Not an investment.
For example, here’s a typical scenario:
Finance $100,000 for a house.
$1000/month escrow payment (principle, interest, homeowners insurance.)
x 12 months
x 5 years
=$60,000 dollars
Unlikely that the house has appreciated $60k in 5 years, don’t you think?
Probably a net loss, although maybe it’s less of a net loss than renting. If it appreciated $30k, then you only spent $30k or $500/month. A lot of rentals will cost you over $500/month.
…And, discuss!
You left out a bunch of factors like tax deductions. If I had to live in an apartment I would need psycho therapy which is expensive.
WNY has been the worst place a s far as “investment” goes but…
Damnit, I am trying to think of my arguement, and I cannot remember how long the previous owner of my house lived there. I think it was around the 5-7 year mark. The house appreciated almost $60k in that time.
Also, investement properties can be a money maker. As well as handy-man specials.
Yep. The best you can expect to do with housing is to be cash-neutral, unless you have a double, and then you’re stuck living in a duplex. That’s like buying a used car.
Or unless you hold it for 30 years, in which case investing would have given you better returns.
The difference is that since property does appreciate, unlike cars you can hold rental property as an investment. But housing for you = expense. Housing for others = investment.
If I stayed at my current place for 5 years it would be less than 1/4 of that expense, and i’m renting.
And I live in a pretty nice spot. <3 Drew.
You have a special case. Those non-cash considerations you’re giving up to him wouldnt be an option for most people. Especially girls. :gay:
You make your money when you buy it, not when you sell it. factor in the deductions and appreciation and it’s still a net loss more than likely.
One major issue is the property tax. here in Cattaraugus county the taxes on that house would be around 5500 or 6000 a year. it’s practically legal theft.
Ok… my argument.
Pay cash for a house, 50k, taxes for 5 years are 1200 a year or 6000ish… rent a room out of the house for 500 a month… or 6k a year.
Investment = (55000)
Income = 6000 a year for 5 years = $30,000
Sell house in 5 years for 75,000
Gross = 75+30-55= 50…
or 10% a year… not bad if you asked me… not to mention, you basically lived for free for 4 years…
now those numbers are what ifs, but still… more compelling than your argument.
Cash neutral = profit
When I sold my last house I made a small “profit” but if you factor in 10 years of rent with no tax deductions I made huuuuge money.
I got a $12,000 tax return last year because of my house. That is an extra $1000/ month for those of you that can’t do simple math. How much did you guys get back? 
I know this about money but how do you quantify “quality of life”? My 401K gave me no joy and never has.
My home is a big part of my retirement but, people say, “What if your home isn’t worth much more than it is now?” To that I say, “If my home decreases your 401K has already shit the bed.”
I cant help it that I’m good at what I do.
That’s a lotta mortgage interest :eek:
^And taxes.
I just refinanced so next year won’t be the same but I am paying almost $800 less per month on my mortgage now.
Another hard to quantify factor is “sweat equity”. I am lucky to have a killer set of tools and some knowledge which is valuable. If you have to call someone everytime something needs attention or you want to improve something you are screwed basically.
Boom.
That and if you rent, you won’t be building equity. So 10-15 years down the road when you want to upgrade and use your equity, you won’t have it and you’ll be paying that much more to try and live in a nicer place. This “investment” goes way beyond 5 years.
Sure investing would net you higher returns (my mortgage payment over 30 years at 8% would net me over a million dollars), but that only holds true if you are funding the mortgage and escrow yourself. In a duplex the money comes from the tenants, so you are cash neutral or gain every month.
I own two duplex’s and they pay for themselves, I actually bring in $100/mo. above my mortgage and escrow. I could move to a single family home, and plan to do so in 3 years, and when I do, I will be netting $750/mo. EDIT: and I have 15 year mortgages also.
^“Income” property is totally different that is why it is called “income” property. If you don’t make money you are doing it wrong.
Another factor is location, location, location. If you buy in Cheektavegas the increase in value is going to be limited. Buying the cheapest house in the best neighborhood is the best thing you can do for return. In some cases you can pretty much demo the entire house then rebuild and you are still better off.
^ I know, I was just pointing out that Joe’s comment on investing over the 30 years instead of putting the money into the duplex would return more, and how he didn’t take into account the tenants money.
Oh, also, you have to remember that taxes are REALLY cheap in a lot of other places. I bet I probably pay ~1/3 the taxes than a comparable home in buffalo.
Another thing about renting is, you are paying taxes(believe me it is included in your rent) you just don’t get the deduction.
I like to own my appreciating assets and lease my depreciating assets :gotme: TurboTSI i agree, i just worded my other post badly. Owning a double is definitely a solid cashflow position if you don’t have a problem living in it. It’s nice because you can move out and turn it into an income property at your leisure.
I see one major item you left off your simple calculations… the fact that your 1000 a month is building equity. Yeah, the part of that $1000 a month you paid toward insurance and taxes is pretty much pissed away (which is a major reason why NYS is fucking you real hard here), but the larger part of it is actually going toward the house. You make it sound like if the house doesn’t appreciate 60k in 5 years that 60k is lost. That formula would only work if the house you were paying on had zero value.