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

[Todd#43]

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.

Finally....someone who understands

[r1crusher]

I understand and agree with statements on both sides, but the question as stated was never answered by anyone to support buying a home as an "investment". To each his own, again as long as the buyer (or renter) is happy with their domaciles...enjoy it.

[Todd#43]

I understand and agree with statements on both sides, but the question as stated was never answered by anyone to support buying a home as an "investment". To each his own, again as long as the buyer (or renter) is happy with their domaciles...enjoy it.

There are a bunch of reasons why that question wasn't answered:

1. They don't know what an investment is.
   
2. They've been conditioned for years to believe it IS an investment.
   
3. They believe that because the house is "worth" more than the paid for it, they're making money.
   
4. Anything that gives you a tax deduction MUST be good.
   
5. They don't understand the concept of profit.

If I really had the time, I could probably come up with one hundred more. I've said it before - if you want to buy a house, cool...go for it. Just don't call it an investment.

Renting works for me. I know I'll never get any of the money back that I've spent in rent, and I'm ok with that. You're never going to get back the $200.00 you spent last week on groceries, but that doesnt keep you from eating, does it?

Someone man up and show me a real world example of how buying a house is an investment - PLEASE!

[serpentracer]

truthfully fill out this calculator to the best of your knowledge and see how much money if any, you are wasting on renting.http://finance.move.com/Homefinance/Calculators/RentBuy.asp?poe=homestore

mine came out to this,

$192,000.00 Estimated Cost of Renting

$94,515.79 Estimated Cost of Buying

a savings of, $97,484.21 . . for a 100k home for a 30 year loan.

there is some numbers for you.

now tell me who is wasting money....if you are paying $800 for rent. or are you going to tell me, saving 97k I'll use it up in upkeep of the home? your crazy.

hum, now what to do with my extra money? RETIREMENT SAVINGS! oh the good life. how's them empty pockets working out for you when you are not able to work anymore?

[NinjaNick]

Nice link!

[Todd#43]

truthfully fill out this calculator to the best of your knowledge and see how much money if any, you are wasting on renting.http://finance.move.com/Homefinance/Calculators/RentBuy.asp?poe=homestore

mine came out to this,

$192,000.00 Estimated Cost of Renting

$94,515.79 Estimated Cost of Buying

a savings of, $97,484.21 . . for a 100k home for a 30 year loan.

there is some numbers for you.

now tell me who is wasting money....if you are paying $800 for rent. or are you going to tell me, saving 97k I'll use it up in upkeep of the home? your crazy.

hum, now what to do with my extra money? RETIREMENT SAVINGS! oh the good life. how's them empty pockets working out for you when you are not able to work anymore?

Look, I never ONCE said buying a home was a waste of money. I said it wasn't an INVESTMENT. How many times do I have to say the same thing over and over again.

This is the last time I'm going to say it:

You still haven't shown me how owning a home can MAKE you money.

I did the calculator too, except I dont plan on being in the same place with the same mortgage for 30 years. I used my current monthly rent, and assumed a 15 year mortgage on a home price comperable to the one I rent.

Mine came out like this:

$27,016.20Estimated Cost of Renting $52,118.30Estimated Cost of Buying

I just saved over $25,000.00 renting instead of buying - and only in two short years. I think I'll throw that money in some high yield mutual fund that will pay me some money. You know, I'll "invest" it.

Have one of your "experts" explain the concept of "investing" to you.

[serpentracer]

ok I get your point. but you don't get mine.

it is an investment. I'm not saving money by renting period.

how is that not investing in my future if I'm NOT saving myself money?

short term, no it's not paying out for you. in the long term, yes it is.

either way it's an investment of your future, I'm just doing it different.

no, it isn't the same yield as an mutual fund or something. but I can sell it when it's payed off plus all the extra money I've saved is mine too.

or I can live here till I die. and never pay rent again. and again, saving money.

no matter how you look at it, it is an investement. you just have to stick it out long enough for your equity to be in your favor.

plus, yeah it's something I can take pride in. so it's a personal thing as well. like you were saying.

todd, your welcome to come to a BBQ anytime at my house. no hard feelings;)

[Todd#43]

ok I get your point. but you don't get mine.

it is an investment. I'm not saving money by renting period.

how is that not investing in my future if I'm NOT saving myself money?

