This might upset the real estate agents on MJ but still interesting...
QuoteWhy your house is a terrible investment
I know I'm treading dangerous ground here. But before you get out the tar and feathers, let's do a little thought experiment together.
Imagine over a cup or coffee or a glass of wine we get to talking about investments. Then maybe one of us, let's say you, says:
"Hey I've got an idea. We're always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?"
Well, let's see now (pulling out our lined yellow pad), let's make a list. To be really terrible:
It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.
It should be illiquid. We'll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.
It should be expensive to buy and sell. We'll add very high transaction costs. Let's say 5% commissions on the deal, coming and going.
It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.
...
Read more: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
Oh wow. Interesting. It's even worse for us, we have investment properties also. So we have all the issues, and the renter's issues, etc. It's not for the faint of heart, for sure.
It might be, but it sure beats living in an apartment with neighbors above, below, and beside you.
People trying to convince others and themselves that renting is mostly always better than buying is just a defence mechanism. They feel like fools for over paying in a bubble market. They chose to take out a mortgage they knew they couldn't afford. They treat their home as an investment when it should be considered a home.
It's no different than people turning 60 and realize, they never put enough money away to maintain their lifestyles in a long retirement and now, all of a sudden, they hate their jobs, work too many hours but now they never want to retire for a laundry list of what they consider great reasons. Mostly, it's because they chose to not put away enough money & it they admit it, they are admitting to themselves they are lifetime losers despite having a good job and living well.
To a certain percentage of the population during periods of their lives, choosing to rent and having nothing when your lease ends makes sense.
For money people and most families and most communities, they need the stability of the majority being home owners and having their neighbors take pride in ownership vs the typical rental property look of houses.
One size does not fit all and what fits you today maynot fit you five years from now.
Make the best short and long term choices for you, not what some expert tells you.
QuoteThey treat their home as an investment when it should be considered a home.
This ^^^ 8)
Framing a home as only an "investment" is always silly. It's silly when people think they automatically should buy one as it's a "good investment", and it's silly when they think they automatically shouldn't buy one because it's a "bad investment". I've had enough friends who got hosed by their condos or houses to know buying isn't always a good idea, and I've also been jerked around by enough landlords to know that renting isn't inherently any better.
I made the mistake of going to the link and reading it. What an incredibly stupid article. Almost all of the comments apply to owning a business as well. That would be incredibly stupid too, according to the author. Most of the people I know who own their own homes are happy and most of the people I know who rent would love to own a place.
My Mom made the "crazy" decision to buy a place. She paid it off (with that pesky mortgage payment she established 25 years ago) and lived the last 5 years of her life with no payment at all. Just the taxes, $700 per year in SC. Then, when she passed away she left to her kids a property owned free and clear and worth about $200,000.
I'm so sick of reading these "why real estate is a bad investment" articles. Try sleeping in your 401K.
Quote from: BoldBoyOfTheSouth on January 31, 2014, 09:30:22 AM
People trying to convince others and themselves that renting is mostly always better than buying is just a defence mechanism. They feel like fools for over paying in a bubble market. They chose to take out a mortgage they knew they couldn't afford. They treat their home as an investment when it should be considered a home.
Your last 3 sentences are saying the exact opposite of your first. Nice job, bro.
I bought my first home this year and it's not all the sunshine and rainbows that everyone said it would be, but it has brought me happiness and financial gain. As a gardner, the owner of a huge dog, & someone who loves working in the yard; I have really enjoyed the freedom and the space afforded to me by my house. While the value has gone up, it is not liquid, so I have less cash for other investments as I previously did.
Quote from: Captain Zissou on January 31, 2014, 10:46:52 AM
Quote from: BoldBoyOfTheSouth on January 31, 2014, 09:30:22 AM
People trying to convince others and themselves that renting is mostly always better than buying is just a defence mechanism. They feel like fools for over paying in a bubble market. They chose to take out a mortgage they knew they couldn't afford. They treat their home as an investment when it should be considered a home.
