please elaborate on why a house is a good investment

[fullracehonda]

well, i have been thinking about buying a house for a while, and now that im in a position too, im not positive that i want too.


at first, ive heard insurance is around a thousand, and property taxes where i was looking are around 2500, but where i am looking now property taxes are on the low side around 4000, and the average 5-6000, and on the high side 10000.


do house normaly appreciate in value more than that? like 7000 dollars per year on a 300k dollar house? i was looking at putting in around 200k and financing around 50k, but maybe i should dump around 6000 a year in rent, and look for some other way to invest 200-220k of cash?

 

[fullracehonda]

p.s. i am open to some financial advisor type opinions:

i am 23, i dont have much going for me, this is extra money i have left over from an insurance settlement, ive already factored in buying a car, paying off debt, buying some other trivial things i want(tv, computer, etc) and having a nice rainy day fund.

 

[DeNguyen]

Think of it in terms of buying or leasing a car. There are pros and cons to each depending on your lifestyle.

On another note, the home you live in should NOT be your PRIMARY investment.

To answer your last question, there are too many variables to predict appreciation. Like they say though, location location location! 7k/year return on a 300k home would be minimal if the home was in a prime location.

well, i have been thinking about buying a house for a while, and now that im in a position too, im not positive that i want too.


at first, ive heard insurance is around a thousand, and property taxes where i was looking are around 2500, but where i am looking now property taxes are on the low side around 4000, and the average 5-6000, and on the high side 10000.


do house normaly appreciate in value more than that? like 7000 dollars per year on a 300k dollar house? i was looking at putting in around 200k and financing around 50k, but maybe i should dump around 6000 a year in rent, and look for some other way to invest 200-220k of cash?

 

[jond]

A homes value goes up with inflation. Nothing more.
Your rent also goes up with inflation.
Your mortgage payment(which includes taxes, insurance, etc) DOES NOT go up with inflation.

 

[steveny]

A homes value goes up with inflation. Nothing more.
Your rent also goes up with inflation.
Your mortgage payment(which includes taxes, insurance, etc) DOES NOT go up with inflation.

This is really the best argument for buying a house.

If you are happy renting invest the money elsewhere.

 

[sahtt]

It's a mediocre investment. Most of the reasons for buying a home fit better under the luxery consumption catagory. Unexpected air conditioner replacement can wipe out a decade of rent vs ownership gains.

 

[steveny]

Often times when people look at the raw numbers they never figure in the tax advantage of owning a home. If you figure that in owning really is cheaper. However if I didn't own a home right now and just got a huge windfall AND was in my 20's I would find a good money manager and give him/her the money as I KNOW it will be a much better investment.

 

[ANYTIME]

Often times when people look at the raw numbers they never figure in the tax advantage of owning a home. If you figure that in owning really is cheaper. However if I didn't own a home right now and just got a huge windfall AND was in my 20's I would find a good money manager and give him/her the money as I KNOW it will be a much better investment.

and one that is honest

 

[Ski_Banker]

As most Primers know, I've been *very* bearish on housing/homes for a number of years. But, I think for a number of reasons, 2009-10 will be good times to buy a house. There's NO HURRY though. A few reasons:

1. The gov't is throwing everything it has at stemming the housing price decline. Eventually it will succeed, even if it just means writing down principal on every single mortgage. So, there will be a slow bottom.

2. Gov't will incentivize first time home buyers to help in this process. It already has, with some tax credit programs, but those will likely be increased substantially.

3. INFLATION. This is the reason to strongly consider R/E as an asset class in the years to come. Highly mortgaged R/E will do very well.

BUT -- do NOT put a $ more equity into a home than you need to. The inflation will erode the value of your mortgage, in your favor. Also, obviously make sure the purchase is sensible (ie, you don't buy a big home when you would normally just live in a 1BR apt). As others have said, speak to a name-brand financial adviser on what to do with the cash. Right now, I wouldn't do a thing but there will be great stock opportunities in 2010.

 

[HTN]

That's a good chunk of cash to play with.
I would purchase a less expensive property. Not sure of your location to comment price range. Typically, you can sell smaller/less expensive properties quicker. Also their is a larger pool of buyers. I am a strong believer of home ownership. You don't have to worry about the landlord going into foreclosure and deal with the stress. As the previous posters mentioned pros/cons of both sides, just make sure that it's in a great location. Population growth alone will eventually drive prices back up. To what point... I have no clue.