I never said you weren't saving money when compared to paying . I said it wasn't an in investment, and paying rent isnt wasting money.

short term, no it's not paying out for you. in the long term, yes it is.

either way it's an investment of your future, I'm just doing it different.

no, it isn't the same yield as an mutual fund or something. but I can sell it when it's payed off plus all the extra money I've saved is mine too.

or I can live here till I die. and never pay rent again. and again, saving money.

No, in the long term it doesn't "pay out". You may have paid less in mortgaging a house for thirty years than someone will pay in rent over that extended period but it wont put any money in your pocket. By the way, if you live in the same house till you croak, never refinance (or take an "equity" loan") you still haven't made any money - you cant take it with you, you know?

no matter how you look at it, it is an investement. you just have to stick it out long enough for your equity to be in your favor

I don't think you've proven it, and on average people don't stay in one place long enough to get to that point. Even if you manage to pay off your mortgage you'll still have plenty of costs involved in owning an OLD house that needs lots of repairs and updates.

plus, yeah it's something I can take pride in. so it's a personal thing as well. like you were saying.

todd, your welcome to come to a BBQ anytime at my house. no hard feelings;)

I have plenty of "pride" in the house that I rent. Its a very nice 4 bedroom 2 full bath, 2 half bath house in a desireable suburb west of Cleveland. I have a two car garage, and a view of Lake Erie from the deck on the second floor. My point is you don't have to own the place you live to have pride in it.

I know for a fact that I'll not be living here much longer, as we're planning on moving closer to my kids this spring. If I had purchased this house when we moved in two years ago, I'd be stuck trying to sell a home in a housing market that isnt doing very well right now. Not a good thing.

Own your house, rent a house...do what you want. Just don't try to make it something it isn't.

[NinjaNick]

BBQ! Who said BBQ!

[Todd#43]

truthfully fill out this calculator to the best of your knowledge and see how much money if any, you are wasting on renting.http://finance.move.com/Homefinance/Calculators/RentBuy.asp?poe=homestore

mine came out to this,

$192,000.00 Estimated Cost of Renting

$94,515.79 Estimated Cost of Buying

a savings of, $97,484.21 . . for a 100k home for a 30 year loan.

there is some numbers for you.

now tell me who is wasting money....if you are paying $800 for rent. or are you going to tell me, saving 97k I'll use it up in upkeep of the home? your crazy.

hum, now what to do with my extra money? RETIREMENT SAVINGS! oh the good life. how's them empty pockets working out for you when you are not able to work anymore?

By the way, I re-ran your "calculation".

Explain to me how you're only paying $94,515.79 for a house with a sell price of $100,000.00.

If you stay there for 30 years, your cost to purchase will be $345,564.30Estimated Cost of Buying

I think you missed a step....

[NinjaNick]

[Angrish]

Here is a pig getting ready to take off!!!

[Benyen Soljax]

I know for a fact that I'll not be living here much longer, as we're planning on moving closer to my kids this spring. If I had purchased this house when we moved in two years ago, I'd be stuck trying to sell a home in a housing market that isnt doing very well right now. Not a good thing.

Own your house, rent a house...do what you want. Just don't try to make it something it isn't.

after reading this large and drawn out argument where the two sides are subliminally arguing different points, it seems like the real culprit here is the financial advisor that advises people to "invest" in a house when it is not in their best interest. i.e. college student about to graduate, or someone who hasnt found a job to settle down in yet (as is the case with contractors), or in todds case someone who just isnt where they want to be for the rest of their lives. so lets go have some ribs and go burn down some "financial" offices.

