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> A house is an investment. As a rental, sure. As a home? yeah, i'm pretty skeptical of that idea. There's no rate of return. Some people buy a big house to r

by jfoutz 10y ago

> A house is an investment. As a rental, sure. As a home? yeah, i'm pretty skeptical of that idea. There's no rate of return. Some people buy a big house to raise a family, and then downsize when the kids move out. I can kinda sorta see that as an investment, because you've got a planned future exit, and the value you extract from the extra space is more than the 1-2% rate of return. Your cheap place to live is just a cheap place to live. Sure, in the long run, it's a good deal, but there's no rate of return. Is McDonalds for lunch is an investment, because it's cheaper that a fancier place?

bluGill 10y ago
What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize. Don't forget to subtract what you would have paid for rent over that time period from the cost of the house payment (plus maintenance): there is your real return, it isn't that I pay $300,000 over 30 years for a $100,000 house that is now worth $315,000. It is that I paid $500/month - minus $300/month rent = $200/month or $72000 for an investment worth $315,000. Of course all the numbers above are subject to debate. I used a 4% yearly price increase for the house, I didn't factor in rent increases (though I should). You will be hard pressed to find a good house for $100,000 today, but you also won't find a place to rent for $300/month. Again, a house is a poor only investment. However as part of a consider portfolio it can be great for some.
- jfoutz 10y ago
  > What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize. Well, i'd thought of not-liquid investments as something that's tougher to sell than, say stock. Perhaps a family run business or a matisse or a Toyota 2000. Something purchased with the explicit intention of making money. It might be risky, and ultimately be a loser, but the plan is to sell it for more than you bought it for. Assets on the other hand are things you want or need without much regard for the rate of return. Sure, that comic book might be worth a lot some day, but people buy them because they want them. My coffee maker has a rate of return, i'm sure i could get a few bucks for it on craigslist or a garage sale, but i'm not going to pretend it was an "investment". Sure, there exist some people that are pretty serious about their house as an investment. I have a couple of friends that bought houses right after school, paid them down, leveraged the equity to by another, and continue the chain. Most people, call their house an investment but regard it as an asset. Neglecting basic maintenance can wipe out a decade of gains, a new roof, or minor flooding from a plumbing leak. It's easy to watch people blow $30k on a new kitchen. That's very rarely going to be realized in house value when it's finally sold. Perhaps we're just talking past each other. I think there's a distinction between asset and investment, but i'm willing to admit that perhaps that distinction is inaccurate or wrong somehow. It just seems like people call assets investments to sort of feel better about how they're planning for the future, without actually planning for the future. edit Is it ok to invest with money you can't afford to lose? People put a sizable chunk of their salary into mortgages, and insure them to limit the risk. That doesn't seem like investor behavior.
  - dpark 10y ago
    I'm no financial expert, but I'm pretty sure your idea of an asset is wrong. An asset is anything that has value. An asset can be depreciating or appreciating or neither. An investment is just a place to put money. You can buy stocks in the hope they'll increase in value rapidly. You can buy gold hoping that it will outpace inflation. You can buy bonds with negative yields in the hope that they are at least safe. These are all investments. They are also all assets.
    - jfoutz 10y ago
      I see. I'd thought an investment was a separate and distinct thing compared to an asset, with the intention of having a higher rate of return compared to ordinary stuff. Since an investment is simply a place to put money, there really is no distinction. Seems odd, but I suppose I can accept that as a common understanding.
      - dpark 10y ago
        I think the general expectation is that an investment will make you more money than holding cash. A new car and a gold chain are both assets but most people would not call then investments. But that's not a strict definition, because if you intentionally buy cars and gold chains with the intent of using them as a store of wealth, they are technically investments, just really bad ones.
dpark 10y ago
Owning a home is functionally equivalent to renting from yourself. So if a rental property is an investment, then so is owning your own home. I also don't understand how you can claim there's no rate of return. Home values have historically trended upward reliably. Does the stock market also have no rate of return?

by jfoutz 10y ago

bluGill 10y ago

What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize. Don't forget to subtract what you would have paid for rent over that time period from the cost of the house payment (plus maintenance): there is your real return, it isn't that I pay $300,000 over 30 years for a $100,000 house that is now worth $315,000. It is that I paid $500/month - minus $300/month rent = $200/month or $72000 for an investment worth $315,000. Of course all the numbers above are subject to debate. I used a 4% yearly price increase for the house, I didn't factor in rent increases (though I should). You will be hard pressed to find a good house for $100,000 today, but you also won't find a place to rent for $300/month. Again, a house is a poor only investment. However as part of a consider portfolio it can be great for some.

jfoutz 10y ago
> What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize. Well, i'd thought of not-liquid investments as something that's tougher to sell than, say stock. Perhaps a family run business or a matisse or a Toyota 2000. Something purchased with the explicit intention of making money. It might be risky, and ultimately be a loser, but the plan is to sell it for more than you bought it for. Assets on the other hand are things you want or need without much regard for the rate of return. Sure, that comic book might be worth a lot some day, but people buy them because they want them. My coffee maker has a rate of return, i'm sure i could get a few bucks for it on craigslist or a garage sale, but i'm not going to pretend it was an "investment". Sure, there exist some people that are pretty serious about their house as an investment. I have a couple of friends that bought houses right after school, paid them down, leveraged the equity to by another, and continue the chain. Most people, call their house an investment but regard it as an asset. Neglecting basic maintenance can wipe out a decade of gains, a new roof, or minor flooding from a plumbing leak. It's easy to watch people blow $30k on a new kitchen. That's very rarely going to be realized in house value when it's finally sold. Perhaps we're just talking past each other. I think there's a distinction between asset and investment, but i'm willing to admit that perhaps that distinction is inaccurate or wrong somehow. It just seems like people call assets investments to sort of feel better about how they're planning for the future, without actually planning for the future. edit Is it ok to invest with money you can't afford to lose? People put a sizable chunk of their salary into mortgages, and insure them to limit the risk. That doesn't seem like investor behavior.
- dpark 10y ago
  I'm no financial expert, but I'm pretty sure your idea of an asset is wrong. An asset is anything that has value. An asset can be depreciating or appreciating or neither. An investment is just a place to put money. You can buy stocks in the hope they'll increase in value rapidly. You can buy gold hoping that it will outpace inflation. You can buy bonds with negative yields in the hope that they are at least safe. These are all investments. They are also all assets.
  - jfoutz 10y ago
    I see. I'd thought an investment was a separate and distinct thing compared to an asset, with the intention of having a higher rate of return compared to ordinary stuff. Since an investment is simply a place to put money, there really is no distinction. Seems odd, but I suppose I can accept that as a common understanding.
    - dpark 10y ago
      I think the general expectation is that an investment will make you more money than holding cash. A new car and a gold chain are both assets but most people would not call then investments. But that's not a strict definition, because if you intentionally buy cars and gold chains with the intent of using them as a store of wealth, they are technically investments, just really bad ones.

dpark 10y ago

Owning a home is functionally equivalent to renting from yourself. So if a rental property is an investment, then so is owning your own home. I also don't understand how you can claim there's no rate of return. Home values have historically trended upward reliably. Does the stock market also have no rate of return?