Why buying a house might not be a good investment afterall......

[Benyen Soljax]

buying a house is never a bad investment. you have to have a place to live. Why give your money for rent. you are throwing it away.

unless youre in college and dont plan on staying in a college town for the rest of your life.

[serpentracer]

So, was it a good investement for the guy that's selling his $150,000 house for $75,000?

I thought the purpose of an investment was to make money???

it's like the stock market. some days your stock isn't worth squat other days it's worth more than you paid.

my question is why is so many homes up for sale? it's not like people are losing jobs left and right and unemployment is high.

buying right now would be smart. selling is not.

[Benyen Soljax]

my question is why is so many homes up for sale? it's not like people are losing jobs left and right and unemployment is high.

+1.

but they will never report on that. its not news. things that make life suck are news. if the real reason for all of this housing hubbub was found to (hypothetically) be that people are just being scared into selling their house, and they should just keep it, or that banks should really be telling them that they cant afford that house right now, then there would be no news. another reason i dont watch news on tv or internet unless theres a good reason.

[Todd#43]

it's like the stock market. some days your stock isn't worth squat other days it's worth more than you paid.

my question is why is so many homes up for sale? it's not like people are losing jobs left and right and unemployment is high.

buying right now would be smart. selling is not.

You're right...its like the stock market

What rate of return (annual) makes an investment worthwhile? 1%, 5%, 25%?? Compare the annual return on most mutual funds versus the annual return on a house.

If my investments performed like most people's housing "investments" I would look for somewhere else to put my money...like in a mayonaise jar burried in the back yard.

If you want to "own" a house, go for it. Just admit that you like it and its a lifestyle choice, not fuggin investment. If you REALLY believe its an investment show me the numbers. Shouldn't be that hard - pick a mutual fund and they'll tell you how its performed over just about any period.

While we're at it, I'm going to start a class action suit against the gas company and the electric company. That shit just flows into my house every time I flip a switch, turn up the thermostat, or take a shower. I had NO IDEA my bill would be that high...they should have told me. Its all their fault - not mine.

This country is going to shit because way too many people refuse to take responsibility for their own actions. Until they do, this is only gonna get worse - much worse.

[serpentracer]

you know what I'm trying to say damn it:drink:

ok, you show me a real estate investor that is poor...does the name Donald Trump ring a bell? sure the average person isn't looking into that aspect but you get the idea.

so why do you think throwing your money away on rent is better than buying a house? that's foolish my friend. if you are paying on your house, you are putting that money back into your pocket. not into someone else's. in the long run you have something to show for it. and if you sell it for profit guess what? you just got everything you put into it back plus extra. that's smart. that's making your money work for you.

[Todd#43]

you know what I'm trying to say damn it:drink:

ok, you show me a real estate investor that is poor...like say, Donald Trump.

No, I dont know what you're trying to say. Show me the numbers that prove buying home with a mortgage is a GOOD investment. Better yet, start by telling me what rate of return makes a good investment, THEN show me the numbers.

By the way, Trump didn't make his bones taking out mortgages on houses. He made it buying and DEVELOPING commercial real estate.

Try again....

[shittygsxr]

trump started out by having a rich daddy.

[serpentracer]

todd, you just don't understand the way things work.

go do some research.

you are putting money back into your own pocket. not someone else's. that's all I'm going to say about this subject....

oh, if you are going to quote posts, make sure you get it all and understand all of the arguments first.

I can't help it if you just don't undestand the way things work. some people can make millions out of nothing. others just sit back and tell them it won't work. you seem to be that guy.

[Todd#43]

so why do you think throwing your money away on rent is better than buying a house? that's foolish my friend. if you are paying on your house, you are putting that money back into your pocket. not into someone else's. in the long run you have something to show for it. and if you sell it for profit guess what? you just got everything you put into it back plus extra. that's smart. that's making your money work for you.

