Home Ownership History

[pjigar]

Let me first comment about the "ROE" (Return on equity). Most people don't buy house for cash but they calculate returns of their house on the purchase price. If you adjust your returns on your equity (or down payment) then your leveraged return will be a lot higher. e.g. if you put 20% down then your leveraged return would be 5x higher.


Another point: Typically mortgage payment+HOA+property tax+upkeep costs are lower than market rents so you need to add those savings including the principle payments back to the leveraged return which will push the return even higher. There are also intangible advantages with the home ownership: pride, freedom, peace of mind, back yard, etc. for which there is no price tag.


So in summary, home ownership pays off in a long run. I read an article a while back that said homeowners are typically better savers (it didn't mention there it is causation or correlation). For me, I can says it is a causation. I tend to spend money if I can "see" it.


Finally here has been our journey of home ownership:
1st house: FL, Bought for $103K, Owned for 1 year: Compounded return on purchase price: 30%, Leveraged return: 300% (10% down payment).
2nd house: TX, Bought for $220K, Owned for 7 year: Annualized compounded return on purchase price: 1%, Leveraged return: 5% (20% down payment).
3rd house: TX, Bought for $425K, Owned for 8 year: Annualized compounded return on purchase price: 5%, Leveraged return: 25% (20% down payment).
4th (current) house: TX, Bought for $540K, Owned for 7 year so far: Annualized compounded return on purchase price: 8%, Leveraged return: 32% (25% down payment).


I am not counting the "mortgage vs rent" savings in the numbers above. It is fair to say that we have been extremely lucky with the home ownership. I can't even afford to buy our current acreage with my current income. Enough said.

 

[wmc1000]

This made me look into our 7 houses over 46 years. To the best of my calculations, with the estimated value of our current home - if we sold today and counting taxes paid and repair/remodel costs over the years we have broken even over the 46 years

Lost a minimal amount on 2 houses and made significant amounts on 4 so we are sitting at zero total housing costs for 46 years if we sold today.

 

[retire48in2018]

Last 2 homes, we owned 8 years, and both almost exactly doubled. We paid off first home, used cash to buy current (last home) - which is in process of selling


2007 - paid $160k Sold $365k
2015- paid $275. Realtor Estimate net - $600-$650k

This is 9% rate of return over last 16 years once we add in the materials we buy to update the homes. But, it’s a lot of sweat equity. Buying ugly, outdated home and upgrade ourselves. Buying materials at serious discounts, etc. We enjoy doing this work overtime.

Prior to those 16 year - nearly impossible to do
- as we were moved by job every couple years - company bought old and facilitated new home costs. So, those first 16 years (1991-2007) - a little better than break even - across 6 homes in 16 years. When we were able to have a little more time at a place, and could update - changed the game.

 

[RobbieB]

I just looked at the townhouse I should have kept.

Sold for 81,000 in 1987, Redfin has it now for 550,000. CAGR of 5.5 %

Yeah, should have kept it. But then all that extra dough I wasn't paying out was in equities, so I came out just fine me thinks. Not to mention interest rates were about 10% back then too.

Yeah, pretty much a wash me thinks.

 

[athena53]

I just looked at the townhouse I should have kept.

Sold for 81,000 in 1987, Redfin has it now for 550,000. CAGR of 5.5 %

Yeah, should have kept it. But then all that extra dough I wasn't paying out was in equities, so I came out just fine me thinks. Not to mention interest rates were about 10% back then too.

Yeah, pretty much a wash me thinks.

And that's before property taxes, HOA fees, insurance, repairs and upgrades. I've put a lot into my current house in the 7 years I've been here, more for my enjoyment than to increase market value (no guarantee of that). The biggest was enclosing the back deck, but I've also replaced most of the windows, added plantation shutters, installed quartz countertops.. it adds up.

 

[75Norton]

I bought a house in 1982 for $65K - sold in 2013 for 165K but after taking out improvements we made it probably only went up 1% per year. Bought a house for 335K in 2013 and it is probably worth 600K now after 230K of improvements so not much appreciation. It is a large, unusual house that might be difficult to sell. We bought a vacation rental house in SW Florida for 550K in 2010 and it is worth 1200K now. The first two houses are in the Midwest.

 

[Morricol61]

1st house: We paid $36,000 in 1990. Borrowed $20K to replace roof and put in a new kitchen, bathroom and create a 3rd bedroom within the existing floorplan. Sold in 2006 for $56,000. Current value is $410,000.

2nd house: Purchased in 2001 for $84,000 and made no improvements apart from a new stove and dishwasher. We sold it in 2010 for $282,000. Current value $260,000.

3rd house: Land bought in 2007 for $110,000. Built the house in 2009 for $270,000 and sold in 2019 for $420,000. Current value is $680,000.

