4 ms·

I only see real estate as a good investment two reasons: 1. Capital/equity appreciation - the value of the home + land is worth more in the future. This is not

I only see real estate as a good investment two reasons: 1. Capital/equity appreciation - the value of the home + land is worth more in the future. This is not a guarantee in most parts of the country. There are a few areas that are fairly resilient (usually within the metro area of the largest cities in the country) but the barrier to entry can be impossibly high for most people. 2. Hedge against inflation - the value of your mortgage stays the same, but rents (and, in turn, the value of the dollar) increase. This is the classic "rent vs buy" scenario. If rents / sq ft are more in your area than owning the home it's worthwhile. This may not always be the case but even if rents dip they may (will) rise again and the predictability of a mortgage payment over 30 years can offer stability. Again, though, it can require considerable upfront capital to secure that steady payment.

whttheuuu 8y ago
I suppose it depends where you live. But in general, in growing cities it's a matter of supply and demand. More and more people move to growing cities, and there is a fixed supply of zoned land to build on. A few other reasons to add to your list: - Preferential tax treatment. In the US and Canada, capital gains/appreciation on your home is completely TAX FREE. For comparison, any gains you make on the stock market 15-40% will go to taxes. - Leverage. Try going to a bank and ask for a $500K loan to invest in stocks. Not going to happen. You can do this with a mortgage at incredibly low interest rate.
- refurb 8y ago
  In the US appreciation is only tax free up to $500k.
  - EpicEng 8y ago
    "only"? What percentage of home buyers do you imagine see more than $500k in appreciated value on their home?
    - sokoloff 8y ago
      It's $250K for an individual, $500K for a couple. It's quite easy for a coastal city home to appreciate by more than the $500K exclusion. If I had to guess, I'd take the "over" on 5%.
    - refurb 8y ago
      A couple bought a house near us in SF for $900k back in 2011. It’s now worth close to $2M. They’ll be paying taxes on half of that appreciation.
      - deleted 8y ago
        [deleted]
      - masonic 8y ago
        ... and CA taxes on the full amount.
  - masonic 8y ago
    ... only for couples filing jointly (otherwise $250K), and only for Federal taxes.
GoodJokes 8y ago
Rent seeking is just so against my ethics that I see 2 only an an option for sociopathic individuals .
benj111 8y ago
Nitpick. The value of the house is the hedge (you would expect that to rise with inflation) The mortgage is fixed (or at least decoupled from inflation). I wouldn't describe something fixed as a hedge?
- DrScump 8y ago
  The mortgage is fixed Only if it's fixed-rate for its full term.

whttheuuu 8y ago

I suppose it depends where you live. But in general, in growing cities it's a matter of supply and demand. More and more people move to growing cities, and there is a fixed supply of zoned land to build on. A few other reasons to add to your list: - Preferential tax treatment. In the US and Canada, capital gains/appreciation on your home is completely TAX FREE. For comparison, any gains you make on the stock market 15-40% will go to taxes. - Leverage. Try going to a bank and ask for a $500K loan to invest in stocks. Not going to happen. You can do this with a mortgage at incredibly low interest rate.

refurb 8y ago
In the US appreciation is only tax free up to $500k.
- EpicEng 8y ago
  "only"? What percentage of home buyers do you imagine see more than $500k in appreciated value on their home?
  - sokoloff 8y ago
    It's $250K for an individual, $500K for a couple. It's quite easy for a coastal city home to appreciate by more than the $500K exclusion. If I had to guess, I'd take the "over" on 5%.
  - refurb 8y ago
    A couple bought a house near us in SF for $900k back in 2011. It’s now worth close to $2M. They’ll be paying taxes on half of that appreciation.
    - deleted 8y ago
      [deleted]
    - masonic 8y ago
      ... and CA taxes on the full amount.
- masonic 8y ago
  ... only for couples filing jointly (otherwise $250K), and only for Federal taxes.

GoodJokes 8y ago

Rent seeking is just so against my ethics that I see 2 only an an option for sociopathic individuals .

benj111 8y ago

Nitpick. The value of the house is the hedge (you would expect that to rise with inflation) The mortgage is fixed (or at least decoupled from inflation). I wouldn't describe something fixed as a hedge?

DrScump 8y ago
The mortgage is fixed Only if it's fixed-rate for its full term.