Why do you think that renting is "throwing money away"? I get plenty for my money. I have the freedom to move when the place I'm renting no longer suits my needs, without having to worry about selling it. I dont have to cut the grass, or shovel snow. If something breaks - like a furnace, major appliance, hot water heater - the landlord (property owner) pays to fix it. If the roof leaks, the place needs painted, or one of the toilets backs up someone comes and takes care of it. Best part is I dont pay a dime for it. To me, its worth it. Certainly not an investment, but I'd rather invest in things that pay a reasonable annual return. A house doesn't do that.

Lets say you buy a house for $150,000, with no money down. A 15 year mortgage at 5.5% would cost you $220,600.00 over the life of the loan, assuming you didn't accelerate payments and made all of them on time. Add an additional $45,000.00 for real estate taxes over the same term, and you're up to $265,600.00. Homeowner's Insurance @ $100.00 per month would bring the total to $283,600.00. How much time per year do you spend doing regular maintenance - lawn work, painting, shoveling snow? Is two hours per week fair? What's your time worth - say $20.00 per hour? Thats another $31,200.00 per year. Wow...we're getting up there...$314,800.00. If you make any improvements during that time, or buy a new major appliance you could easily add another $1,000.00 per year. We'll leave out any tax assessments (new sidewalks, street work, etc.) and our total is $329,000.00

Your "investment" would have to increase in value around 6% per year just for you to break even. Inflation is about 3% so you really need to see a 9% increase to realize any profit. I havent seen homes appreciate that much in several years.

Good luck making $$ with your "investment"

[Todd#43]

todd, you just don't understand the way things work.

go do some research.

you are putting money back into your own pocket. not someone else's. that's all I'm going to say about this subject....

oh, if you are going to quote posts, make sure you get it all and understand all of the arguments first.

I can't help it if you just don't undestand the way things work. some people can make millions out of nothing. others just sit back and tell them it won't work. you seem to be that guy.

I cant help it if you edited your post while I was replying...

I've shown three times now how buying a house with a mortgage doesnt put money in your pocket. So far, no one else has been able to show me the numbers that prove it works.

I have done the research, and I've owned houses. I've shown why I think its not a good investment, why dont you show me some numbers that back up what you say?

[serpentracer]

it's not what I say it's how it works. if you bought something that didn't return money back to you, you made a bad choice in a house.

about the only ones you cannot make money back on are a mobile/modular home.

[Todd#43]

it's not what I say it's how it works. if you bought something that didn't return money back to you, you made a bad choice in a house.

about the only ones you cannot make money back on are a mobile/modular home.

Jesus....

This has got nothing to do with how my home purchases/sales worked out. I flipped some residential properties back in the early 90's and made a couple of bucks. The market was different then, and money was cheap. These weren't properties that I bought to live in, they were properties that were bought to be sold. The houses that I lived in didn't really return any money to my pocket the way an investment should. Of course, they weren't bought as investments - they were bought to live in. It was a lifestyle choice.

If "that's just the way it works" you should be able to show me some numbers that back it up. If you're going to buy a stock in a company, you'd want to see some numbers, wouldnt you? Whats the value of the company relative to earnings, what's the company's debt to equity ratio, that kind of thing. Why cant you show me the numbers that prove a house is a "good investment"?? You seem to believe that it is (along with some others) but no one can show me any proof.

What part of this dont you understand?

[serpentracer]

do you know how it works. nope

you will have a thing called equity.

pretend you bought a house for 75k. you made 10k in improvements. now you are down 85k. you sell it for 100k. you just made 15k

[Todd#43]

do you know how it works. nope

you will have a thing called equity.

Equity is money on paper...its not cash in your pocket. All it does is allow you to incur more debt.

The "equity" you have in your house only compares the amount that owe on the mortgage against the "value" of the house. It doesnt account for what you've paid over the term in taxes, improvements, repairs, maintenance, etc. If you'd actually read my post, your cost of ownership can easily exceed the value of your "equity". That makes owning a home a zero-sum game - much like renting, only your costs are higher.

