House buying dilemma

[Dtail]

Owned 5 homes. Made money on 4 of them including current one so far. 2 of them the returns were over 100% gains. 10% loss on one owned for 2 years.

 

[ShokWaveRider]

I have owned 4 homes in 3 different countries, made money on all. Rented 3 homes between purchases but only for a relative short time 1, 3 & 3 years respectively. Made more on the houses we have owned than all the rents we paid plus a lot more. Looking to downsize now but having trouble finding well built single story home without a pool with a view that we like.

 

[COcheesehead]

…having trouble finding well built single story home without a pool with a view that we like.

A little over 5 years ago we built our forever house. We loved it. Everyone thought it was cool. We had a great view. Then one day on a bike ride, I stumbled across a lot with a spec started on it. It had a better view, a better yard, a bigger floor plan, etc, etc, etc and it got stuck in our head. So we bought it. It’s the house my wife says we never knew we needed. So keep looking. You never know.

 

[Diogenes]

Most on this forum are living in a house they bought while working, and probably paid it off before they retired. Your only house is not an investment, it's a place to live. House 2, 3, 4, etc are likely viewed as investments. Choose wisely.

"Wisely" is the key adverb. If we're not confident in our prowess, our judgment, our discernment, what then? My "solution" is stasis. If I disbelieve that I can choose wisely, I desist from choosing. How to break the logjam?

But I disagree that one's primary residence shouldn't be viewed as an investment. Anything that costly should have investment value. If it doesn't, why buy it? I didn't accumulate the money, just to spend it.

The point is, some of the best things in life happen when we take a calculated risk, and not just live the status quo every day.

Maybe another way to look at it to help alleviate your anxiety, is that you're not really just spending money. You're just moving money from a low performing asset class (intermediate-term bonds funds) to real estate.

This of course is arrantly true. Completely eschewing risk, gets us nowhere. But for a risk to be "calculated", we have to have decently keen assessment of what we're doing. This is the more important, the larger the investment, and the more idiosyncratic it is. I mean, a person can dump $100M into the S&P 500 (just to give a tart example)... it's a risk of sorts, but there's no idiosyncratic risk. Now try the same with a single stock... that's idiosyncratic risk. A house is by definition idiosyncratic risk.

Your other point is also sincerely well-taken... a house should be regarded as an investment that's alternative to other slow-ish moving investments, like say municipal bonds. Bought wisely, it's less of an expense than just an alternative investment.

 

[Lorenzo]

Most on this forum are living in a house they bought while working, and probably paid it off before they retired. Your only house is not an investment, it's a place to live. House 2, 3, 4, etc are likely viewed as investments. Choose wisely.

This. I don't look at my home as an investment; it's where I sleep at night and plant myself when I'm not off doing other things, and if it appreciates in value (as my prior home did not do very much), that's just a bonus. I would suggest buying a house because you want the lifestyle of playing around with the house and yard, making it your own with whatever embellishments or improvements suit your fancy--something you are very limited in doing with a rental. DW and I bought our house a few years ago because that's the kind of lifestyle we wanted, especially growing our own food, having a workshop for me, climate-controlled storage for our precious toys, etc. Having a customized sports car hobby garage sounds like a good reason to buy a house to me.

... But, a house would allow me to indulge in the first step towards the sports car dreams (there's a thread on the subject), in the sense of building a large garage and acquiring equipment.

 

[COcheesehead]

A house shouldn’t be considered part of an investment portfolio, but its value/your equity should be considered part of your life plan.
The value can be used for your giving plans, long term care, assisted living, source of funds for other endeavors. No it may not be a traditional investment, but it is likely an inflation hedge and a source of value that you’d be foolish to not include in your financial plans.

 

[jldavid47]

We debate this here occasionally. Some see a rising house price as "profit." Others suggest the rising price simply means you would have to pay a rising price at some OTHER house if you sold your house to get the profit.

I am in the second camp. The worst part about it is that your closing costs are roughly proportional to the sale price. If we sell our house for $400K, our closing costs are roughly $25K where we live. If we purchase another house for $400K we start out $25K in the hole plus moving costs. The only way we would do such a thing is if the new house better fits our lifestyle.

We wanted to build a final retirement house, but the market here went crazy during the pandemic and it just isn't feasible from a financial standpoint any more. Fortunately, when we bought our current house 12 years ago, we bought one with a first floor master bedroom which makes keeping this house in the long run much more feasible from a livability perspective. YMMV.