4 ms·

It's not an investment if you live in the property.

by radar 7y ago

scarface74 7y ago
Yes and no. I don’t consider a home an investment in the traditional sense. I do consider a paid off house to be worth the amount of money that I would have to save to have a safe rate of return to live somewhere minus maintenance and property taxes. If a paid off house will save me $12000 a year. The value of that house to me is $12000/.04 Also, a house is a great inflation hedge. Rent goes up with the market. The mortgage stays the same. Property taxes and insurance can go up.
- nostrademons 7y ago
  > Also, a house is a great inflation hedge. Rent goes up with the market. The mortgage stays the same. Property taxes and insurance can go up. It's actually even better than that: if inflation goes up, you pay back the mortgage with cheaper dollars than you bought it with. If you're expecting higher inflation in the future (and it hasn't yet been priced into interest rates) a house is a great purchase. The flip side is that if you get deflation (say, an economic recession hits and a lot of people in your area lose theirs jobs, possibly including you), a house is a leveraged asset, and you can quickly lose everything. As many homeowners found out in 2009.
  - scarface74 7y ago
    But you have to live somewhere. The eviction process is a lot faster than the foreclosure process. A landlord is incentivize to evict you as fast as possible. The bank does not want your house - especially during a recession where the value is dropping and then they become responsible for insurance and upkeep. Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small.
    - almost_usual 7y ago
      The eviction process varies quite a bit by municipality. Evicting someone in San Francisco is _much_ harder than evicting someone in another city. I would much rather rent in SF than own a home.
    - SketchySeaBeast 7y ago
      > Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small. Hopefully wage growth keeps up with inflation then.
      - scarface74 7y ago
        That’s the beauty of a fixed mortgage. Wage growth doesn’t have to keep up with inflation. The mortgage stays the sane - the only thing that goes up is the property taxes and insurance. One of the few benefits of living in one of the most conservative suburbs of one of the more conservative states is their aversion to raising taxes.
        SketchySeaBeast 7y ago
        But the only way to make it hurt less is if you have more spending power in relation to it - if your wages don't rise much, but the price of living goes up, the mortgage is still going to hurt just as much.

It's not an investment if you live in the property.

by radar 7y ago

It's not an investment if you live in the property.

Yes and no. I don’t consider a home an investment in the traditional sense. I do consider a paid off house to be worth the amount of money that I would have to save to have a safe rate of return to live somewhere minus maintenance and property taxes. If a paid off house will save me $12000 a year. The value of that house to me is $12000/.04 Also, a house is a great inflation hedge. Rent goes up with the market. The mortgage stays the same. Property taxes and insurance can go up.

nostrademons 7y ago
> Also, a house is a great inflation hedge. Rent goes up with the market. The mortgage stays the same. Property taxes and insurance can go up. It's actually even better than that: if inflation goes up, you pay back the mortgage with cheaper dollars than you bought it with. If you're expecting higher inflation in the future (and it hasn't yet been priced into interest rates) a house is a great purchase. The flip side is that if you get deflation (say, an economic recession hits and a lot of people in your area lose theirs jobs, possibly including you), a house is a leveraged asset, and you can quickly lose everything. As many homeowners found out in 2009.
- scarface74 7y ago
  But you have to live somewhere. The eviction process is a lot faster than the foreclosure process. A landlord is incentivize to evict you as fast as possible. The bank does not want your house - especially during a recession where the value is dropping and then they become responsible for insurance and upkeep. Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small.
  - almost_usual 7y ago
    The eviction process varies quite a bit by municipality. Evicting someone in San Francisco is _much_ harder than evicting someone in another city. I would much rather rent in SF than own a home.
  - SketchySeaBeast 7y ago
    > Anecdotally when my parents bought their house in 1978, the $600 a month they were paying on their mortgage was a slight stretch. When they were in their last year in 2008, that amount was laughably small. Hopefully wage growth keeps up with inflation then.
    - scarface74 7y ago
      That’s the beauty of a fixed mortgage. Wage growth doesn’t have to keep up with inflation. The mortgage stays the sane - the only thing that goes up is the property taxes and insurance. One of the few benefits of living in one of the most conservative suburbs of one of the more conservative states is their aversion to raising taxes.
      - SketchySeaBeast 7y ago
        But the only way to make it hurt less is if you have more spending power in relation to it - if your wages don't rise much, but the price of living goes up, the mortgage is still going to hurt just as much.