Your last 3 sentences are saying the exact opposite of your first. Nice job, bro.
I bought my first home this year and it's not all the sunshine and rainbows that everyone said it would be, but it has brought me happiness and financial gain. As a gardner, the owner of a huge dog, & someone who loves working in the yard; I have really enjoyed the freedom and the space afforded to me by my house. While the value has gone up, it is not liquid, so I have less cash for other investments as I previously did.
Are you paying more for your home than you were paying rent? Do the benefits of privacy and yard etc offset the decrease in liquidity? Do you plan to live there for a long time? I am quite certain you figured all that into your decision... I did... most people do. These are the things that make a purchased home... a home... and not an investment.
Quote from: BridgeTroll on January 31, 2014, 10:55:53 AM
Quote from: Captain Zissou on January 31, 2014, 10:46:52 AM
Quote from: BoldBoyOfTheSouth on January 31, 2014, 09:30:22 AM
People trying to convince others and themselves that renting is mostly always better than buying is just a defence mechanism. They feel like fools for over paying in a bubble market. They chose to take out a mortgage they knew they couldn't afford. They treat their home as an investment when it should be considered a home.
Your last 3 sentences are saying the exact opposite of your first. Nice job, bro.
I bought my first home this year and it's not all the sunshine and rainbows that everyone said it would be, but it has brought me happiness and financial gain. As a gardner, the owner of a huge dog, & someone who loves working in the yard; I have really enjoyed the freedom and the space afforded to me by my house. While the value has gone up, it is not liquid, so I have less cash for other investments as I previously did.
Are you paying more for your home than you were paying rent? Do the benefits of privacy and yard etc offset the decrease in liquidity? Do you plan to live there for a long time? I am quite certain you figured all that into your decision... I did... most people do. These are the things that make a purchased home... a home... and not an investment.
Well put.
I think there's a good point in Bold Boy's comment. I've met a lot of people who got burned on their condo or house purchase and don't want to do it again, so they act as if it's never a good idea for anyone. Just like there are plenty of people - especially before about 2008 - who've had ownership work out for them, so they think it's always a good idea for everyone. Clearly that's not the case. Lessons being: not everything's the same for every person/family, everyone should do their own homework, and brush your teeth twice daily.
People definately buys home for other reason. Me, I purchase mine two years ago. Im paying $575.00, compared to $720.00 I was paying for my apartment, I dont have to move unless I choice too, I dont have to worry about rent going up 40.00 every year, I have privacy, I can have parties without someone calling the rent office, I just bought a dog and I dont have to pay a pet deposit, I can do anything I want without someones permission. The "investment" part is the last thing on my mind. Actually, its not on my mind at all.
While it may not be "on your mind," it seems like it is an investment in "peace of mind." Plus own it long enough, you will get a monetary return of some sort. With rent, you get a hole in your pocket (and I have no problem with people renting.)
BT: I rented in 3 vastly different situations before I bought, which ranged from the 33rd floor of the peninsula to a 9' by 10' room in a small house in Avondale. My mortgage is slightly more than what I paid at the peninsula (actual principal and interest is $55 less per month). I will say that I bought more house than I needed, which is tough. However, I have enough space for a wife and child, when those come along. The freedom, privacy, and pride in having my own little slice of the planet definitely offset the added expense.
I can really argue both ways. It was great to pay so little last year and be able to save. This year i have been able to indulge in more hobbies and explore my creativity and build self reliance with my house (i never repaired anything i rented). If you buy or rent within your means, it's really a matter of personal preference.
Quote from: Tacachale on January 31, 2014, 10:59:28 AM
Well put.
I think there's a good point in Bold Boy's comment. I've met a lot of people who got burned on their condo or house purchase and don't want to do it again, so they act as if it's never a good idea for anyone. Just like there are plenty of people - especially before about 2008 - who've had ownership work out for them, so they think it's always a good idea for everyone. Clearly that's not the case. Lessons being: not everything's the same for every person/family, everyone should do their own homework, and brush your teeth twice daily.