[Angrish]

Buy a farm!! I'm making money just doing my taxes!!!LOL

[Disclaimer]

Shoot, some of these sheriff sales are looking like mighty nice upgrades to my location and living quarters...

[Fonzie]

at that point just walk away from the house and let the bank have it. There will be many class action lawsuits against banks as thier irresponsible lending artificially inflated the cost of housing and regular joe's have to foot the bill again.

Why is it the banks fault? It's the persons fault for spending beyond there means. If you make 35,000 you shouldn't be living in a 250k home. People need to take responsibility for there actions. THEY signed the papers, THEY knew what they were getting into. I don't feel bad for these people. they signed papers KNOWING they had a variable interest rate, then they act surprised when the interest rate goes up and they can't afford their payment anymore. WTF did you think was going to happen? interest rates were going to stay at 1% forever?

why is it my fault that the bank gave 10 assholes a loan that they couldnt afford that drove up the prices on my block? They are bankers they know about money, and believe it or not actually spend quit a bit of time in school learning about it. Wether you want to admit it or not "people" are not educated about money or investing. They dont know the difference that one percentage point will make in their loan payment, they dont know what an ammortization schedule is. That is why we have bankers, if everyone was smarter than them, bankers would not exist.

If you can answer this question with a well thought out response I will shut up.

When something happens to you medically, and you had previously just seen a doctor, why is it the doctors fauly?

When something happens to you financially, and you had perviously just seen a banker, why is it "your" own fault?

Skimmed through most of this. Having been a banker for 8 years, and worked at the then 5th largest bank in the country (Bank One, now Chase), & then 5th largest in the state (Sky), in all different capacities...mortgage lending, consumer lending, retail branch, new accounts, sales, investments, etc.....I can tell you you're giving them WAY too much credit. Anymore....It's resembles the used car salesman job you mentioned above, than the old time lenders. There were times I thought a well trained sales monkey could do my job more the way the bank wanted it done.....Which was all about bottom line sales #'s.....Ethics & customer service were silently second priority & mostly paid lip service as a way to justify/rationalize selling the client more products/services. Many of the people I worked with on the branch level were not college graduates, or were fresh faced just out of. Bottom line.....Either nowhere to go, or new & eager to please/easily molded

10 years ago when I was in the lending arena, most of the actual processing & documentation were done elsewhere anyways. Not even locally, but several main hubs across the country. So the front line branch person we all deal with was just in charge of attaining & submitting sales/applications & paperwork. They don't actually qualify you anymore like the old days

Bank One even had a name for it......"Share of Wallet", and had done studies about how many products, and which ones, they needed to sell you to have the best odds of you not switching banks. They figured if they had you in 4 of their products, preferably a high interest DDA & SAV, loan, & auto bill bay IIRC, which they called the "Grand Slam", that they had you locked up & you weren't going anywhere just for a free cooler, toaster or camp chair. They would even have weekly contests to see who could "sell" the most accounts....even ATM/debit cards. Bet you didn't think that was a service/product that needed/could be "sold"

They'd even have mandatory Monday morning "Big 5" meetings with all branch personnel to come up with the top 5 ways to "sell" the product of the week to the bank clients. Never heard of "Big 5"??.....Google Marty Cohen Banks spent millions for this psychiatrist turned salesman to teach their employees his sales system. Had to sit through the drivel of that pompous a$$hole once with each bank & feign enthusiasm while fighting vomit, or else risk being labeled negative & a "non believer". It was like being taken over by a cult, and nothing you say or do can stop it. I watched as the once customer driven community bank I'd moved to drank the Jim Jones kool aid after getting bought out by Sky & quickly started walking down the exact same "sales" culture Bank One had preached/brainwashed

Anyways......As you can tell....I can go on for days about how "big" banking has turned into a used car lot anymore. Even the tellers have quotas to hit for how many times they try to sell you a product or get you to talk to someone, or else risk getting disciplined if they don't.