4th and final home bought in 2013 for $134,000. It was a fixer upper and we rented it out after spending $4k on necessary repairs and landscaping, most of which we did ourselves. Tenant paid $50,000 in rent over 6 years and we spent a similar amount on repairs and maintenance, rates, insurance and property management fees. in 2019 we moved in to the house ourselves and immediately spent $50,000 on building a 2 bay shed and a 2 bay carport; a new driveway; replaced some of the stumps and leveled the floors; replaced the old fence; bought plants and pavers and made new gardens. In 2022 we spent a further $6,000 to replace the wiring and electrical switchboard and altered the internal floor plan by knocking through a wall to create a new entrance and demolishing and rebuilding a wall to increase the size of our bedroom. Our much improved forever home is now estimated to be valued at $270,000 which is about right for a this area. We don't have a mortgage and have no plans to sell. We love living here, we have great neigbours and a comfortable home in which we hope to live for the rest of our lives.

 

[catii]

First home, AZ, 1970, $38K, only lived there 1 year before military, rented it, sold 1975, $51K

Second home, AZ, 1977, $58K, lived there 2 years, divorce, sold 1980, $80K

Third home, WY, 1979, $60K, lived there 3 years, company closed, sold 1982, $84K

Fourth home, LA, 1982, $75K, lived there 10 years, relocated HQ to Hawaii, rented, sold 1994, $134K

Current home, HI, 1992, $365K, still living here 33 years, mortgage paid off, current value $1,655,500

Rental property, HI, 1988, $400K, always rented, mortgage paid off, current value $1,595,990

Never calculated ROI, but, in hindsight, looks pretty good!

Looking back, all of my house purchases were made either on the outskirts of town, or out in the boonies, letting the city slowly head in our direction. That kept the purchase price lower, property taxes lower, & newest utilities.

 

[VaiFIer]

Great eye opening article by JL Collins on Home ownership

Never ever buying a house again. Just the down payment alone invested in VTSAX will out perform everything else.

https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terrible-investment/

 

[horfield]

London->California->Arizona

Due to my job location, have owned in expensive areas and always traded up. Getting a foot on the property ladder at the age of 25 was the best thing I ever did.

• Brought a London UK) apartment in 1985 for 40,000 pounds and sold in 1989 for 90,000 pounds
• Brought a London house in 1989 for 126,000 pounds and sold in 1997 for 176,000 pounds
  
  Permanently emigrated to the USA in 1997
  
  
• Brought house in Santa Barbara CA in 2001 for $500,000 and sold for $740,000 in 2003
• Brought house in San Francisco East Bay for $1M in 2003 and sold for $2M in 2019
• Current house purchased for $1.2M in 2019 and is now worth around $2.3M (Mostly equity)

 

[Mansderm]

About to make money, I hope

I bought 6 homes, sold 4, about to sell 5 th. I never made money because I had to "make it mine". I always over improved and did not get that back. But I always made extra payments and paid most off early so saved on interest. The 5th house, going on sale tomorrow, I paid cash during the crash of 2008. It has appreciated 100%. I did some major improvements but I think it's going to be my first to make money. The 6th home purchase, I'm currently living in, I've already got some probably "too big" plans but I have that need to do so. I did qualify for a mortgage, with no earned income since I'm retired, so I have payments for the first time in 15 years. As per advice here, I'll try to not pay it off early since I have a decent interest rate and the value of money has decreased. But I hate having debt. And I don't trust how the banks post the payments ( I've had them make major mistakes in the past) so I double check everything they do.

 

[athena53]

Our first mortgage in 1981 was a 9.25% adjustable rate mortgage, considered a good deal at the time. Fortunately for us the rate went down after 5 years, just dumb luck.

I never claimed our homes were an investment. But I do consider them a hedge against inflation, I can't imagine anyone doesn't care at all...

My Ex did worse than that. He bought in 1982 and his credit was abysmal. His was a 16.5% ARM which, thank heaven, decreased to 15.5% in 1983 and had gone down to 14.5% in 1984 when he sold. We'd married in the meantime, my credit rating was quite respectable, and the new mortgage was 12%. I bet the bank cried when the old mortgage was paid off.

I agree that just looking at appreciation doesn't tell the whole story- if you put the same amount in the S&P 500 you'd still have to pay to live someplace.

The weird thing about improvements/upgrades: second DH and I both did best on houses we didn't improve- the ones in NNJ where we could afford to pay the mortgage (and the exorbitant property taxes) and fix what was broken and that was about it. I did get a nice bonus before I sold mine and put french drains and 2 sump pumps in the basement and (it tended to get an inch or so of water in heavy rain) and tore out the old pink tile master bathroom shower and put in something more sober and up-to-date. Those were well worth it.