I think alot of people are going to start being burned again. I am seeing people pay sometimes double for homes and condos for what they were going for 2009-2011. I saw some condos going for 40-50k a few years back and now are back over 100k.
Unless you are buying a house with cash, we are basically debating whether it is better to rent the money or the house.
What does everyone think of this point?
QuoteIt should be subject to the fortunes of one country, one state, one city, one town...No! One neighborhood! Imagine if our investment could somehow tie its owner to the fate of one narrow location. The risk could be enormous! A plant closes. A street gang moves in. A government goes crazy with taxes. An environmental disaster happens nearby. We could have an investment that not only crushes it's owner's net worth, but does so even as they are losing their job and income!
Quote from: Captain Zissou on January 31, 2014, 11:30:55 AM
BT: I rented in 3 vastly different situations before I bought, which ranged from the 33rd floor of the peninsula to a 9' by 10' room in a small house in Avondale. My mortgage is slightly more than what I paid at the peninsula (actual principal and interest is $55 less per month). I will say that I bought more house than I needed, which is tough. However, I have enough space for a wife and child, when those come along. The freedom, privacy, and pride in having my own little slice of the planet definitely offset the added expense.
I can really argue both ways. It was great to pay so little last year and be able to save. This year i have been able to indulge in more hobbies and explore my creativity and build self reliance with my house (i never repaired anything i rented). If you buy or rent within your means, it's really a matter of personal preference.
It really is... I think age and stability play into the choice also. When I was younger I was MUCH more mobile... renting was really the only way. Not sure if it is tied to maturity or not but stability became more of a priority than mobility. The very thought of being responsible for the upkeep of the property you own became more of an enticement. The idea of paying "rent" money to pay off the loan taken to buy the house seemed better than lining someone else's pocket... who clearly did not care about the property except to cash your check. Like you I enjoyed yard work, gardening, having a dog and a place for the child to play safely. But I was always quite clear with myself that I had bought a home... not an investment. 8)
Quote from: MusicMan on January 31, 2014, 11:23:39 AM
While it may not be "on your mind," it seems like it is an investment in "peace of mind." Plus own it long enough, you will get a monetary return of some sort. With rent, you get a hole in your pocket (and I have no problem with people renting.)
a HUGE hole. WIth my rent being 720 and going up every year, I was getting depressed. My annual raise at work was being ate up because of my renting increasing. Im glad thats over. LOL
Quote from: Lunican on January 31, 2014, 11:50:52 AM
Unless you are buying a house with cash, we are basically debating whether it is better to rent the money or the house.
Not really. We're debating renting the money or the house with the entire series of benefits and downsides of either option.
Quote from: Lunican on January 31, 2014, 11:50:52 AM
What does everyone think of this point?
QuoteIt should be subject to the fortunes of one country, one state, one city, one town...No! One neighborhood! Imagine if our investment could somehow tie its owner to the fate of one narrow location. The risk could be enormous! A plant closes. A street gang moves in. A government goes crazy with taxes. An environmental disaster happens nearby. We could have an investment that not only crushes it's owner's net worth, but does so even as they are losing their job and income!
Like the rest of the article it's only really meaningful if you're considering buying a home only as a financial investment.
Sounds like the author has some investment properties and wants to make sure he maintains a steady flow of renters...
But even in this thread people claim that rent is throwing money into a hole and lining someone else's pockets. I think the author is trying to dispute the notion that buying a house is any better.
Quote from: Lunican on January 31, 2014, 02:30:39 PM
But even in this thread people claim that rent is throwing money into a hole and lining someone else's pockets. I think the author is trying to dispute the notion that buying a house is any better.
I understand what he is trying to do. I do not think he did a very good job of it.
^Yeah, he's being as reductionist as the (hypothetical) people he's criticizing who think buying a home is always a good investment. Whatever good points he's making he's ignoring literally every other factor in any decision on where to live besides it being a financial investment. Of course here we are talking about it, so obviously he's doing something right.