Thats why most people think buying a home is a good investment - they dont look at ALL the costs involved.

[Todd#43]

do you know how it works. nope

you will have a thing called equity.

pretend you bought a house for 75k. you made 10k in improvements. now you are down 85k. you sell it for 100k. you just made 15k

That would be great, but that house is going to cost you MORE than $75,000.00

One more time....A $75,000 mortgage at 5.5% for 15 years will cost you $110,000.00 (180 payments @ about $612.00 each)

Put $10,000.00 in improvements in it, and you've now spent $120,000.00 (not $85,000.00)

You sell it for $100,000.00 and you LOSE $20,000.00

Do you get it yet?

[serpentracer]

but all of that is returned to you. especially because of inflation etc..

the only thing you get returned to you renting is nothing. you don't own a damn thing.

when I pay off my house, I own it. if I sell it that's 100% profit. I'll be getting all of my money plus some. as long as it's not a dump.

houses don't depreciate like a car or something if you don't fuck it all up etc..

and make improvements. it all adds value.

and updated kitchen could cost you $5k, but the appraiser says it added 12k in value, that's a 7k return on a 5k investment. how is that not smart?

all experts agree, owning a home is NOT a waste of money renting IS.

[Todd#43]

Ehhh....nevermind.

IF you think you're making money on your house, thats cool.

[serpentracer]

man, you are the only person I've ever heard say renting is not a waste of money and buying a home is.

[Todd#43]

Dude, I never once said buying a home is a waste of money. All I said was it isnt an INVESTMENT, and I've shown you logical reasons why I believe it isn't. Sure, you have something at the end of the mortgage, and it has value, but you have to be VERY lucky to realize any profit. If you don't realize any profit, its not an investment.

Look at it this way - is your checking account an investment? You put money in it every month, and all you get out of it is what you put in it. According to your argument it MUST be an investment. Most people would say that it isnt.

Renting isnt a waste of money either. I receive something of value for my money. If I didn't pay rent, I'd live on the streets - that wouldn't be smart, would it?

If you can show me how buying a home is an "investment" (you have to realize a cash profit) I'm all ears. Otherwise, I'm going to quit wasting my time with this thread.

[serpentracer]

I ment it is an investment for you, in the long run, a return of your own money. not exactly a profitable source of income or something along that line. but, in the long run you can turn a profit. when you sell it for more than you pay, that's a profit.

you'll never be done paying rent.

[Todd#43]

I ment it is an investment for you, in the long run, a return of your own money. not exactly a profitable source of income or something along that line. but, in the long run you can turn a profit. when you sell it for more than you pay, that's a profit.

you'll never be done paying rent.

An investment returns income - that's why it is called an investment. If it doesn't pay you more than your total cost in, its a bad investment.If it does pay you more than you paid, then its a good investment. Keep in mind that what you paid is way more than the initial selling price of the house.

I'm sure I'll never be done paying rent, because I'll always need a place to live. I may buy another house in the future, but it wont be an investment. It would be a lifestyle choice.

I would have to guess that a lot people in this day and age will never be done paying mortgage payments. With today's mobile society and people constantly refinancing the payments just go on forever.

If you can mortgage a house, make all your payments and actually clear a profit on it, more power to you. Thats a job well done. I believe most people DONT make money on a mortgaged house.

[NinjaNick]

I understand what you're saying TODD I think. You're stating, it's all paper money. You'll never see it in your hands while you say to your wife," Here's the cash I made on our house this year as we're living in it. Let's go and spend, spend, spend." You're saying that it's paper money, you never really see it. You won't be pulling it out of your wallet flipping through it to buy a burger or anything someday. RIGHT?

