I made a hell of a profit on a house. About to make it six out of six.
Yes but you made a lifestyle decision and just got lucky. Stop trying to pretend that you can forecast the future.

There are many stories of people who lost their shirts pursuing the American Dream and I think there will be more pretty soon. Not saying that you are like these people but there is no free lunch.
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Old 06-07-2007, 03:33 PM   #19
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I beg to differ. I looked at a number of areas in which to purchase, looked at 60-100 homes, and picked a good property that I felt was undervalued in an area I expected would improve and appreciate. I then bargained the seller into the ground and put sweat equity into the properties.

Seems I made some of my own luck.

I didnt buy in an area that sucks for appreciation. I didnt buy an overpriced home. I didnt buy a property type that wouldnt rise in value. I didnt pay too much. And I didnt pay contractors twice what their work was worth.

I dont need to forecast the future. Just not being an idiot seems to suffice.
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Old 06-07-2007, 06:20 PM   #20
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I don't really look at my home as an investment at all. I enjoy living in it, like the neighborhood, etc. and if, or when, we downsize and make a little on the deal, that's all good. If not, I enjoyed it while I had it.
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