Posted on 02/16/2012 7:40:37 AM PST by C19fan
Rich Arzaga owns a luxury home in San Ramon, California, but he's not betting on it as an investment.
The founder and CEO of Cornerstone Wealth Management, who bought the 5,000 sq. ft. property in 2005 for $1.8 million and has spent $500,000 improving it, considers the abode a wonderful place for his family. But ask him to rate his home -- or any home, for that matter -- as a financial investment, and Arzaga balks.
"It's the American Dream to own a home, but whoever said that didn't do the analysis on it," says Arzaga, knowing he's taking a contrarian stance to conventional wisdom.
(Excerpt) Read more at reuters.com ...
I rented in Seattle between 1997 and 2011. Compared to owning the same homes in that time period, and even considering that there was a huge boom (and bust), I saved tens of thousands of dollars.
And of equal importance, when I decided to move to KY, I simply gave 30 days notice. :-)
A home is never an asset since you have to live somewhere and it’s certainly no longer a moneymaker.
Having said that, it is usually better to live in a modest affordable home where you can build equity than to pay for someone else’s mortgage.
I’m fine with buying homes and letting others pay the mortgage on them if they really want to...
I learned that a few years after building my house. The property taxes alone on the house exceeded what I was I paying in rent beofre I built. But I did build something quite different than what I was renting. Even though, according to the financial expert, I’m wasting money owning a home I prefer the peace of mind knowing I have somewhere to go and do as I please. The real possibilty of receiving a notice to vacate the premises hanging over you head daily would bother me.
I regret it to the last day of my life. Not that the person involved would GAF, mind you.
To each his own.
If forced to choose, I would rather live in a double wide with 20 acres than “rent” a nice townhouse where someone elses rules are constantly hanging overhead, but that’s just me...
Only in a downturned economy does this logic work. When property prices are rising those that buy a house pay much less than those renting. Those that buy a house control their costs for the most part while those renting keep moving around while trying to find something they can afford. I have a great house that I pay the same in actual money out of pocket that someone in an upscale apartment pays and gets nothing out of. I have a place to call home, have lots of wooded land and elbow room. The apartment dweller...not so much.
“A home is never an asset since you have to live somewhere and it’s certainly no longer a moneymaker.”
So, when someone buys a home, lives in it for a number of years then downsizes as they get older, having the equity isn’t an asset? Are you really saying today’s economy is tomorrow’s economy? When we sold our last house two years ago we got back more than we put in, seems like an asset to me. The house we are in now could be sold today for over $100k in profit. Seems like an asset to me.
Actually the best way to accumulate cash is to be in an underwater financed home while skipping all payments till you, if ever, get foreclosed. Think of it, you can buy all the big screen TVs, cars, clothes etc you would normally waste the money upon making a mortgage payment. Then along comes His Excellency and he will probably give you a bonus ontop of your frugality.
Oh, there's many out there that demonstrate plenty of mobility regardless of "owning" that house. What's the point of sticking around to complete the sale with no buyers for an underwater unit?
Define "profit"....
I'd make that much after paying off the mortgage. But after paying the Realtor fees and moving expenses, I'd have zip. And that sad scenario makes me one of the "lucky" homeowners today.
—What’s the point of sticking around to complete the sale with no buyers for an underwater unit?—
Well, in my case it meant I was able to easily buy a small farm (with new house) because I had good credit.
Interestingly, my house payment on the 15 year loan is less than the car payment on a six year loan was for our 2001 Chrysler 300M. :-)
I'd make that much after paying off the mortgage. But after paying the Realtor fees and moving expenses, I'd have zip. And that sad scenario makes me one of the “lucky” homeowners today.
Don't forget property tax. if you pay an average of 6k per year you will need to double the value of a 200k house just to pay the tax.
If this article were true, there would be no such thing as rentals. Our home is worth 5-6 times what it was fifteen years ago. Mortgage free but the taxes are up 5 times so that’s killing us (no thanks to the northerners who have moved down and brought their ideas of prices with them). Why would I want to pay someone else’s mortgage, taxes and give them a profit? Our entire paycheck would never cover the rent on this place today. Owning means we’d still have a roof over our heads in a financial crisis.
Home prices have jumped so much literally half the houses here are up for sale. These are second homes so the owners are looking for a tidy profit in their investments.
Renters pay that tax as well. Not too many people willing to rent a property for less than their costs.
Granted, My point is that residential real estate is not really an investment but a cost. I was attempting (possibly a poor attempt) to refute the anecdotal stories that someone buys a two BR house and sells it for twice what they paid thirty years later. In actuality they lost money because the cost of ownership was more than the increase in value and a majority of that cost was the cost of government.
Renters do too. The difference is, in addition to not having ownership financial liabilities, they maintain mobility. And you mention property tax. There is nothing stopping them from raising it any time they feel the need.
Congratulations on being among the very few.
My point is that you have to live somewhere and that the paradigm has changed regarding home values and profit.
Owners never ever include taxes in your rent, right?
Of course they do. All ownership costs are built in, FOR THEM TO PAY. If the heater goes out, the lump sum is out of their pocket. They can’t raise your rent because of it. At least not THIS year. If at some point the rent does get to high, do you have to deal with a realtor, stage your house, and suffer with endless looky-loo low-ball dreamers parading through your house?
Here’s what it boils down to.
About half of us paying a mortgage, could find a comparable house to rent for substantially less in the same area. In my case, it’s around half. My wife and I talk about the exercising the option frequently.
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