[shittygsxr]

Why do you think that renting is "throwing money away"? I get plenty for my money. I have the freedom to move when the place I'm renting no longer suits my needs, without having to worry about selling it. I dont have to cut the grass, or shovel snow. If something breaks - like a furnace, major appliance, hot water heater - the landlord (property owner) pays to fix it. If the roof leaks, the place needs painted, or one of the toilets backs up someone comes and takes care of it. Best part is I dont pay a dime for it. To me, its worth it. Certainly not an investment, but I'd rather invest in things that pay a reasonable annual return. A house doesn't do that.

Lets say you buy a house for $150,000, with no money down. A 15 year mortgage at 5.5% would cost you $220,600.00 over the life of the loan, assuming you didn't accelerate payments and made all of them on time. Add an additional $45,000.00 for real estate taxes over the same term, and you're up to $265,600.00. Homeowner's Insurance @ $100.00 per month would bring the total to $283,600.00. How much time per year do you spend doing regular maintenance - lawn work, painting, shoveling snow? Is two hours per week fair? What's your time worth - say $20.00 per hour? Thats another $31,200.00 per year. Wow...we're getting up there...$314,800.00. If you make any improvements during that time, or buy a new major appliance you could easily add another $1,000.00 per year. We'll leave out any tax assessments (new sidewalks, street work, etc.) and our total is $329,000.00

Your "investment" would have to increase in value around 6% per year just for you to break even. Inflation is about 3% so you really need to see a 9% increase to realize any profit. I havent seen homes appreciate that much in several years.

Good luck making $$ with your "investment"

There are a couple of additional factors in your equation that you left out such as tax deductions for the interest you pay, and the money you save from not living somewhere else.

You definately have your point and it is very valid. If I had 200k to invest, a home would not be my first choice it would actually be my last. A home is the uneducated mans savings account, because the same man living in a cheap apartment would invest the savings in beer not the stock market. The same way people overpay there taxes every paycheck and then go all apeshit when they get a big return. There checks could have been $100 higher and set up an automatic investment account using sharebuilder.com or similar and actually earned a return rather than letting the gov't hold the money interest free.

The only people who truely get rich off of real estate investing are the banks

[Todd#43]

I understand what you're saying TODD I think. You're stating, it's all paper money. You'll never see it in your hands while you say to your wife," Here's the cash I made on our house this year as we're living in it. Let's go and spend, spend, spend." You're saying that it's paper money, you never really see it. You won't be pulling it out of your wallet flipping through it to buy a burger or anything someday. RIGHT?

You're on the right track, Nick. What I'm saying is that the money you spend for your house ends up being wayyyy more than you sell it for. But you're correct in saying that for the most part its money on paper...

There are a couple of additional factors in your equation that you left out such as tax deductions for the interest you pay, and the money you save from not living somewhere else.

You definately have your point and it is very valid. If I had 200k to invest, a home would not be my first choice it would actually be my last. A home is the uneducated mans savings account, because the same man living in a cheap apartment would invest the savings in beer not the stock market. The same way people overpay there taxes every paycheck and then go all apeshit when they get a big return. There checks could have been $100 higher and set up an automatic investment account using sharebuilder.com or similar and actually earned a return rather than letting the gov't hold the money interest free.

The only people who truely get rich off of real estate investing are the banks

You're right, there is a tax savings, but all it allows you to do is get back some of the money that should have been yours in the first place. Keep in mind that you're not getting ALL of your mortgage interest back. The mortgage interest paid is a deduction from your gross income, not a straight deduction from your tax liability. Additionally, as your mortgage progresses through its term the amount of interest you pay in later years is decreased, as is your deduction.

Agreed - a "savings account" that doesnt pay you any interest is pointless.

[r1crusher]

It is a lifestyle choice and it makes pefect sense to me. But understanding the total cost of ownership I won't be duped into thinking I'm going to buy a house as an "investment". Will I make some money when I sell, probably. Will I make back all the money I've put into it, not even close. You'd have to pay it off and stay in it for a long time.

That's it....I'm going to hire the "Stupid Renter" as my new financial advisor.