The loan originators are no different. They get paid on commission or salary +(car salesman) & have pipelines & sales goals they have to forecast & hit.... or else. Plus most long term ones are hooked into the local realtors, who only give their referrals to originators they know can get things approved....QUICKLY. Don't wanna dry up that gift horse, do 'ya???

Sooooo.....How free from conflict do you think they are when it comes to lending you a $250,000 loan, when they know you only make $60,000/year.......But they still need to loan another $500k to hit their projected pipeline/sales goal for the month???

If they can find a program to get you approved (which there have been an abundance of since the Clinton days...That's why there are so many "non bank" mortgage brokers these days).....They're gonna make you that loan all day long so they can feed their family & keep their job for another month. Most big banks sell their loans on the secondary market (i.e. investment pools), and once that happens......The original bank/originators, etc are all off the hook for whatever happens with that loan later on (i.e...default, foreclosure, etc)

So when everyone's standing around with their hands in the air right now, wondering how in the hell the housing market & economy got into this mess to begin with.....They can get all fancy & complicated with their explanations, but a lot of it boils down to simple pressure on the little man......

"Joe, we want you to hit x sales $$ this month/year, since you did w $$ last month/year. What do you have in your pipeline to achieve that #? Where are you going to get more to feed your pipeline to achieve your now higher goal, so you can close more loans this month, and keep your job & feed your family for another 30 days/year?" If you've already reached saturation....Are you gonna start compromising your ethics/ideals by finding more flexible/creative (riskier) loan programs....Or risk losing your job if you don't hit your #'s ?!?

[Fonzie]

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?

Depends on where you're at in your loan cycle Todd, & what the current housing market is like/what your appraised value is now, compared to time of purchase

In the previous housing market, if your $75k home was paid off after your 30 year mort was done ($120,000)......Your home may very well be worth more than that $120k now

Hard #'s......My folks bought their home 32 years ago. Simple 2 bedroom in middle class neighborhood for $25,000 in 1977. Now appraises for 3x that, prior to this current downturn......But I'm sure they could still sell it for $50k +. After 32 years.....They could probably at least get double their money back, + have had a place to live all that time (rent $$)

Rule of 72....Divide 72 by your rate of return to see how many years to double your $$

Or.......Divide 72 by rate of return to find how long to double. Works either way.

You need at least 7% to double your $$ every 10 years.....10% to double every 7 years

Edited April 16, 2009 by Fonzie
Punctuation, etc

[NinjaNick]

OK! Why did Angrish dig up this thread. Not again!!

[Fonzie]

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.

This is "old/up market thinking". We're gonna try selling our house after owning it last 10 years. We've done some improvements.....It needs some more. Modest home.....3 bedrooms under $100k. Realtor tells me we'll be lucky to break even on it in this market

Previous market.....I'd of fixed the remaining things because this is my down payment $$ and like you said....It would increase value. THIS market.....I don't want to put another dime or any more elbow grease into this place, as I'm never gonna see it....Like pissin' $$ away or workin' for free right now!!

Honestly.....If I'm just gonna break even......I've often pondered what Shiddy said earlier about just givin' it back to the bank.....'Cause even puttin' it up for sale, if it takes a while to move with the market saturated the way it is......Is gonna cost me $$ for every month it sits. So then I'm not even breaking even......but losing $$ like Todd says

[Fonzie]

HAAA!! Sorry Nikko.....Didn't pay any attention to the dates 'til you just mentioned it

[NinjaNick]

You get so into it sometimes. No matter how much I have to share...no way in hell am I put that much effort into explaining my reasoning on the internet..

Those are some looooooong posts Fonzie.

[Fonzie]

Just think if I didn't break it up into paragraphs.....Like some people on here

[NinjaNick]

Just think if I didn't break it up into paragraphs.....Like some people on here

No crap! I've seen a few that never even use periods!

It's like trying to understand what Lassie was barking to us reading their posts.