It's like those that argue the skyway doesn't pay for itself. Sure. You're right, but it has other benefits not captured by that narrow barometer of success. Roads (apartments in this case), on the other hand make you no returns and fail to provide many of the ancillary benefits as well.
Yeah..... I took it there.
let me know when I can deduct part of my rent from my taxes
^if you work from home ;D
Quote from: ProjectMaximus on January 31, 2014, 11:46:01 PM
^if you work from home ;D
guaranteed audit if you take that credit/deduction.
Quote from: carpnter on January 31, 2014, 09:25:09 AM
It might be, but it sure beats living in an apartment with neighbors above, below, and beside you.
Quote from: Captain Zissou on January 31, 2014, 10:46:52 AM
As a gardner, the owner of a huge dog, & someone who loves working in the yard; I have really enjoyed the freedom and the space afforded to me by my house.
You can own a place with neighbors above, below, and beside you, just as you can rent a place with a yard with room to garden and for pets.
Let's not confuse the characteristics of a property with mortgage vs. rent.
Quote from: fsquid on February 01, 2014, 02:18:30 AM
Quote from: ProjectMaximus on January 31, 2014, 11:46:01 PM
^if you work from home ;D
guaranteed audit if you take that credit/deduction.
not really, but i get your point. it's simply a risk that you'd rather not deal with.
Quote from: fsquid on January 31, 2014, 06:07:46 PM
let me know when I can deduct part of my rent from my taxes
When I lived in the District of Columbia, you could deduct part of your rent from your DC income tax because it was assumed that a portion of your rent went to pay the landlord's property taxes, and you the renter shouldn't be responsible for that.
Quote from: ProjectMaximus on February 01, 2014, 11:23:41 AM
Quote from: fsquid on February 01, 2014, 02:18:30 AM
Quote from: ProjectMaximus on January 31, 2014, 11:46:01 PM
^if you work from home ;D
guaranteed audit if you take that credit/deduction.
not really, but i get your point. it's simply a risk that you'd rather not deal with.
One of the things that the IRS has been going after the last 5 years is the home office stuff. I know consultants who work from home 100% of the time and they don't take the deduction simply for that reason.
Perhaps it is simply due to winter season,brown & down,extra special vision focus (dang!....look at that!....never saw That before....), a good chunk of Duval County within the Westside Core is looking pretty beat up.
And it's all Close to Better.
Maybe too close for comfort.
Quote from: fsquid on February 01, 2014, 03:49:23 PM
One of the things that the IRS has been going after the last 5 years is the home office stuff. I know consultants who work from home 100% of the time and they don't take the deduction simply for that reason.
Cool. I definitely believe you, but it's just not a guaranteed audit...must depend on the industry but i can tell you dozens of of my friends/colleagues from school do this (we were taught to in our music business classes after all), and they're not getting audited. Probably not enough income for the IRS to worry haha!!
Btw, I'm referring to music teachers and performers with home studios.
My wife and I lived at the beach for 2 years and here in Avondale for the past 14, we did not buy either place as an investment or even a home, we lived there for the neighborhood. As has been chronicled here the beach from 98-2000 was interesting with the Crab Pot still around and few of the high rises that are there now, but we jumped at the opportunity to be a part of a great neighborhood, which are are a part of and are enjoying the new King Street district, the changes over the years to Avondale and we are hopeful for Murray Hill.
We could rent or own, it does not matter to us, but we live where we live because of the neighborhood. In the end, you really have to love WHERE you live to provide a quality of life.
Quote from: mtraininjax on February 02, 2014, 02:30:37 PM
We could rent or own, it does not matter to us, but we live where we live because of the neighborhood. In the end, you really have to love WHERE you live to provide a quality of life.
I like that! ;)
Try having a house in short sale because of a divorce. Then having a paltry second mortgage not sign off on the deal a YEAR AND A HALF later. Then have the whole thing foreclosed on by the first mortgage. Lifetime loser huh?