Save at least $100K for rainy days(money market,cd). For the remaining cash, just sit on it and wait to see what the market will do in the next 6 months. With cash, you will have options. I guess my thing is...don't go into something that you have no knowlege of. Spend time reading and talking to smart people.

 

[Vega$ NSX]

Man, so much good advice in one thread. I agree with all of the above, especially:

1) Remember to not look at a primary house as an investment. It's a place to live. You should use that criteria first when looking to purchase.
2) Mortgage payments vs. inflation. At a time when inflation is going up and could continue to go up, fixed mortgage payments look pretty good.
3) I think 2010 is shaping up to be a good time to buy, but again, there is no hurry to buy either. I think the R/E market will be stay where it is at for a long, long time.
4) The government will really help you, especially if this is your first home.

 

[steveny]

I have apartments that the rent has near tripled on but you know what my mortgage payment is still the same.

 

[Shaun Ray]

Not sure if this is of help to the discussion but one thing I've really liked about home ownership with a lot of equity built up (you could be in a similar situation) is you can have a home equity loan. For instance, if you buy a $200,000 home and let's say you put $150,000 down, you have a nice bit of equity. Heck, you can pay the $50,000 off with home equity line and make whatever payments you want each month, after. My equity line is currently 4% and although I don't use it, it's nice to have for a rainy day. In your case, you could pay a minimum $167 a month on a home equity loan for the $50k (or pay much more and bring that loan down each month). As long as prime interest remains low (I think we're good for the next 18 months) you can't find cheaper money than 4%. (may be 3.5% next month)

I sort of look at it like a monthly mortgage payment that you elect to pay or not - depending on what you have in the checking account for that month. And if you have a nice house that you pay $167 a month to keep everything at level - well that's pretty cheap rent. (And I believe that is tax deductible interest to boot!)

Anyway - a long explaination to say home ownership does have some perks. On the downside - I hate yard work and maintenance - still, I own a home:smile:

 

[Crazy Acura]

p.s. i am open to some financial advisor type opinions:

i am 23, i dont have much going for me, this is extra money i have left over from an insurance settlement, ive already factored in buying a car, paying off debt, buying some other trivial things i want(tv, computer, etc) and having a nice rainy day fund.

Change that first. Education is a always good investment. :smile:

 

[NSXrunner]

I may be in the minority here but I do not consider a house as an investment and never did. I consider it a house, a place to live, nothing more. Now if something comes out from it down the road, then more power to me. But if I come up in the red or break even, then I don't care because its my home and nothing more. I feel that looking at it as an investment is what got the market where it is, in the toilet. People living off speculated value and equity then then the market shifts, poof, foreclosed.

Just my 2 cents. :smile:

 

[fullracehonda]

thanks for all the reply's!

i forgot to add i the tax status factor, generaly how much of a tax break would i receive? 1st time home buyer, and what happens if the tax credit is more than i pay in taxes?

as far as education goes, i will have to find something i can do well, my brain does not work as well as most, i think i have a mild case of schizophrenia because i have a very hard time absorbing knowledge

 

[steveny]

as far as education goes, i will have to find something i can do well, my brain does not work as well as most, i think i have a mild case of schizophrenia because i have a very hard time absorbing knowledge

No I think that's the other personality that has that er wait uh oh crap is that the police outside HIDE!!!!


I don't think schizophrenia has much to do with absorbing knowledge but I think it can make you not want to learn maybe. Don't really know for sure.

 

[fullracehonda]

lol.

on webmd i was browsing one time, and one of the key things i remember about it is that it does hurt the ability to absorb knowledge, which makes pretty good sense since i was very good at match since i was young, but when i started getting into algebra2, calculus, etc during tests i could do things like remember 4 differenty methods of solving those problems, i could just remember the last one we did, hence i would fail my tests for not answering the questions with the right method

i dont know, what ever. im going to apply to be the ceo or GM, or run for president, i figure i can land atleast one of those jobs

 

[drtruong]

You guys have been talking about buying a house as an investment. I am thinking buying a commercial building for myself and the rest will be rented out. The tenants will pay for my rent and the mortgage. However, looking for a good location is another story.

 

[Sarge]

Because they are cheaper now.