 

[SJhawkins]

We currently live in the one and only house we ever bought. It is likely worth about 4 times what we paid for it 31 years ago (although we did renovate and add on, so that's not just price appreciation). I don't expect we'll ever own another.

Same deal here, over 30 years as well too.
It's a small house on a few acres, house seemed a little small when raising kids, kids are about ready to fly. Should be the perfect retirement home being its a ranch style and lot to putz around with in the yard!

 

[Surewhitey]

We bought house #1 in TX in 1999 for $145k, sold 7 years later for $178k & company picked up the realtor fees & moved us to the largest city in the US... Big income upgrade. 14% for 7 years

'07-15 rented in Los Angeles & Mexico. From $2800 to $1600 in LA (downturn reduced rents dramatically), $5-600 in Mexico

2015 bought #2 in TX for $275k, put $30k into it & sold 2.5 years later for $438k (dumb luck market fluctuations...) $100k clear (tax free!) after realtor fees; about 33% after reno & realtor.

2018 bought #3 in TX for $282k, put $40-50k into it & is around $40k (down from $500k 6 months ago... 30% in 5 years.

 

[ocean view]

Bought a 3 bedroom townhouse in 1993 for $240k. Sold it in 2003 for $560k.

Moved down the freeway a bit, bought a 4 bedroom house for $590k in 2003. Still in this house. Zillow values it at $1.8m 20 years later, down about 10% from a year ago.

 

[Alex The Great]

Never ever buying a house again. Just the down payment alone invested in VTSAX will out perform everything else.

https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terrible-investment/

Total market appreciation has been great for the last decade. But there is no guarantee it will happen in future. Actually all indicators suggest exactly the opposite. Yes your house may not appreciate as well but you can live in it or rent it out. It has its intrinsic value no matter what happens. While money invested into the market can be wiped out.

 

[athena53]

At this point I don't want the house to appreciate much more- I'm single so I'm limited to a $250K capital gain before the remainder gets taxed. Bought at $242,000, now worth maybe $400,000, hoping to be here another 5+ years. I'm keeping records of improvements since they add to the basis.

 

[Gumby]

As long as the marginal tax rate is not 100%, it's always better to get more money.

 

[ERD50]

Never ever buying a house again. Just the down payment alone invested in VTSAX will out perform everything else.

https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terrible-investment/

But VTSAX (or other broad market fund) is not a reasonable comparison for your primary residence. The reasonable comparison is rent vs buy, and there are a lot of intangibles in that decision.

I'd agree with you that I would not invest in a house that's not my primary residence, but others here have apparently done well with that strategy (better than the market? I don't know). But I like to be diversified, and that's much easier to do with a few mouse clicks and a fund, than it is with real estate. But, to each their own.

-ERD50

 

[athena53]

As long as the marginal tax rate is not 100%, it's always better to get more money.

I know- I realized that after I typed it and almost went back and edited it. The principle still bothers me- not only the Federal but the state government get a chunk in their hands but it would also throw me into a higher IRMAA bracket.

It would be nice if it were indexed and if it were adjusted for how long you've been in the house.

 

[Gumby]

I know- I realized that after I typed it and almost went back and edited it. The principle still bothers me- not only the Federal but the state government get a chunk in their hands but it would also throw me into a higher IRMAA bracket.

It would be nice if it were indexed and if it were adjusted for how long you've been in the house.

I hear you. We've been in this house for 31 years and we've blown well past the exclusion in terms of the gain if we were to sell now.

 

[pb4uski]

Just wondering out loud whether you could sell it to a trusted relative or friend and then buy it back as you approach the exclusion amount of gain... a variation on stock tax gain harvesting that increases your basis and you pay nothing in capital gains taxes if you are in the 0% LTCG tax bracket.

Or sell with seller financing and rent for a period and then buy it back.

 

[athena53]

Just wondering out loud whether you could sell it to a trusted relative or friend and then buy it back as you approach the exclusion amount of gain... a variation on stock tax gain harvesting that increases your basis and you pay nothing in capital gains taxes if you are in the 0% LTCG tax bracket.

Or sell with seller financing and rent for a period and then buy it back.

Interesting thought! I may look into it if I get to that point. Might get complicated if the buyer actually has to come up with the cash at closing although I just realized my brother the retired tax CPA would be able to finance. (They own 2 houses and a town home all free and clear.) He would also be in a very good position to tell me whether the IRS would take a dim view of it. I know that if he had any qualms he wouldn't participate and I'd drop the idea.

 

[Alex The Great]

You need to be careful as $250K exclusion rule applies if you owned the house and actually lived in it during two years out of the last five years.

 

[athena53]

You need to be careful as $250K exclusion rule applies if you owned the house and actually lived in it during two years out of the last five years.

Oh, yeah. I bet my brother would have pointed that out. Reversing it 6 months later wouldn't work.