I plan to sell my home for $400K+ in several years moving into another home I have. I'm either going to enjoy spending it or leave it as inheritance, I don't need it for retirement.
Rent will forever increase, but your mortgage will not and you’ll pay the same property taxes in both cases.
Well it’s a hell of a lot better than paying someone to live on their property that’s for sure.
The house across the street from me recently rented for 3 times what my mortgage is.
My home will be paid off next year which means I’ll be keeping an extra $1,400 a month in my pocket.
Dunno, man, I bought my house for $99k 12 years ago, it’s almost paid, and it’s worth $400k now.
Look at it this way.....
In the long run, are you better off renting or buying?
Answer: Buying.
Tell that to Donald Trump and every wealthy person out there with a real estate portfolio!
I would agree that multi-million dollar mansions are a huge risk as an investment. The pool of buyers is very limited, so millions can be lost when one needs to sell one of those.
We sold the house we raised our family in last summer, and it gave me the opportunity to compare the purely financial counter-factual question of “would I have been better off in financial terms renting, vs owning this house all these years”.
We saw a substantial capital gain, some of which was subject to federal taxation, had some sales expenses, which yielded the base “ownership” rate of return.
The counter-factual was a little harder, but I had some data on rental rates, and hard data on portfolio returns in the 401K. If one assumes that you had the discipline to put all of the “excess” income into the same portfolio mix as everything else in the 401K, it turned out, for us, that we would defiantly have had a better financial return by renting.
But that ignores the quality of life issues that come along with that more expensive mortgage. As the children grew older, we updated the back yard to better suit our summertime activities, we had the kitchen set up exactly the way we wanted it, added a mother-in-law unit when it was time to take care of an elderly family member etc etc etc.
There’s more to life than the amount of cash you have at the end.
So, this article isn’t wrong, per se, but it really does leave out a big part of the decision making process when it comes to how people decide where they’re going to live and raise a family.
We bought our current place in 2010. It’s paid off and tripled in value. My Grandad told me long ago “They make all kinds of stuff, but they make ain’t making more land, son.”
It used to be, your first home was a “fixer upper”.
Nowadays a “fixer upper” will be in a crime-ridden neighborhood, so it’s simply not worth it.
If you own your home you have the peace of mind that you can live in your home for as long as you desire.
On the other hand, if you rent your home you are at the mercy of the landlord as to how long you can live in your rented home.
Rent it out. I was in the same position as you are. Some 8 years ago I moved from our fully paid for home in the city out to a log cabin in the country. Had I sold then, I would not have realized a $75,000 increase in value.
I turned over the management to a property leasing company who collects 10% of the rent and they take care of everything else including qualifying the tennants, collecting the rent and providing upkeep and repairs as necessary. Taxes, insurance and maintenance eat up a little more than four months of the income I get, but who's complaining? And the property continues to appreciate in value.
Rent it out.
This guy might have a point if you rent a bare-bones apartment, then aggressively invest the rest in a quality stock index mutual fund.
However, that takes a discipline many renters just do not have. Plus there’s the quality of life thing. Sitting on your own back porch does have a certain charm.
That doesn’t mean you should not rent. Some apartments are located in great areas. And there’s no grass to mow. So add up the pluses and minuses for yourself.
Your home is a place to live. Period. If you move out and rent it to someone else, then it becomes an investment.
A home hedges against rent expense (assuming you’re going to live somewhere).
Indeed, I would recommend that if you sell your home and move to a rental, to invest the proceeds of your home sale in an equity-REIT.
When is a home NOT an investment?
When it’s beyond your income. A $20 million home requiring six full-time servants might be appropriate for Taylor Swift, but would probably be beyond the income of most Freepers.
I’d say the same about investments in precious metal and jewelry, in luxury cars and art. If its in line with your income, sounds prudent to me.
Real estate as a means of generating net profit cash flow? Sure, why not.
Real estate as a first-time homeowner? Hopefully. I bought a 1,250 sq. ft. condo in Californa and sold it 20 years later for a $300K profit, which I rolled over into a 3,000 sq. ft. house. That home has now appreciated another $150K in 10 years, but I don't have plans to sell it and move again, making the appreciation worthless to me from an investment standpoint. But as a means to acquire equity to buy larger later, absolutely.
-PJ
I wonder where in the eff they think Trump made his millions.
Property is an investment.
The only property i can think of that is a.liability is timberland. Unless your a huge forest products company, owning land for timber is a liability.
Takes a long time to get any return on investment and by the time to harvest comes around, inflation eats it all up...especially local and state property taxes.
If you live in a state like New York, you don’t really own your home.
It’s like a partnership with the mafia.
They want their share in taxes every month and are brutal about it. That and regular maintenance mean you lose money, even after capital gains.
The purchase of a home is one of the best ways for the average American to build wealth.
The key to a young person is: get a good education, get a good job, and live within your means.
That means buying a house you can afford and no more. Later, trade up if you need or want to.
I was talking to a very wealthy man about this recently. I asked him what his essential financial wisdom is. He lives in a home probably $10M in value.
His main thing is keeping his cash highly mobile. He prefers the ability to call his guy and move X million $ from place to place in five minutes. Real estate, at least for him, is too static.