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View Poll Results: Do you rent or own?
Rent 6 4.88%
Own 104 84.55%
Rent for now but plan to own 13 10.57%
Own for now but wouldn't again and plan on going back to renting 0 0%
Voters: 123. You may not vote on this poll

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      07-20-2020, 08:32 AM   #89
zx10guy
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Why was this moved to the sports subforum?

I can see maybe some viewing real estate as a blood sport though.....
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      07-20-2020, 11:20 AM   #90
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Why did this thread get moved to the sports lounge?
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      07-20-2020, 11:46 AM   #91
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Well technically the bank still owns it.

But even once it's paid off, the government will still take it if I don't pay my property taxes.
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      07-20-2020, 02:08 PM   #92
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Quote:
Originally Posted by AlpineWhite_SJ View Post
Bought at 599k, sold at 1.15M. Put roughly 100k into it while owning it for capital improvements (roof, hvac and some foundation work). No tax benefits for the improvements, No HOA, and very little maintenance since I did a lot of it myself instead of hiring people, outside of big projects in the capital improvement area.

To clarify, my numbers were napkin math on the raw appreciation of the asset, since I think some think that the Bay Area real estate market is solid gold but fail to realize just how much a passive investment can appreciate. A more thoughtful analysis takes into account tax bracket, barrier to entry (ie 20% down), tax savings for deductions, tax outlay for property tax, how much you spend on maintenance, loan interest rate, insurance expense, and more. Also, our gain was under the taxable threshold so you’d also have to compare to long term gain on the index. All in, we made much more than the numbers I put up, so likely better than the same amount placed in an index. But it’s tough to communicate in simplistic terms to someone who doesn’t have the same variables.
AlpineWhite_SJ Spot on.

Total return for me means:

Purchase price gain (price sold - price purchased)
Less: interest on loans, whether mortgage or otherwise
Less: property taxes
Less: capital improvements (remodelling, additions, etc.)
Less: maintenance expense
Less: HOA or other site-related fees
Add: tax benefit, if any
Total: Return

Total Return = Return / initial investment (down payment, if any)

Then do a CAGR calculation and compare it to the S&P over the same time frame including dividend reinvestment.

Subjective benefits have already been mentioned, mainly that owning offers the potential to have a higher quality environment for raising at-home children.

One of the main subjective disadvantages of owning a home is illiquidity (boat anchor effect) of the asset.

If a person:

a. does not have at-home children, and
b. seeks maximum net present value, then

owning a home does not appear to be in the best financial interest of said person.
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      07-20-2020, 05:28 PM   #93
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Quote:
Originally Posted by chassis View Post
AlpineWhite_SJ Spot on.

Total return for me means:

Purchase price gain (price sold - price purchased)
Less: interest on loans, whether mortgage or otherwise
Less: property taxes
Less: capital improvements (remodelling, additions, etc.)
Less: maintenance expense
Less: HOA or other site-related fees
Add: tax benefit, if any
Total: Return

Total Return = Return / initial investment (down payment, if any)

Then do a CAGR calculation and compare it to the S&P over the same time frame including dividend reinvestment.

Subjective benefits have already been mentioned, mainly that owning offers the potential to have a higher quality environment for raising at-home children.

One of the main subjective disadvantages of owning a home is illiquidity (boat anchor effect) of the asset.

If a person:

a. does not have at-home children, and
b. seeks maximum net present value, then

owning a home does not appear to be in the best financial interest of said person.
You forgot real estate agent commission fees. Granted you can do a FSBO but chances are you still have to pay 3% for the buyer's agent commission.
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      07-20-2020, 09:15 PM   #94
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Quote:
Originally Posted by zx10guy View Post
You forgot real estate agent commission fees. Granted you can do a FSBO but chances are you still have to pay 3% for the buyer's agent commission.
Fully agree!
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      07-21-2020, 07:17 AM   #95
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Quote:
Originally Posted by zx10guy View Post
You forgot real estate agent commission fees. Granted you can do a FSBO but chances are you still have to pay 3% for the buyer's agent commission.
I also forgot moving costs. These need to be included, because they are transaction costs associated with disposal of the asset. These can add up to several thousand dollars, or much more, even for a small family and small home.

In my view the NPV attractiveness of owning a home vs renting is not there. There are however other, nonfinancial, reasons to own a home.
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      07-21-2020, 12:04 PM   #96
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I'm an owner of a nice house almost in the woods now and I forget how was it to live in rent apartment)))
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      07-21-2020, 01:25 PM   #97
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Quote:
Originally Posted by chassis View Post
There are however other, nonfinancial, reasons to own a home.
I keep trying to tell people if something COSTS them money, it's not truly an asset. But I've stopped trying to talk to people who are stupid.

When we sell this house in a few years, assuming there isn't a global depression that makes the '08-09 meltdown look like flat earnings for a quarter.........I'm trying to get my girl to downsize and go back to renting.
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      07-21-2020, 02:04 PM   #98
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It can be tough to maintain a home, but i wouldnt call it a sport!
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      07-21-2020, 05:51 PM   #99
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Quote:
Originally Posted by infinitekidM2C View Post
It can be tough to maintain a home, but i wouldnt call it a sport!
I train all week in the gym to work weekends on my house
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      07-22-2020, 12:09 PM   #100
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Quote:
Originally Posted by zx10guy View Post
Why was this moved to the sports subforum?

I can see maybe some viewing real estate as a blood sport though.....
No idea...I wondered where it went.
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