Wish I was a perfect person like some others on here...
Every type of property can be bought or rented so this isn't really a discussion about everyone's living preference.
Here is an average 1,500sq ft 3 bed 2 bath house on the Southside renting for $1,375 and would sell for $180k.
http://www.zillow.com/homedetails/12228-Cobblefield-Cir-S-Jacksonville-FL-32224/44608128_zpid/
With the transactions costs (of buying and selling), insurance, taxes, maintenance, and low appreciation you'd have to live in this house a very long time before buying it is cheaper than renting it.
Yes, because we've already established there's no possible other reason for buying a home than making an "investment".
Lunican - that is incorrect. Transaction fees are going to cost you about 3K... how long do you think you need to be there to make it better than renting? I know the answer so I am curious if you do....Do you know what the payment would be on 180k today compared to renting? I think you will be surprised.
Monthly expenses may be cheaper, but upon exit of the property an owner will recoup (in most cases) some or all of their expenditures at the time of sale.
A renter will recoup nothing.
Quote from: Lunican on February 20, 2014, 08:45:02 AM
Every type of property can be bought or rented so this isn't really a discussion about everyone's living preference.
Here is an average 1,500sq ft 3 bed 2 bath house on the Southside renting for $1,375 and would sell for $180k.
http://www.zillow.com/homedetails/12228-Cobblefield-Cir-S-Jacksonville-FL-32224/44608128_zpid/
Please dont link that grotesque architecture and neighborhood planning that is Kernan blvd again. I have to wash my eyes out now!
Quote from: pears045 on February 20, 2014, 11:52:52 AM
Lunican - that is incorrect. Transaction fees are going to cost you about 3K... how long do you think you need to be there to make it better than renting? I know the answer so I am curious if you do....Do you know what the payment would be on 180k today compared to renting? I think you will be surprised.
It depends on whether housing prices go up or down. Also, transaction costs are higher than $3k if you list with a real estate agent.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
Quote from: John P on February 20, 2014, 12:01:30 PM
Quote from: Lunican on February 20, 2014, 08:45:02 AM
Every type of property can be bought or rented so this isn't really a discussion about everyone's living preference.
Here is an average 1,500sq ft 3 bed 2 bath house on the Southside renting for $1,375 and would sell for $180k.
http://www.zillow.com/homedetails/12228-Cobblefield-Cir-S-Jacksonville-FL-32224/44608128_zpid/
Please dont link that grotesque architecture and neighborhood planning that is Kernan blvd again. I have to wash my eyes out now!
Haha yeah, I wouldn't live there but unfortunately it is representative of a typical Jacksonville home.
Pretty typical of new construction homes alllllllll across suburban america. It is understandable that this is not very popular on this website... but millions of people do just fine there... 8)
RealtyTrac (self-serving perhaps) says owning is still better than renting
http://www.miamiherald.com/2014/02/20/3946146/buying-a-home-in-south-florida.html
Quote from: Lunican on February 20, 2014, 08:45:02 AM
Every type of property can be bought or rented so this isn't really a discussion about everyone's living preference.
Here is an average 1,500sq ft 3 bed 2 bath house on the Southside renting for $1,375 and would sell for $180k.
http://www.zillow.com/homedetails/12228-Cobblefield-Cir-S-Jacksonville-FL-32224/44608128_zpid/
With the transactions costs (of buying and selling), insurance, taxes, maintenance, and low appreciation you'd have to live in this house a very long time before buying it is cheaper than renting it.
In general if you take the monthly rent and multiply by 100 that tells you the price you could pay for a house and rent it at a profit. So in this case if you bought the house for $137,500 or less it would be a good investment for a rental property. If it actually sold for $180,000 it is not a good deal - it would be cheaper to rent.
The Median price of a house in the NE Florida MLS was $131,700
Not everyone can afford the Taj Majals of 32224. lol!